Bitcoin News Today: Polish Crypto Exchange Loses 17000 Bitcoin in 2011 Server Error

In 2011, Bitomat, a Polish-based cryptocurrency exchange, suffered a catastrophic loss of 17,000 Bitcoin after its administrators accidentally deleted the platform’s wallet.dat file during a routine server upgrade. At the time, Bitomat was the third-largest Bitcoin trading platform globally, handling approximately 17,000 BTC in monthly volume [1]. The incident occurred as the exchange’s server, hosted on Amazon EC2, was being reconfigured to increase RAM. The admin failed to enable persistent storage, meaning the virtual machine wiped its local storage—including the only copy of the wallet file—upon rebooting [1]. Amazon Web Services was unable to recover the lost data, leaving the exchange with no access to its users’ funds [1].

In response, Bitomat’s administrator, Bartek Szabat, issued an open letter to the Bitcoin community seeking help in identifying the cause of the incident. Szabat speculated that third parties might have deliberately caused the crash to obscure illegal activities or force the exchange offline. However, the root cause was ultimately a human error in cloud server configuration [1]. To compensate users, Szabat proposed selling the euro equivalent of 17,000 BTC, valued at $220,000 at the time—now worth approximately $1.95 billion—to make them whole [1].

The solution came in the form of a takeover by Mark Karpeles and Mt. Gox, which had already faced its own share of security issues, including two major breaches involving 80,000 and 300,000 BTC respectively. The acquisition allowed Bitomat users to transfer their accounts to a Polish-language version of Mt. Gox, where they could trade using the local złoty pair [1]. Karpeles described the move as a “happy ending,” noting that it gave users access to a larger market with local currency support [1].

Despite the resolution, the incident highlighted a core vulnerability in early crypto exchanges: the reliance on custodial wallet systems and third-party infrastructure. At the time, the mantra “not your keys, not your coins” was already gaining traction within the Bitcoin community, emphasizing the importance of self-custody. However, even self-custody could be undermined by a lack of technical knowledge or operational security [1]. Bitomat’s tragedy underscored the risks of trusting a single point of failure—be it a server, a cloud provider, or an exchange.

Though modern exchanges have evolved significantly since 2011, the underlying tension between convenience and security remains. Users continue to balance the ease of trading on platforms with the risks of custodial storage. Multi-signature wallets and full-node validation are available, but they require technical know-how and operational commitment [1]. Until then, users remain reliant on the infrastructure and integrity of the exchanges they use.

Mt. Gox itself collapsed in 2014, raising questions about the long-term viability of even the largest exchanges. The Bitomat incident serves as a historical warning: the early days of crypto were marked by innovation, but also by fragility. For users, the lesson remains: manage exposure carefully, and never assume that storing coins on an exchange is risk-free.

---

Source: [1] The exchange that accidentally deleted its 17,000-Bitcoin wallet file

(https://blockworks.co/news/bitomat-exchange-deleted-17000-bitcoin)