Canadian Bitcoin Exchange Cavritex To Shut Down Over Security Issues

Journalist:
February 19, 2015

Cavritex, a Canadian bitcoin exchange, announced it will cease operations after discovering its database may have been compromised. The company urged customers to change their passwords immediately, noting that funds will be returned to customers and that it has maintained 100 percent reserves. In a notice posted on the company website on Feb. 17, Cavritex said damage to the company’s reputation caused by the potential database compromise will significantly harm its ability to continue to operate successfully.

No new deposits will be accepted, and trading will be halted effective March 20, 2015. Effective March 25th, 2015, no withdrawals will be processed. The company will communicate with account holders that continue to hold balances after March 25, 2015.

As of Feb. 18, Kyle Kemper, vice president of business development, said the company has not yet started processing withdrawals. Nor could he say how many customers have changed their passwords.

“We have not started processing bitcoin or litecoin withdrawals yet, but we are working on making this possible as soon as we can guarantee the safety and security of the process”

Fiat withdrawals operating

Kemper explained to CCN:

“I can say that fiat withdrawals are operating (with slight difficulty based on the volume of requests) and that clients are exiting the system that way. For clients who want to withdraw their crypto, they need to fill in their BTC withdrawal addresses on the settings page of their account.”

Cavritex noted that on Feb. 15, 2015, it found reason to believe that an older version of its database, including 2FA secrets and hashed passwords, may have been compromised. The database in question did not include identification documents.

Kemper said he could not discuss at present how and when security concerns first came to the company’s attention.

Asked if the company’s relationship with its banking partner played a role in the decision to cease operations, Kemper said it was a factor, but not the primary factor.

Also read: Norwegian bitcoin exchangee Justcoin exits gracefully after being dropped by their bank

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Banking issues a challenge

Since he joined the company last April, Kemper said Cavritex has had a stable banking relationship. “Before I joined, I know that (CEO) Joseph David had opened accounts with most of the major Canadian banks and had them shut down. For many companies in the space, this continues to be a great challenge.”

The company noted it has never lost customer funds, and to its knowledge, its production environment has never been breached.

“We are sad to see it come to this, and we want to thank all of our customers for the years of patronage,” Kemper told CCN. “We have also received incredibly positive messages from our users and we are deeply saddened that we are exiting the bitcoin business. We want to assure the community that we still firmly believe in the digital currency revolution, and we are looking forward to the future.”

Lester Coleman

Lester Coleman is a media relations consultant for the payments and automated retailing industries.