Bitcoin Exchange Blames Data Center Provider for $100,000 Theft

A Bitcoin exchange is blaming its colocation provider for a security breach that left to the theft of about $100,000 in virtual currency.

Ottawa-based Canadian Bitcoins says that staff at the Rogers Data Center failed to check the identity of a scammer using a tech support web chat, allowing him access to the company’s servers. “It is important to note that this breach occurred without any authentication being performed by the Rogers Data Centre staff whatsoever,” the exchange said in a statement.

The Oct. 1, 2013 incident was outlined in a story by The Ottawa Citizen, which said an online chat user claimed to be James Grant, the owner of Canadian Bitcoins. Here’s an excerpt:

“According to a text copy of the chat session obtained by the Citizen, at no point during the nearly two-hour-long conversation was the caller asked to verify his identity. After being asked, the technical support worker gained access to Grant’s locked server pen, plugged in a laptop and then manually gave the fraudster access to Canadian Bitcoins servers, where he cleaned out a wallet containing 149.94 bitcoins, valued at around $100,000.”

Rogers told the paper that it has offered a credit to Canadian Bitcoins, which has instead removed its equipment from the Rogers data center.

“Canadian Bitcoins has requested a full accounting from Rogers regarding the security breach at their Ottawa Data Centre and also filed a police report,” the company said.

“The situation surrounding this customer is unique to this customer, and does not apply to any other customer of Rogers Data Centres. Rogers has been fully co-operative with authorities in the investigation,” Rogers told the newspaper.

An email to Rogers customers, which was posted on Reddit, said the incident occurred while the facility was operated by Granite Networks, which in the process of being acquired by Rogers. ” It should be noted that this incident took place during the acquisition period before Rogers Data Centres had full business operational control of the facility,” the email read. “Once Rogers Data Centre had taken full operational control of this Granite location, its full suite of security protocols was implemented.”

For more, see the Ottawa Citizen and CoinDesk.

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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  1. I have been having more and more discussions about these growing pains of Bitcoin with clients and friends lately. The fact of the matter is Bitcoin popularity and adoption has soared since October of 2013. That is a mere SIX MONTHS ago. Hash rates increased 147X in that time period. The value has bounced around quite a bit too which has caught the attention of traders and the Satoshi Nakamoto frenzy perpetuated by Newsweek put even more attention on a currency that is only a few years old and having to live up to expectations created over 100+ years about money. Go back and read about how your country's currency was doing after 5 years and compare and contrast with where Bitcoin is. Bitcoin and the other crypto currencies will continue to experience growing pains for a while. Most people didn't pay any attention or know what Bitcoin was a year ago. What were YOU doing one year ago on the first day of Spring? Not paying attention to Bitcoin I'll bet. The same is true of miners who were largely 20 and 30 somethings although that has begun to change in the past year. What else is changing is that people, myself included, are bringing expertise to the Bitcoin space from decades in a particular discipline to help mature the currency. In spite of what Warren Buffet and a host of other 'famous' money people have said, crypto currency has a critical mass and continues to grow. Merchants are adopting it, ATMs are popping up more and more, you can buy it and trade it like Dollars, Euros or Yen, Japan will tax it. What is missing is 100 years of basic systems, controls, and security that haven't been an issue until now, because it hasn't had the critical mass it does now. There was no reason to steal Bitcoin because it had no value. Right? If it has no value, then why are people stealing it? Why are they upset of they had it stolen? Why are lawyers spending time on suits in a bankruptcy if there is no money in it? Still want to argue it has no value? It does have value, it needs be be made secure, as secure as its peers - traditional currency - who have the benefit of a 100+ year head start. The issues with Bitcoin are the same issues with a growing company who makes something of value - only this isn't a company it's a community - and what it has created, Bitcoin, is gaining value. The value will not increase if it is not treated as having value and protected. Companies use patents, Bitcoin uses cryptography, and all of the stories about fraud, laundering, and other headline grabbers came about because the system worked as designed. To be transparent, to call out frauds, to keep the economy flowing. So there is a real opportunity for those of us who have been around the data center business since the 25 watts a foot days to bring the expertise, facilities, and protective products and services to the Bitcoin community as we move into the 50-100 Kw per rack world of Bitcoin. Just because there is a new technology, a new density, or something new of value out there, means we abandon what we know or let down our guard. It happened to Rogers during an acquisition when they were busy doing the things you do to integrate companies. Breaches happen, Target, Google DNS, and a bunch of others show us that Bitcoin is no different. One last thing - if you want to keep your Bitcoin more secure, keep it in a wallet, your wallet, not on an exchange. If your wallet is like mine, there isn't much in it.