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Years after brutal $2M hack, Gatecoin cryptocurrency exchange is dead

It lost 185,000 Ether and 250 BTC in 2016, and that hurt

Seminal cryptocurrency exchange Gatecoin is dead. It’s finally going into liquidation, years after it lost $2 million in cryptocurrency belonging to its customers.

Gatecoin was one of the first regulated digital asset exchange services to spring up. Hailing from Hong Kong and launched way back in 2013, it was focused entirely on Bitcoin, Ethereum, and Ethereum-based token markets.

According to the post, signed by “The Gatecoin Team,” payment service troubles supposedly “paralyzed” Gatecoin’s operation for months, and caused the company “substantial loss” from which it could not recover.

“On 13 March 2019, the court has granted a winding-up order against our company,” the statement reads. “A provisional liquidator has been appointed and we have to cease operation with immediate effect. Please rest assured that we will assist the liquidation process in order to expedite the realization and redistribution of our assets to the creditors.”

It seems the pain just never stopped for Gatecoin. The (still-unresolved) hack from three years ago saw 185,000 Ethereum ($24.2M) and 250 Bitcoin ($960K) stolen from the startup’s “hot wallets,” all of it owned by its users.

At the time, that combination of cryptocurrency was worth just over $2 million – but at the height of the bull market, the Ethereum alone was valued in excess of $203 million. In January last year, Gatecoin was processing around $17 million in daily cryptocurrency trade, but volume had since tapered off significantly.

Still, Gatecoin blames the impending liquidation on a third party payment service provider (PSP), which it says failed to process “most of the transfers in a timely manner.”

“Even after we managed to mitigate our loss by replacing that PSP with more reliable alternatives to process our clients’ transfers in September 2018, the situation did not improve because that PSP retained a large part of our funds,” Gatecoin claimed. “After months spent trying to recover those funds, we commenced legal action against that PSP but were advised that it is unlikely that we would be able to recover the funds from them in full.”

While the hack happened almost three years ago, Gatecoin suffered a swathe of banking disruptions in the years following. They started in September 2017, when its Hong Kong-based bank accounts were suddenly frozen, and the headaches never stopped (until now).

So let’s mark the end of another busted cryptocurrency business, and pour one out for those victims who never recovered their Gatecoin funds. Exchanges in 2019, learn from Gatecoin’s failure and stop fucking around: store customer funds in secure cold wallets and keep good business practices, or you may as well start the liquidation process today.

Want to find out more about cryptocurrencies and blockchain technology? Check out our Hard Fork track at TNW 2019!

Published March 14, 2019 — 11:24 UTC