LocalBitcoins Names Malware As Cause of Wallet Issues

LocalBitcoins users took to reddit and official LocalBitcoins forums today (17th April), reporting that some bitcoin wallets managed by the company have been emptied, and that transactions have been delayed.

The Finland-based bitcoin buying and selling service has now issued an official response to these claims via its blog, stating that the problem is likely the result of a malware intrusion.

In the post, LocalBitcoins announced it would limit hot wallet activity on its services while it addresses the issue.

Further, it released its initial assessment of the situation:

"So far, we have found one systematic and recent attack against LocalBitcoins users, and right now it seems that the amount of users attacked have been under 30, and amount of bitcoins reported has been less than that."

The company also downplayed that there were larger issues with the site, stating:

"Nothing indicates that this [may] have been a security flaw on the website itself, but we are going to continue investigating the case."

LocalBitcoins said it would investigate the issue further over the weekend,

Malware attack

LocalBitcoins explained that based on the small number of users affected, and the fact that the compromised accounts did not have two-factor authentication enabled, the intrusions may be the result of malicious code.

Read the post:

"[The] most likely explanation to these attacks [is] stolen user credentials through phishing or malware."

The attack appears automated, according to the company. It went on to suggest that intrusions seem to be common to users that do not have two-factor authentication in place, and that logins on those accounts are coming from seemingly random IP addresses. Though, at press time, one comment on the post suggested that users who had two-factor authentication enabled may have been affected.

Protecting bitcoins

LocalBitcoins

has decided to limit the transactions going in and out of its hot wallet for hosted storage until it finds a way to root out the possible malware issue, according to the company's forums.

This means that withdrawals are being temporarily delayed:

"We will continue investigating these cases during the weekend, and meanwhile outgoing transactions might be delayed, since we try to minimize cold storage movements until everything is sorted out. We apologize all inconvenience affected."

The first thing users should do to protect bitcoins in any wallet is to enable two-factor authentication on an account, which uses a secondary element such as a phone to verify a user's identity.

Another important thing to do is to disable JavaScript, which is susceptible to zero-day exploits. Bitcoin users with balances on hosted or "hot" wallets should always consider keeping their main cache of bitcoins in an offline or "cold" wallet.

This story is still developing. CoinDesk will monitor and provide updates as new details become known.