Ethereum Worth Over $8 Million Apparently Stolen from Freewallet Users UPDATE

Updated with an official statement from Alvin Hagg, Freewallet co-founder.

Freewallet users are reporting that cryptocurrency held at wallets from Freewallet – known for its mobile Bitcoin, Ethereum and Monero wallets – is disappearing. Using Ethereum Blockchain explorers, we can see that someone has redirected over 21,000 ETH (worth over $8 million) from random Freewallet wallets to a single address.

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The company has made no comments on any social media or online forums, which raises suspicions by many in the community that this is an ‘exit scam’ – meaning an intentional fraud carried out with the intention of scamming users out of their funds as soon as the option arises, for example ETH/USD reaching a record $400 per Ethereum token as happened yesterday.

However, considering examples of lost cryptocurrency in the past, it is too soon to judge if this is really the case. It is more than possible that some hacker just found a bug to exploit in the programming of the wallet and took advantage of it at the expense of both Freewallet and its users.

Hackers, cyber attackers and scammers are consistently targeting cryptocurrency related businesses including wallets, exchanges, ICOs and more. As the market is largely unregulated and as many police organizations around the world are incapable of understanding the matter, it seems an easy target with little repercussions. The community, however, has the tools to track where the funds go and devise means to recover them, as we have seen before.

Finance Magnates approached the Freewallet team asking for a comment on the situation and we will update if and when it arrives.

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Update

A few hours after publication the company provided an official statement from Alvin Hagg, Freewallet co-founder:

“Freewallet operates for more than 1 year on a market and puts safety of users assets as a high priority. Our security team operates top level cryptocurrency multilayer security systems. Since the beginning of operations not a cent of user money was lost.

Alvin Hagg, founder, Freewallet,

Freewallet stores funds in a multi-signature cold storage with a bank level security grade. From time to time there are rebalancing procedures between different cold storages and hot wallets. There’s no need to worry, this is an ordinary and planned procedure for cryptocurrency systems. All user assets are completely safe. We offer more than 14 wallets and all of them are operating fine.”

In response to further questions presented by Finance Magnates they added:

“Freewallet is a cryptocurrency startup located in Prague. Due to significant market growth our support team is overloaded and communication is slowed. Right now we are scaling support system up, in a coming days user communication should become much faster.

User funds are stored in a cold storage. We support more than 14 different coins and blockchains and even more is coming. We have developed an unified technology to ensure assets are stored securely and reliable. With this technology all incoming transactions are received via addresses unique for each user. They are gathered in pool and then go either to payout aggregator or multi-signature cold storage.
We consider our platform as one of the most secure on the market.

Ethereum blockchain was overloaded yesterday with Bancor ICO transactions. A small bunch of that transactions are still being processed now; they will arrive back in a couple of hours. New Ethereum transactions are coming in and out normally. In a future Freewallet updates we’ll consider making a special feature for such cases. Users will be able to monitor a current blockchain load and predicted time for a transaction to be processed.”

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