Bitcoin exchange Mt. Gox blitzed by strong denial of service attack

The largest bitcoin exchange said Thursday it is fighting an intense distributed denial-of-service attack it believes is intended at manipulating the price of virtual currency, which has seen volatile price swings in the past few days.

Mt. Gox, which is based in Tokyo, said the attacks have caused its worst trading lags ever and caused error pages to be displayed to traders, according to a post on Facebook. By its own calculation, 80 percent of the bitcoin trades in U.S. dollars are executed on Mt. Gox's trading platform and 70 percent of all trades in other currencies.

The lag of six or seven seconds before a trade is executed "is not acceptable," said Gonzague Gay-Bouchery, marketing for Mt. Gox, in a phone interview. But he cautioned that Mt. Gox's trading platform isn't like those of the New York Stock Exchange or the Nasdaq.

The price surge, which saw bitcoin hit as much as $142 per coin on Wednesday, has caused malicious opportunists to try and game the system, according to Mt. Gox. Attackers have waited until bitcoin's price hits a high, sell their bitcoins and then start a DDoS attack that destabilizes the exchange. They hope bitcoin holders will panic and sell, causing the price to drop. The attackers can then buy the cheaper bitcoins and try the attack again when the price floats higher.

The latest DDoS attack started last night Japan time and intensified around 5 a.m. this morning, Gay-Bouchery said. Mt. Gox uses a Florida-based security vendor, Prolexic, to fend off attacks, but "they have been slower than usual to catch what happened," he said.

Gay-Bouchery said he wasn't sure when the attacks would subside. He warned bitcoin traders not to panic or invest more money than they're willing to lose. Traders should also use Mt. Gox's options for two-factor authentication in order to prevent their accounts from being hacked.

Mt. Gox is in the midst of a major technical overhaul of its exchange. Gay-Bouchery said Mt. Gox is rebuilding its trading platform from the ground up. The system is in testing now, but Mt. Gox hopes to have it live by the end of the year.

"It takes a lot of time to make something bulletproof," he said. "We cannot release something half-baked."

The trading platform will be separated from the front-end website, which will make it immune from the problems it has faced in the last few days, he said. Mt. Gox doesn't release much information on its systems in order not to tip off hackers.

Mt. Gox has seen a surge in people applying to trade on its platform. In 2012, between 9,000 to 11,000 people signed up per month, Gay-Bouchery said. In January, those numbers doubled, and in February, the numbers tripled. The exchange saw more than 60,000 people sign up in March, which has caused delays in verifying accounts. Mt. Gox will raise trading limits if people supply identification to comply with anti-money laundering rules.

The exchange is also working with external companies to streamline the verification process and beefed up its internal account verification team to more than 20 people.

"I really would like to stress that people trust us with a lot of money right now," Gay-Bouchery said. "We want to do everything by the book. We may appear slow in many respects but we are taking our time to do it right."

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