By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - Hong Kong-based digital currency exchange Bitfinex said late on Wednesday that after a security breach on its website it will temporarily disable trading, deposits and withdrawals.

The announcement was made on its website.

Bitfinex also said it was working to restore limited service to its trading platform. The firm runs one of the largest exchanges for trading bitcoin and other digital currencies such as ether, and litecoin.

On Tuesday, Bitfinex announced it discovered a security breach, with about 120,000 bitcoins, or roughly $70 million, stolen from customer accounts.

The company said only the bitcoins were stolen.

The theft at Bitfinex is the second largest bitcoin heist from an exchange since Tokyo's MtGox lost about $350 million bitcoins in early 2014. MtGox's loss eventually forced it to file for bankruptcy protection.

"To accommodate the relaunch, all withdrawals, open orders, and open funding offers will be canceled," said Bitfinex. "Furthermore, in order to compute losses for relevant parties, settlement of all financed positions will occur in all accounts."

Zane Tackett, Bitfinex's director of community and product development, said on social media website Reddit that the company is "settling all positions, not liquidating."

He added that the investigation on the bitcoin theft is still ongoing.

The bitcoin price fell significantly in the aftermath of Tuesday's security breach. On Tuesday, after Bitfinex confirmed the theft, bitcoin fell 11 percent. It has since recovered, and last traded at $566.79 on the BitStamp platform.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Leslie Adler and Sandra Maler)