I give shtylman props for being upfront about the theft rather than dither about it as some places have.

That +1000.  I t baffles me why larger sites have not implemented that yet.  Hell they could even make it a user option.

He sent out an e-mail less than 24 hours ago about API keys being compromised, and asserted that "No accounts were compromised financially nor was there any access to coins or any funds."    

 - http://bt.irlbtc.com/view/105079.msg1159003#msg1159003


That could have been an initial attempt to communicate based on a misunderstanding of the actual situation but there was no further communication until this announcement.

MtGox does this (I hate to encourage more centralization of trading activity but it is the reality).  IIRC something like 80%+ of coins on deposit are in offline cold storage.   Sadly I was impressed by shtylman's other security measures and I assumed he used a cold wallet for at least a portion of the funds.   Expensive mistake on my part.

I have put the website back online for users who have USD to request a withdrawal via ACH. If you choose to leave your USD funds in the account they will be available for trading once it resumes. I hope to resume trading later in the week.

If you had outstanding orders they have all been cancelled.

Once trading resumes, I hope to be able to start repaying BTC losses using the proceeds from fees. More information about this will be provided later.

Potatoes aren't a digital construct thinly traded only on unregulated exchanges which hasn't yet been defined by FinCEN or any other regulatory body.  I do agree that Bitcoin will need to be regulated eventually.  It simply can't co-exist with fiat currencies under existing laws without regulation and definition.

Still I think this is a case of people wanting to have their cake and eat it to.  Either Bitcoin is outside of regulation and statutes or it isn't.  It can't be "kinda" under the law.  If it is regulated that means tight AML, trade reporting to IRS, regulatory requirements for handling Bitcoins, licensing (VA requires a $500K bond to be a money transmitter for example), etc.

It can't be under the law when you want something and then outside regulation all the other times.  It is all or nothing baby.

Personally like it or not, I think on a long enough time line we will be in the "all" category.

I agree with TangibleCryptography.

In your own words:

Unless you have gotten legal advice to the contrary (if you have please let us know), I would advise processing ACH withdrawals on a as needed basis.

Of course. However, potatoes have value, they can be stolen too. Imagine a commodity exchange where you can deposit bags of potatoes that you and other customers have "farmed". Those potatoes can be sent to the exchange as well as fiat money (legal tender btw). Someone have stolen all the potatoes, exchange goes BK... Effectively a judge has only two choices:

1. Distribute all fiat back to depositors and leave potato sellers to hold the bag (an empty potato bag no less).
2. Value all the lost potato deposits in fiat, distribute whatever fiat left proportionally.

I bet it will be 2.