On Sunday evening, Bitfinex tweeted that the exchange was “under DDoS attack”. The attack reportedly began during scheduled maintenance earlier that day that was otherwise successful, and has “been ongoing since.” No further information has been given since the initial announcement.
The DDoS attack is the latest in a string of issues with the exchange that have been so serious that even the New York Times took notice. Following last week’s Tether hack, the newspaper published a report entitled “Warning Signs About Another Giant Bitcoin Exchange”, in which it described Bitfinex as an “opaque operation” that did not publicly list any information about the individuals who are responsible for running it.
An Opportunistic Connection?
According to German news website T3n.de, it is known that Bitfinex was incorporated in the British Islands and is led by CEO Jan Ludovicus van der Velde and Chief Strategy Officer Phil Potter, who are also CEO and director of Tether, respectively. Despite efforts to establish Bitfinex and Tether as separate entities, the connection between Bitfinex and Tether makes last week’s hack especially suspicious.
Additionally, the New York Times reported that in addition to having been fined and cut off by some American banks and regulators, Bitfinex “has lost millions of dollars of customer money in two separate hackings, leading critics to question whether it even has the money it claims to hold.”
Why Do DDoS Attacks Happen?
A DDoS (Distributed Denial of Service) Attack is an attempt to overwhelm a server with traffic from multiple (distributed) sources. Outside of the world of cryptocurrency, this is a tactic often used for activist purposes. For example, Anonymous has famously used DDoS attacks within the world of crypto, however, DDoS attacks can have a different goal: price manipulation. This was the cause assigned by many to the last time Bitfinex experienced a DDoS attack in June of this year.
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DDoS attacks do not give hackers direct access to anyone’s crypto funds. However, they do prevent trading from happening on the exchanges that they affect. Hence, trading volume is kept artificially low, which in turn keeps crypto prices artificially low, giving opportunistic hackers a chance to buy up coins.
Because Bitfinex is currently the largest cryptocurrency exchange in the world (according to CoinMarketCap), its position as a target for this particular kind of attack makes sense for hackers who may be hoping to scoop up more bitcoins before their price rises any higher.
Indeed, the price of Bitcoin has been skyrocketing over the last several weeks. At the time of writing, a single Bitcoin was worth an eye-popping $9673; among other things, CME’s announcement that it will be offering Bitcoin futures trading in December has been driving the price to unprecedented heights.
Exactly who is behind this particular DDoS attack is unknown, although the series of suspicious happenings at Bitfinex makes it difficult not to wonder why such a high-profile company is not taking better care to not be involved in so many high-profile hacking incidents and crimes. As cryptocurrency continues to gain footing in mainstream financial systems, however, this kind of negligence will not be tolerated.