BITCOIN, Heists, Thefts, Hacks, Scams, and Losses

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In summary: I don't know if this actually happened, but...?In summary, the website of major bitcoin exchange MtGox was offline Tuesday amid reports it suffered a debilitating theft. Around midmorning in the U.S., the company released a statement saying it had closed off transactions "to protect the site and our users." It offered no further details.
  • #71
theb2 said:
My point was you can short any currency

Sure and I can gamble in Vegas too. When these guys question bitcoin transactions you know you're in trouble.

http://allafrica.com/stories/201803010018.html
The Central Bank of Nigeria (CBN) has again cautioned Nigerians to be wary of investments in crypto currency as they are virtual currencies that are not legal tender in Nigeria.
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  • #72
Borg said:
While it would be clear which transaction inserted it into the ledger, a person would still be guilty of distributing it.

That seems to sort of be the point. This appears to be a way to deliver illegal data in a way that the recipient has plausible deniability.
 
  • #73
russ_watters said:
I've never heard anyone suggest before that Bitcoin could be non-inflationary.

The argument as presented in #54 was shown incorrect in #57. The new argument (#54+#58) is apparently that Bitcoin can't depreciate, but it's value can go down. I don't know how to argue with that.

The fixed money supply of Bitcoin, or gold, or the giant stones of Yap are deflationary. As economies grow, if the money supply remains fixed, the value of each unit of money has to grow as well - i.e. the price of goods denominated in that currency must fall.
 
  • #74
Vanadium 50 said:
That seems to sort of be the point. This appears to be a way to deliver illegal data in a way that the recipient has plausible deniability.
Which is even worse than I was thinking. I guess that they will have to change their name to BitPorn.
 
  • #75
256bits said:
The thing I find weird about all these electronic money systems such as Bitcoin and others start ups who want to make a buck, is that while hyperbolizing it as the way of the future cashless society, the value is still referenced to the old clunky central banking system.

The old central banking system uses mostly electronic money. However, its electronic money is created by a complex process which includes decisions by committees about interest rates and decisions by individual loan officers about specific business ventures. Perhaps the inertia in this complex process accounts for the superior stability of traditional electronic money.

Superficially, the electronic currency of central banks seems less vulnerable to electronic theft than cryptocurrencies. If this is true, why?

Are traditional banks more skilled at computer security than cryptocurrency banks? Is it harder to transfer traditional electronic assets anonymously? Are the records of who owns traditional electronic assets more robust? - e.g. multiple independent copies - the banks computer records, its printed records, the depositors records.
 
  • #76
Student loans aren’t just for buying textbooks, No. 2 pencils, and apples for bribing teachers anymore. According to a recent survey, as many as one in five college kids may be using their student loans to cash in on the cryptocurrency craze.
...
The Student Loan Report surveyed 1,000 current college students with student loan debt about whether they were asked whether they used their student loan money to invest in cryptocurrencies like Bitcoin and found that 21.2% of them have Sallie Mae to thank for their cryptocurrency investment.
https://www.fastcompany.com/40549479/students-are-using-their-loan-money-to-buy-cryptocurrency-study
 
  • #77
Stephen Tashi said:
the electronic currency of central banks seems less vulnerable to electronic theft than cryptocurrencies. If this is true, why?

Regulation, perhaps?
 
  • #78
Vanadium 50 said:
Regulation, perhaps?

That's what I really don't understand about the attraction of Bitcoin other than being a get rich scheme in countries with a stable national currency. There already is digital currency and most of us use it everyday. A dollar in an electronic bank account is worth the same as a dollar bill and that electronic balance is backed by government deposit insurance up to a limit of at least $250,000 in the US. Bitcoin is unlikely to ever have a major role in the economy beyond the minor role of being a vehicle for money laundering, tax evasion and the like.
 
  • #79
Stephen Tashi said:
The old central banking system uses mostly electronic money. However, its electronic money is created by a complex process which includes decisions by committees about interest rates and decisions by individual loan officers about specific business ventures. Perhaps the inertia in this complex process accounts for the superior stability of traditional electronic money.
Well, the main thing is that the money of the US is backed by the faith and credit of the US government. So the stability of the money comes from the stability of the US economy. Cryptocurrency is backed by the fickle whims of its userbase and fickle whims are unstable.
Superficially, the electronic currency of central banks seems less vulnerable to electronic theft than cryptocurrencies. If this is true, why?

Are traditional banks more skilled at computer security than cryptocurrency banks?
Yes. Because any criminal/idiot can set up a cryptocurrency bank. And many do.
Is it harder to transfer traditional electronic assets anonymously? Are the records of who owns traditional electronic assets more robust?
Yes. This is why one of cryptocurrency's main strengths is also a big weakness.
 
  • #80
Stephen Tashi said:
Perhaps the inertia in this complex process accounts for the superior stability of traditional electronic money.
The explanation may be simpler: much deeper and more liquid markets. There are tens of trillions of dollars and euros in the world; it would take an enormous number of people selling dollars for euros in very large amounts to move the dollar/euro exchange rate by even a few percentage points. The bitcoin float is much smaller, so even a small change in demand can lead to huge price swings.
 
  • #81
https://www.cnbc.com/2018/01/30/cryptocurrency-and-taxes-what-you-need-to-know.html
Bitcoin had its coming-out party in 2017. With all the excitement and opportunities around cryptcurrency, it might be easy to forget about crypto taxation. Almost every bitcoin or other "altcoin" transaction — mining, spending, trading, exchanging, air drops, etc. — will likely be a taxable event for U.S. tax purposes.
A Reddit user who was "surprised" to learn he owed the IRS roughly $50,000 from his crypto-trading profits - money that he had not set aside when he cashed out his bitcoins at the height of the boom - complained in a viral post that crypto trading "ruined his life."

The alleged trader, who uses the screenname Thoway, explained that he bought eight bitcoins for $7,200 in January 2017 then cashed them out in December for about $120,000. Here's the catch: his altcoin investments quickly sunk, eating away most of his bitcoin profits. But unbeknownst to him, by selling his bitcoin, Thoway had inadvertently triggered a "taxable event".
https://www.zerohedge.com/news/2018...-irs-50k-i-dont-have-because-i-traded-cryptos

He "ruined his life", not Bitcoin.
 
  • #82
nsaspook said:
He "ruined his life", not Bitcoin.
By investing in cryptocurrency!
 
  • #83
I don't even understand why "this ruined his life".

He bought 8 BTC at $7200 each, then sold them at $15000 each. OK, he made $62,400, so if that were the end of the story, he owes around $15,600 in taxes.

He then bought $120,000 in another cryptocurrency, which for the purpose of this exercise, let's assume lost half its value. So if he were to sell the new cryptocurrency, he would have $60,000 in capital losses to offset the capital gains, so he would owe taxes on $2400, or about $600. He would also have $60,000 in cash from the sale. So he started with $57,600 and ended up a year later with $59,400 after taxes: an after-tax yield of 3.1%.
 
  • #84
Vanadium 50 said:
I don't even understand why "this ruined his life"...
Obviously you only pay taxes on profits, so in order to pay taxes you have to have profited. His reaction to his net good fortune is called "whining".
 
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  • #86
Poor guy - needed to create an offsetting capital loss in same tax year ? Shoulda saved that windfall for a rainy day like April 15th..
 
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  • #87
russ_watters said:
Obviously you only pay taxes on profits, so in order to pay taxes you have to have profited. His reaction to his net good fortune is called "whining".

I think you're right. His problem is that he made some money, didn't want to pay taxes on it, and still doesn't. The only real connection to Bitcoin is that he probably figured he could get away with it because, well, because Bitcoin.
 
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  • #88
I looked into this a little more. Mr. Thoway made an even bigger profit: the BTC he bought were at $900, or $7200 total. When he made his profit, he took the money he should have used to pay taxes on it to invest in other cryptocurrencies, and lost the money.

This is a sad story, but it's entirely Mr. Thoway's fault. Had he paid a CPA or read the tax code himself, he would have known to sell the falling cryptocurrencies in 2017 so he could offset the capital gains. Furthermore, there's really no Bitcoin aspect to this, other than that happened to be where he made his money. The same story could be said had it been real estate, or fine art, or frozen concentrated orange juice futures.
 
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  • #89
https://www.technologyreview.com/s/...r-sleuths-who-track-cryptocurrency-criminals/
Robinson won’t name his clients, but a quick search on USAspending.gov reveals that they include the US Drug Enforcement Administration, the Internal Revenue Service, the FBI, and Immigration and Customs. Chainalysis works with those and more, including financial regulators like the SEC. Chainalysis also says that Europol and more than half the police forces in Europe are using its software.

The US Treasury’s interest in the blockchain reflects the fact that crypto-crime isn’t limited to coin heists and black markets. It’s also about fraud and tax evasion. “This is going to be an interesting tax year,” says Jeffrey Robinson. “It’s the first time in the US where they’re cracking down on Bitcoin exchanges for tax purposes.”
 
  • #90
https://www.bloomberg.com/news/arti...g-vix-alarm-says-tether-used-to-boost-bitcoin
Tether, one of the most-traded cryptocurrencies, shows a pattern of being spent on Bitcoin at pivotal moments, helping to drive the world’s first digital asset to a record price in December, according to research by a University of Texas professor known for flagging suspicious activity in the VIX benchmark.
“Tether seems to be used both to stabilize and manipulate Bitcoin prices,” finance professor John Griffin and co-author Amin Shams wrote in a paper released Wednesday. Outside spokesmen for Tether and related cryptoexchange Bitfinex didn’t immediately respond to messages seeking comment.

http://www.businessinsider.com/bitc...r-alleges-bitfinex-tether-manipulation-2018-6
Bitfinex CEO JL van der Velde said in an emailed statement: "Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex."
 
  • #91
Gosh, you mean that there was criminal activity centered around Bitcoin? How can this be?
 
  • #92
In slightly old news, Bitcoin is trading at about a third of what it did at its peak.
 
  • #93
Vanadium 50 said:
In slightly old news, Bitcoin is trading at about a third of what it did at its peak.
That just leaves more room for growth.
 
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  • #94
Blockchain 51% attack on Bitcoin fork.

https://www.ccn.com/fools-gold-bitcoin-fork-faces-cryptocurrency-exchange-delisting-after-51-attack/
As CCN https://www.ccn.com/bitcoin-gold-hit-by-double-spend-attack-exchanges-lose-millions/ at the time, the attackers managed to steal an estimated $18 million worth of BTG from multiple cryptocurrency exchanges by using rented mining rigs to accumulate a majority of the Bitcoin Gold network’s hashpower. This allowed them to execute a double spend attack, through which they rewrote recent blockchain data to reverse payments and steal funds from exchanges.

https://www.coindesk.com/blockchains-feared-51-attack-now-becoming-regular/

Mining compute farms are being used to attack cryptocurrency exchanges using equipment designed generate coins. :nb)
 
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  • #95
I hope that Nigerian 'Prince' didn't invest in cryptocurrencies.

https://cointelegraph.com/news/nige...coins-disintermediation-is-a-critical-concern
In March, the Nigeria Deposit Insurance Corporation also warned Nigerian citizens against the use of cryptocurrencies, stating that they don’t recognize them as legitimate currencies. Adikwu Igoche, an NDIC executive, said that cryptocurrencies are not authorized by Nigeria’s Central Bank and consequently aren’t insured by them.
https://www.ccn.com/bitcoin-price-drops-to-new-yearly-low-at-3200-whats-causing-the-decline/
On December 14, following a fairly large sell-off from the $3,400 region, the https://www.ccn.com/bitcoin-price/ dropped to a new yearly low at $3,200.

As Bitcoin (BTC) declined in value, other major cryptocurrencies including https://www.ccn.com/tag/ethereum, https://www.ccn.com/tag/stellar, and https://www.ccn.com/tag/bitcoin-cash experienced large losses against the U.S. dollar, with BCH falling by more than 11 percent.
 
  • #98
russ_watters said:
If that's true, it's a colossally stupid security setup!

It's more likely possible criminal activity.
https://www.newsbtc.com/2019/02/05/...o-bitcoin-funds-could-it-more-than-a-mistake/
Furthermore, the researchers found that QuadrigaCX used highly deterministic wallets to manage client funds. These wallets would enable the exchange to generate millions of unique bitcoin wallet addresses from a single, original clustered wallet address. Zerononcense claimed that it had recognized one of such grouped addresses with the help of WalletExplorer.com, a service which is supposedly good at “address clustering.”
...
Therefore, it is likely that Quadriga was pitting traders’ positions against each other to fulfill deposit/withdrawal requests.

“QuadrigaCX did not have a designated hot or cold wallet to send the customer their funds,” wrote Zerononcense. “In specific, they were forced to aggregate funds from disparate, disorganized locations in order to ensure that the withdrawal was successful.”

Ethereum Cold Wallets Missing Too
Separate research shared by My Crypto CEO and Founder Taylor Monahan revealed a similar case for Ethereum. She shared QuadrigaCX’s three ether wallet addresses. Two of these wallets made huge withdrawals to addresses associated with other top exchanges such as BitFinex, ShapeShift, and Poloneix. Between 2015 and 2017, Quadriga had made withdrawal worth approx $22 million, adjusted according to ETH/USD rate change.

https://www.ccn.com/wheres-the-missing-150-million-crypto-exchange-quadrigacxs-fiasco-gets-weirder-with-new-research
Some of the main addresses of QuadrigaCX also reportedly sent outgoing transactions after the death of its CEO Gerald Cotten, which should not be possible if the CEO had full control over all of the firm’s wallets.

There are many parts of the QuadrigaCX narrative that are uncertain and as Kraken CEO Jesse Powell put it, unbelievable.
...
No definitive conclusions can be driven until the local police release its report on the exchange.

But, the details on the wallets or addresses linked to QuadrigaCX which have emerged in the past week have led analysts and investors to become skeptical about the current situation involving the exchange and its loss of $150 million and whether the $150 million existed in the first place.
 
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  • #99
https://www.adelaidenow.com.au/news/law-order/man-demands-answers-after-police-raid-damages-suspected-adelaide-drug-house-turns-to-be-cryptocurrency-mining-setup/news-story/bd936a9dd57eb7a0343908437232ec60

 
  • #100
TheBlackAdder said:
This thread should be called schadenfreude.
A little, yes. But more of a warning.
I'd rather have a visibly volatile deflationary store-of-value (which increases the value of your savings over the years) than a seemingly stable inflationary store-of-value (which halves the value of your savings over the course of 25 years, given a median inflation of 2.7%).
Are those my only two choices? I don't think I know anyone who uses money as a long term store of value.

...If so, I guess my answer would depend on how volatile. Bitcoin is so volatile, so new, and so technologically flawed that I don't think you can reasonably predict what its price will be in 25 years - you can't even claim to know whether it is inflationary, deflationary or neither (the volatility is much larger than the long term trend). The safest prediction for its value in 25 years is zero.
Bitcoin is not just some runaway code on thousands of computers. A vast community of computer scientists, cryptographers, engineers, etc. are working on it. It's not an experiment anymore like it was 10 years ago. Most skeptics seem to forget to imagine what's happening in the background. Occam's Razor; what's more likely? That all these Bitcoin exchanges and developers just happen to be created all over the world, separately, because of some scam?
Yes, that is the most likely. Stuff like that happens all the time. At one time there were more Beanie Babies in the United states than there were people - it had way more Believers than Bitcoin does. Through McDonalds they once sold 100 million of them in 10 days. Today when you donate them to charity they weigh the garbage bag and calculate the tax write-off value by the pound. Unfortunately you won't even be able to do that with Bitcoin.
 
  • #101
TheBlackAdder said:
Bitcoin protocol is a technology like TCP/IP; and I do not think anyone would agree if someone called TCP/IP vs. Beany Babies a fair comparison.
On that line of thought it is not the TCP/IP but the usage based internet tariff is what would be a fair comparison.

Well, that's still not accurate. That's still the price of a 'something'. Maybe that walk-based pocket-monster gathering (sorry, I forgot the details) would fit.
 
  • #102

Billionaire founder of crypto exchange Binance says he's 'poor again' after its luna holdings — once worth $1.6 billion — crashed and are now worth just $2,200​

https://finance.yahoo.com/news/billionaire-founder-crypto-exchange-binance-053545416.html

Binance's luna holdings were worth $1.6 billion in early April at the token's peak price. The coin traded at about $0.0001468 on Thursday.

Luna's value has plunged in the past two weeks.

Its implosion started when its sister token, terraUSD, lost its peg to the US dollar; the two tokens' valuations are tied to each other. When terraUSD's price fell, investors rushed to dump their holdings in a scenario similar to a bank run. TerraUSD's plunge, in turn, dragged down luna's price.

Easy come, easy go.
 
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  • #103
He must have a strange definition of "poor again".
Despite his comments, Zhao, 45, definitely isn't broke. Bloomberg estimated his net worth at about $14.8 billion as of Thursday.
 
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  • #105
How Crypto Disappeared Into Thin Air
When a currency’s value is based on belief alone, it’s liable to evaporate.
https://www.theatlantic.com/ideas/archive/2022/05/how-cryptocurrencies-defied-gravity/629926/
"Since November, something like $1.5 trillion in cryptocurrency value has been erased. Bitcoin and Ethereum, the market’s bellwethers, are both down about 60 percent from their peaks. And most strikingly, the so-called stablecoin Terra and its sister token, Luna, which together were valued at about $60 billion six weeks ago, imploded in a matter of days and are now essentially worthless," James Surowiecki writes.

"This huge sell-off of course raises a natural question: What happened? You can certainly point to potential culprits. Inflation and interest rates are rising—though cryptocurrencies were supposed to be hedges against inflation, and indifferent to what’s happening in the “fiat” financial world. Stocks are being sold off—though one of crypto’s big selling points was that it was supposed to be uncorrelated with other assets. But really, there’s a much simpler explanation: People’s faith in crypto wavered. And faith, not fundamentals, is what most of crypto’s value depends on."
It only had value as long as someone could convert to dollars (or real currency) sometime in the future.
 
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