00:00How did this happen? I mean, I was reading about one of the victims here and he said his
00:04part of the system was in like a safety deposit box at a bank.
00:08Yeah, I mean, people had the perception that if you have a cold wallet, that it's secure.
00:12And I think this has kind of upended that impression. You know, there was a security
00:18flaw in CoinKite's system that someone, it seems, might have even hacked into it all the way back
00:26in April times. But then the news kind of blew up over the weekend because a lot of other users
00:31were complaining about their accounts getting drained. And so they have a whole mess on their
00:36hands now. And do most people have other Bitcoin in one storage place or do they kind of diversify
00:43and spread it out, kind of the way that people spread out their deposits at banks?
00:47Yeah, I think it just depends on the person. There were some very sympathetic, harrowing
00:51stories of one guy was saying he bought two Bitcoin for his children's future. Another
00:57guy lost all of his savings because he just had it there. But I'm sure some of the users
01:01have it in different places, too.
01:02Is there, can we draw any sort of corollary? Like if this were to happen to somebody at a
01:07bank and like, you know, their account were somehow compromised at one of the, you know,
01:13regulated financial institution, would there be better recourse than if it's lost in Bitcoin?
01:19Certainly. Yeah. I mean, that's going to be a big question that we still don't have an
01:23answer to is what are the repercussions for CoinKite, if any? Is there going to be litigation?
01:30Is there going to be any enforcement action? But in terms of the money, I mean, it's kind
01:34of like you don't have the same FDIC insurance and things like that.
01:37Yeah. I'm guessing CoinKite doesn't pay anyone to insure the deposits there.
01:41Yeah.
01:42What do we know about CoinKite, the company?
01:44Not a whole lot. It's a small company. It's based in Toronto, I believe. There was some
01:51commentary online by upset users about the CEO saying that he was not, you know, aware
01:56enough about the flaws. I'm sure that we'll find out more about them in the coming days.
02:01I mean, our team certainly is trying to get in touch with people there, but I think they're
02:04like heads down trying to get their arms around the problem.
02:07So I think for a lot of people, this was a system where, you know, something's in cold
02:12storage is seen as a lot safer than a system where something completely lives online, like
02:18maybe, you know, in an exchange, for example. Does this just shatter that notion?
02:24I mean, I would say so, yeah, because it's exactly like what you're saying. People had
02:29this perception that it's safe because it's on like a physical brick.
02:32So what is, so what, I mean, look, you're not going to give financial advice or advice
02:35about people, you know, how people should store their crypto, but based on the folks
02:38you've spoken to and your team out reporting on this, what is the right way to store a
02:43digital asset?
02:45You know, you've seen some of the exchange executives come out and say that their way
02:49is better. And then you've seen some people come out and say, you know, this doesn't
02:52ruin cold wallets. It's one bad example. You know, it doesn't ruin the whole bunch.
02:58But I think time will tell if there are more hacks like this, because they're not the only
03:02one that provides that device, you know.
03:04Right. And there have been a series of hacks, too, perhaps not as many, given that Bitcoin's
03:08price action has not been as robust as it was in previous years. But Eric Bouchounis of
03:13Bloomberg Intelligence has been writing that the cold storage Bitcoin heist definitely shakes
03:18the faithful and strengthens the ETF case where you get exposure to Bitcoin through ETFs,
03:23rather through actual, I don't want to say physical Bitcoin, but through owning Bitcoin
03:27and putting it in cold storage wallets.
03:28Yeah, certainly. I mean, you could see the argument for that, right? If you had the ETF
03:32and not the actual underlying asset, you might not be in such a bad situation. So it's a good
03:37time for Eric to be writing about it.
03:39Do we know that, you know, we can, not we, but this type of asset can be traced? And I'm
03:46wondering if the authorities...
03:47Is that the point of the blockchain?
03:48It is. I mean, and I'm wondering if authorities have any sort of, not leads about who has
03:53it, but at least where it went.
03:55Yeah. I mean, this is already, there are a lot of technical analysts going out there
03:59trying to scour, you know, the CoinKite application and the flaws and who, it's like a big whodunit
04:04in crypto world, right? No one knows who the original hacker was, but now there's more than
04:08a dozen that have been identified. And, you know, they're just identities. You don't know
04:11their name or anything. So I think there will be more to cover in the coming days.
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