So was this company considered "reputable" before this little snafu?
Yes, and to be honest, I see no reason why they shouldn't still be considered reputable.
I am assuming most people didn't even read the article and instead relied on the sensational headline to form their opinion, but here's what happened, quoted from the article in the OP:
The criminals were able to take control of Bitinstant’s internet domains by convincing its domain registrar, Site5, to hand over control of the company’s Domain Name Service, or DNS. “Armed with knowledge of my place of birth and mother’s maiden name alone (both facts easy to locate on the public record) they convinced Site5 staff to add their email address to the account and make it the primary login,” the company said Monday in a blog post detailing the incident.
With control of the DNS, the bad guys also had control over Bitinstant’s email. They then did an online password reset at a Bitcoin exchange called VirWox and started emptying Bitinstant’s account. The total haul: $12,480.
So, for one thing, it wasn't even a technical hack. It was a social engineering hack. Second, it was their DNS provider that screwed them over.
But not only that, the only party that suffered any damages was the BitInstant company itself.
No customers were harmed.
You know why?
Because BitInstant doesn't store people's bitcoins for them. That's not what their business is.
BitInstant allows people to quickly use cash or other methods to procure bitcoins. You don't even need an account with them. You can take some cash to a WalMart, send a MoneyGram to BitInstant, and have bitcoins in your wallet on your own computer by the time you get home.
So, again, I just don't understand why anyone with half a brain would think the article in the OP was an indictment of bitcoin, but when people just read sensational headlines instead of the articles, I guess that's what you get.
This post was edited on 3/7 at 6:47 pm