Hotbit, a Chinese cryptocurrency exchange, has temporarily suspended all services following an attempted cyberattack. The exchange reported that the attack, which occurred on April 29, 2021, disrupted several basic services but did not compromise user wallets. However, the hackers did manage to access Hotbit’s user database. As a precautionary measure, Hotbit advised customers to ignore any communication from individuals claiming to represent the exchange.
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Hotbit Takes Action to Protect Users
To protect users from potential losses, the exchange canceled all pending trading orders and pledged to cover any losses arising from exchange-traded funds listed on the platform during the maintenance period. The exchange expects the maintenance to last for at least seven days, but it could potentially extend up to two weeks due to the ongoing investigation and system upgrades.
Firstly, the deteriorating operating conditions played a significant role in the decision. Hotbit had previously suspended operations for several weeks in August 2022 due to an investigation. The industry faced subsequent crises, including the collapse of FTX and bank crises leading to off-peg incidents with USDC. These events resulted in continuous fund outflows from centralized exchanges like Hotbit, leading to financial strain.
Secondly, the evolving trend in the crypto industry influenced Hotbit’s decision. With the collapse of large centralized institutions, the industry has shifted towards embracing regulation or becoming more decentralized. The team believes that centralized exchanges have become cumbersome, making compliance and decentralization challenging in the long term.
Efforts of the Exchange
Hotbit was known for offering a wide range of assets and value-added services. However, the team deemed the operation model unsustainable from a risk management perspective. The exchange faced significant challenges, including repeated cyber attacks and losses incurred due to the exploitation of project vulnerabilities by malicious users.
The exchange expressed gratitude to its users and acknowledged the joys and hardships experienced during its operation. While the exchange is closing, some team members remain optimistic about the future of crypto innovation and will continue their efforts in the industry.
Hotbit’s Chief Security Officer, Alex Zhou, assured users that their funds remained secure. Although the attackers attempted to breach the wallet server, the exchange’s risk control system successfully identified and blocked the action. Ethereum transaction data also confirmed that multiple token outflows from one of Hotbit’s wallets had taken place, with approximately $14 million in altcoins currently held in another address.
Despite these assurances, the lengthy maintenance period has caused concern among the exchange’s users, who fear the incident could be an exit scam. Recent incidents involving Turkish exchanges, where executives absconded with millions of dollars in user funds, have heightened worries. These incidents have led to arrests by law enforcement agencies and discussions about establishing a central custodian bank for cryptocurrency exchanges in Turkey.
Hotbit’s decision to prioritize security and conduct a thorough investigation demonstrates its commitment to safeguarding user funds. However, the extended maintenance period and the recent history of exit scams in the cryptocurrency space have understandably contributed to unease among users.