updated 04:00 pm EDT, Sun March 23, 2014
Beijing-based exchange freezes accounts and halts withdrawals
Another Bitcoin exchange has run into financial problems, following in the wake of other recent turmoil surrounding the currency after the collapse of Mt. Gox. Vircurex, based in Beijing, is faced with insolvency, causing the company to immediately halt withdrawals. Starting March 24, the company will put a freeze on all customer accounts.
Vircurex suffered two breaches last year, resulting in an undisclosed loss of Bitcoin and other cryptocurrencies. The company had been attempting to reimburse customers, using its own "cold storage" reserves. According to a posting on the company's front page, a number of "large fund withdrawals" in the last few weeks have lead to "a complete depletion of our cold wallet balance."
Because of the fund depletion, Vircurex was faced with either shutting down -- which would leave customers with a complete loss of their funds -- or consider taking drastic steps to keep the exchange running, while funds were hopefully paid back to customers over time. Vircurex chose to keep going, developing a strategy in hopes that it would be able to pay back all of its customers.
A new tier of funds on the exchange will be created called "Frozen Funds" or "Frozen Balance" to mark the funds that will have to be paid back to users. Existing funds will be effectively unavailable to depositors until the exchange can pay them back. In doing so, all accounts will be set to a zero balance, leaving anything deposited marked as one of these frozen numbers.
It isn't a complete loss to account holders, however, as Vircurex will use the remaining funds in their cold storage to pay back some of the frozen funds according to a logic outlined on their website. Monthly net profit of the exchange will be used to pay back users according to the same logic as well.
Vircurex states that this is a one-time action and should not affect future deposits.