Bitcoin hacking scandal
The government has not said that Lichtenstein and Morgan hacked the exchange; they are charged only with laundering the proceeds of the hack. But it appears that the couple never even tried to launder most of the stolen coins—94, bitcoin, or about eighty per cent of the total loot, never left the first wallet. The reason? Laundering digital currency is hard. And the level of difficulty rises as the sums grow larger.
As I discovered last year, while reporting on state-sponsored North Korean hackers , thefts from digital-currency exchanges happen with alarming regularity. North Korean operatives particularly enjoy hacking digital bourses in South Korea. As of last April, one exchange, Bithumb, had been raided four times. Exchanges are vulnerable because they often maintain escrow accounts holding coins in so-called hot wallets, which are connected to the Internet. Last year, Tom Robinson, who is the chief scientist at the blockchain-analytics firm Elliptic, explained to me the appeal of this kind of crime.
Give them back to me. The desired end point of most exchange hacks is to convert stolen digital currency into fiat currency—pounds, euros, dollars. Launderers must also contend with the fact that coins are traceable. The ledger on which trades occur is immutable. It should always be possible to track stolen loot through its digital footprint. The problem of handling stolen bitcoin is not unlike that of smuggling a Picasso in the trunk of your car.
Stealing the painting is one thing; realizing any monetary gain for it is another. Morgan and Lichtenstein seem to have understood some of the dangerous terrain of the crypto laundry. Last year, Robinson, the Elliptic scientist, showed me a visualization of a peel chain. The diagram looked like an airline-magazine route map, in which several lines sprout from one dot and then converge on another.
The affidavit also details how the couple understood other, more sophisticated laundering techniques. One is known as chain hopping. This is when one type of coin is swapped for another—Bitcoin to Ethereum, for instance—to disguise its provenance. The blockchain-forensics firm Chainalysis recently published a report that detailed the growing use of chain hopping, particularly by North Korean criminal groups. The preferred method is to use what is known as a DeFi decentralized finance platform, which swaps currencies without ever taking custody of the funds.
DeFis are not required to have any know-your-customer procedures. According to Chainalysis, in , North Korean hackers used a DeFi called Uniswap to launder the proceeds of a two-hundred-and-seventy-five-million-dollar theft from the KuCoin exchange—one of the largest hacks of any exchange ever. Morgan and Lichtenstein also allegedly moved coins to AlphaBay, a dark-Web marketplace that was shuttered by police in You can buy pretty much anything you want using digital currency on the dark Web, and nobody cares where you got your funds.
But it seems that the sums Morgan and Lichtenstein were looking to launder were too unwieldy to cash out by buying products. AlphaBay was simply a conduit for the stolen coins. When they attempted to open seven new accounts on one exchange using fake identities, the exchange could not verify the accounts, and froze their funds.
The couple ran into locked door after locked door. Before his arrest, Pavlov told the BBC he ran a licensed server company and was not aware it was hosting Hydra. Neither Binance nor any other payment provider linked to Hydra was named by the Justice Department, which declined to comment on Binance.
Hydra transformed the narcotics market in Russia, researchers said. Previously, drug users tended to buy from street dealers with cash. According to a report by the United Nations Office on Drugs and Crime, Hydra increased the availability of drugs in Russia and drove a surge in demand for stimulants, such as methamphetamine and mephedrone.
At the time of the U. Alexandra, a year-old office manager in Moscow, started buying mephedrone and ketamine on Hydra in to help cope with her bipolar disorder. Several friends who used Hydra told her Binance was the safest way to pay dealers, Alexandra told Reuters, speaking on condition she be identified only with her first name. Some of them used fake personal information to open Binance accounts, she said, but she uploaded a copy of her passport.
Binance never blocked or queried any of her payments. Asked about her account, Binance said it was continually strengthening its know-your-customer capabilities. Eventually, she sought psychiatric help and received therapy. Since then, she just used Hydra to buy cannabis. State Department reports from and , without mentioning Hydra or Binance, warned that drug traffickers in Russia were using virtual currencies to launder proceeds.
A State Department spokesman declined to comment on Hydra and Binance. As reported by Reuters in its January investigation, an internal document shows that Binance was aware of the risk of illegal finance in Russia. It cited money-laundering reports by the U. State Department.
Hillmann told Reuters Binance had taken more action against Russian money launderers than any other crypto exchange, citing a ban it imposed on three Russian digital currency platforms that were sanctioned by the United States. Crypto flows between Binance and Hydra dropped sharply after the exchange tightened its customer checks in August , the data from Crystal Blockchain shows.
While bitcoin transactions are recorded on a public blockchain, Monero obscures the digital addresses of senders and receivers. Monero proved to be popular among Binance users. They shared how-to guides with names like DNM Bible, a reference to darknet markets. Binance opposed anyone using crypto to buy or sell illegal drugs, he said. Hackers have used Binance to convert stolen funds into Monero. Darknet users swapped information about buying Monero on Binance to purchase illegal drugs.
Investigators hired by Kowalski traced most of his bitcoin through a series of wallets to six Binance accounts, where the coins were exchanged for Monero, according to testimony and blockchain analysis reports filed as part of an ongoing civil complaint Kowalski submitted last year against Binance in Miami-Dade County, Florida.
Kowalski declined to comment. Ng testified to the court that a crypto trading partner, who he knew online only by the username MoneyTree, deposited the bitcoin in his Binance accounts. Ng testified that he was not aware he was laundering stolen bitcoin. MoneyTree did not respond to emails sent by Reuters to an address that Ng provided to the court. Binance dealt with Ng differently.
The letters, filed with the court, also accuse Binance of not responding to police requests to secure the assets for the duration of their investigation. Binance imposed a seven-day freeze on the accounts, but then lifted it, allowing Ng to exchange the stolen bitcoin for Monero over several months. To determine the matter, the judge has granted discovery, a process where parties request documents from each other.
Hillmann told Reuters that Binance investigates all allegations of misconduct on its platform and takes appropriate action if its investigators uncover wrongdoing. After news of the hack by Lazarus, Zhao tweeted on Sept. Each account then converted portions of the stolen funds into just under two bitcoin, the withdrawal limit at the time for a basic account without identification.
After the hack, Eterbase stopped its operations and later filed for bankruptcy. Auxt, the company co-founder, said the losses meant Eterbase could no longer cover its expenses. Victims of the hack are yet to be reimbursed. At times, the compliance team struggled with its workload.
According to a group chat among Binance staff, the compliance team sometimes approved accounts with inadequate documentation. A team member complained to colleagues that one user was able to open an account by submitting three copies of the same receipt from a meal at an Indian restaurant. In late , Konrad Alber, a retired family lawyer in Germany, invested most of his savings on a trading platform he found online.
He told Reuters he hoped it would supplement his small pension and allow his wife to stop working to support their life in a village in the Black Forest. Konrad Alber, a retired lawyer who fell victim to an investment fraud. In an email, a sales representative told Alber, who had little investing experience, that he could double any deposits within a year.
Find out below, ten of the biggest scandals in the blockchain sphere.
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| Bitcoin hacking scandal | Those files contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinex, and allowed special agents to lawfully seize and recover more than 94, bitcoin that had been bitcoin hacking scandal from Bitfinex. After it was set up inHydra distributed narcotics on behalf of drug dealers, all priced in bitcoin, to millions of buyers, mostly in Russia. The measure mandates security best practices like implementing encryption, supporting two-factor authentication, adding network detection capabilities, and using other cloud defense mechanisms. DAOs run through rules encoded as smart contracts, which in turn are computer programs that facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. At no point in the two-hour session was he asked to prove his identity. The priority, he said, was to ensure Binance betting facebook larger cryptocurrency exchanges and fended bitcoin hacking scandal competition from smaller rivals. |
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| Closest sports betting near me | Many of these also log keystrokes to record passwords, often avoiding the need to crack the keys. DAOs run through rules encoded as smart contracts, which in turn are computer programs that facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. One such example is the defunct bitcoin exchange MyCoin, which was based in Hong Kong and shut down by local authorities in February At times, the compliance team struggled with its workload. This time though he bitcoin hacking scandal accused of multiple counts of rape and assault by sexual penetration. And unlike much in the bitcoin world, no hacks were needed, just good old-fashioned fraud. |
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