03/04/2014 09:51 EST | Updated 05/04/2014 05:59 EDT

Bitcoin Bank Flexcoin Shuts Down After $600,000 Theft

A second online bitcoin bank has shut down after a security breach allowed thieves to steal a large quantity of bitcoins.

Flexcoin made the abrupt announcement on its website Tuesday, admitting that it had been robbed of 896 bitcoins after a thief or thieves managed to collect them from Flexcoins servers and transfer them to two bitcoin wallets — a unique string of numbers and letters that function similarly to an email address, and bitcoin's equivalent to individual bank accounts where customers store money.

At current market rates, the theft amounts to more than $600,000 US. The figure represents the bank's entire bitcoin holdings online, effectively wiping out any customers who held assets there.

"As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately," Flexcoin said in a statement.

The bank did say however, that any customers who had bitcoins held in so-called "cold storage" — not on the site online servers and therefore safe from digital attack — can still retrieve their funds free of charge.

Flexcoin also says it will work with law enforcement to decipher the source of the hack. The company said in a release the money was transferred to the following two bitcoin wallets:

- 1NDkevapt4SWYFEmquCDBSf7DLMTNVggdu

- 1QFcC5JitGwpFKqRDd9QNH3eGN56dCNgy6

Bitcoin is a digital cryptocurrency that isn't tied to any physical assets or controlled by any country's central bank. It's pitched as an alternative to the fiat money system and a way for users to do business online without detection or interference from governments or multinational corporations.

But it's been rocked by security concerns recently, especially after the world's largest bitcoin bank, Japanese-based Mt. Gox, announced that hackers had managed to steal several hundred million dollars from their reserves. Mt. Gox initially froze all accounts in the hopes of retrieving the money, but has subsequently begun bankruptcy proceedings.

In U.S. dollar terms, Flexcoin wasn't a major player in bitcoin, but a second security breach on the heels of Mt. Gox's demise will do little to assuage fears that bitcoin's existence outside government regulation leaves the currency open to criminal activities.

"While the MtGox closure is unfortunate, we at Flexcoin have not lost anything," Flexcoin said via their twitter account as recently as February 25th.

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