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Bitcoin 1 - 0 FBI

Tyler Durden's picture




 

Submitted by Pater Tenebrarum via Acting-Man blog,

The Dread Pirate's Cash Stash is Still Safe

As a quick addendum to our recent post on the Silk Road bust and what it means for bitcoin (surprisingly little), here is something that strikes us as truly funny. Apparently the FBI finds itself unable to confiscate the Dread Pirate's stash of bitcoins:

“Closing down the Silk Road and arresting its alleged operator has left the FBI in uncharted territory. After shuttering the hidden site, law enforcement went to work confiscating the money and materials belonging to supposed drug kingpin Ross Ulbricht, but this usually routine procedure is proving especially troublesome in this case. The cache of more than 600,000 bitcoins in Ulbricht’s personal fortune are still inaccessible to the FBI. The only way to move Bitcoins out of a private wallet is to have the corresponding private key to authorize the transaction. The FBI has been unable to get through the encryption protecting Ulbricht’s wallet, leaving all those Bitcoins — amounting to roughly $80 million at current rates — out of reach. Based on publicly available data, this is about 5% of all Bitcoins in existence right now.

 

Funds held by users of the site, however, were not so well-protected. Before completing transactions on the Silk Road, users would load Bitcoins into an escrow account on the site. The agreed upon coins would only be transferred to the seller’s private wallet once the buyer had verified delivery of the goods. When the feds took over the Silk Road, there were over 26,000 Bitcoins in user accounts that were relatively easy to snatch up.

 

The FBI has transferred all 26,000-plus seized Bitcoins to its own personal wallet, but because Bitcoin transactions are tracked publicly, it didn’t take the internet long to find the FBI’s wallet address. Users have taken to transferring tiny fractions of a Bitcoin to the FBI with public comments attached decrying the war on drugs and the arrest of Ulbricht. Users have even helpfully tagged the wallet address as “Silkroad Seized Coins.” You can check out the comments as they come in by watching the blockchain for the FBI’s wallet.”

 

(emphasis added)

In other words, one of bitcoin's main attraction – that it is untraceable like cash and cannot be 'stolen' in the conventional sense by outsiders  – remains in perfectly fine fettle. The FBI's inability to seize the Dread Pirate's bitcoin stash is a great PR victory for bitcoin.

As to users inundating the FBI's bitcoin wallet with protests against the drug war, this is an additional irony. Since it is not possible to identify them, they need not fear any reprisals, which is giving them an excellent opportunity to vent their opinion on the senseless 'drug war'. That isn't going to change anything, but we suspect that even within the FBI there are by now many people who are questioning whether the 'war on drugs' makes any sense. As noted previously, after more than 30 years, it has yet to attain a single one of its purported official objectives. That leaves basically only one possibility if one employs Occam's razor in pondering the question why it is continued: the official objectives are not the true objectives. There is a hidden agenda.

 

Pecunia Non Olet

The authorities have seized Ulbricht's bitcoin 'wallet' – but this is not sufficient to take control of the funds:

“While authorities have control of Ulbricht’s wallet, that’s not the same as having the funds. It’s akin to seizing a computer from a suspect with valuable data inside, but being unable to access it because strong encryption was used to prevent access. Ulbricht himself surely has the necessary information to unlock his wallet — otherwise there would be little use in accumulating $80 million worth of Bitcoins. It’s possible prosecutors will use the leverage they have on him to work out a deal that includes turning over the encryption keys.”

If Ulbricht is betting on government's greed providing him with a little bit of leverage in negotiations, he is probably correct. It gets even funnier though – the government doesn't recognize bitcoins as 'money' – but that won't keep it from spending this 'non-money'. As the author notes, the essentially bankrupt government no doubt can use the cash infusion:

“The government doesn’t even want to recognize Bitcoins as money, but that apparently won’t stop it from spending them. In these dark days of government shutdowns and sequestration, Uncle Sam could use the infusion of cash. The Bitcoins taken as part of the Silk Road operation will be held until legal proceedings have finished, then they will be liquidated, according to an FBI spokesperson. Users who are out those 26,000 BTC are unlikely to be seeing them again. Even if Ulbricht avoids spending the remainder of his days in prison, his $80 million fortune probably won’t be waiting for him.”

(emphasis added)

They will throw the book at Ulbricht, so it is highly doubtful he will ever leave prison again. Of course it cannot be categorically ruled out that drug laws will change one day and some drug-related sentences will then be altered retroactively. Anyway, bitcoin's reputation as a safe and anonymous form of money remains intact and may even be enhanced in the wake of the Silk Road bust. As to Uncle Sam, he is simply acting according to the ages old maxim:

Pecunia non olet”.

 

Bitcoin

 

Bitcoin, daily: still holding firm after the initial 'mini crash' – click to enlarge.

 

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Tue, 10/08/2013 - 18:07 | 4035782 The Shootist
The Shootist's picture

How many characters are a PIN? Shouldn't be hard.

Tue, 10/08/2013 - 18:15 | 4035794 animalspirit
animalspirit's picture

Characters for a Bitcoin private key?  32 (or, 256 bits).

Enough to keep all the computers on the planet busy until long after the sun burns out.   And then for a few trillion years after that as well.  And that's just to spend the funds for a single Bitcoin address.  Silk Road controlled a ton of addresses.

Now if you are asking about the difficulty in cracking the passphrase used for an encrypted wallet, nobody but Dread Pirate Roberts knows.   If it was easy enough to crack (i.e., less than a few decades) he'll probably share the passphrase with someone he trusts to send the coins to a new address anyway, presuming that hasn't already been done.

Tue, 10/08/2013 - 18:17 | 4035833 EmmittFitzhume
EmmittFitzhume's picture

Haha. Sweet!

Tue, 10/08/2013 - 21:29 | 4036598 MisterMousePotato
MisterMousePotato's picture

@animal ... if only upper/lower alphanumeric characters are used (which is my recommendation), then 43 characters will lend 256 bits of entropy. Interestingly, one will find in the literature that there is no expectation that any digital computer (or combination thereof) will *ever* be capable of breaking such a password due to currently understood limitations from fundamental physics; in other words, constraints imposed by such things as the total energy output of the sun since the beginning of time and/or the number of atoms in the universe or similar exercises in astrophysics, which I really don't understand very well, but, fortunately, I don't have to to understand them at all in order to know how to create, use, and safeguard passwords that will resist any and all efforts to undermine them. (At least for the nonce.)

(Cue the quantum computer nerds.)

Tue, 10/08/2013 - 18:22 | 4035844 VD
VD's picture

would be next to impossible to send coins to new addy since FBI would track them and next reciepient gets busted. better to legalize all drugs and cut FBI by 60%, but then the real agenda is prison-industrial complex and gov control. one day new consciosness will render these gov agencies much smaller...at least that's the dream...

Tue, 10/08/2013 - 20:27 | 4036400 Non Passaran
Non Passaran's picture

> FBI would track them and next reciepient gets busted.

LOL.
How exactly would they do that?
I'll give them a bitcoin address and let's try.

Wed, 10/09/2013 - 00:17 | 4037014 SpykerSpeed
SpykerSpeed's picture

There's no way to know who controls a Bitcoin address, dummy.

Tue, 10/08/2013 - 18:31 | 4035891 JuliaS
JuliaS's picture

I'm wondering if the FBI rented out its last waterboard.

http://xkcd.com/538/

Tue, 10/08/2013 - 18:52 | 4035960 Pool Shark
Pool Shark's picture

 

 

Assuming DPR makes bail sometime in the next few months; what's to stop him from transferring/spending those Bitcoins himself?

 

Tue, 10/08/2013 - 19:00 | 4035994 Silver Bully
Silver Bully's picture

'Silk Road controlled a ton of addresses.'

Note: part of the attraction of bitcoin is that there is a finite number of them that will eventually be 'mined'. I.E - a limited supply.

So now that the Feds have effectively taken 600,000 bitcoins off the table (or 5% or ALL bitcoins currently in existence, according to the article), won't this affect the exchange rate of bitcoins just a tad?

Just a (bullish) thought.

Tue, 10/08/2013 - 19:27 | 4036151 DCFusor
DCFusor's picture

Sadly, you need to learn a little more crypto and computers.  256 bit keys are quite breakable these days, if you have the computers, and the government does indeed have the computers specialized for just that.  Give them a couple weeks, not the age of the solar system, tops.

Tue, 10/08/2013 - 19:29 | 4036176 Papasmurf
Papasmurf's picture

There are 256 processors on one card, many cards in a rack, many racks in a center.  This can be cracked in short order with a parallel attack.

Tue, 10/08/2013 - 20:07 | 4036332 TheHound73
TheHound73's picture

If this were actually true, the cost of the hardware would be negligible compared to the coins gained if you crack, for instance, address 1933phfhK3ZgFQNLGSDXvqCn32k2buXY8a (111,111 BTC or $14mil).  But your statement is false.

Tue, 10/08/2013 - 21:33 | 4036614 MisterMousePotato
MisterMousePotato's picture

The Hound is correct. In fact, there is no expectation that any digital computer (or combination thereof) will *ever* be capable of breaking a password with 256 bits of entropy due to currently understood limitations from fundamental physics; in other words, constraints imposed by such things as the total energy output of the sun since the beginning of time and/or the number of atoms in the universe or similar exercises in astrophysics.

Tue, 10/08/2013 - 22:16 | 4036737 ForTheWorld
ForTheWorld's picture

"AES permits the use of 256-bit keys. Breaking a symmetric 256-bit key by brute force requires 2128 times more computational power than a 128-bit key. 50 supercomputers that could check a billion billion (1018) AES keys per second (if such a device could ever be made) would, in theory, require about 3×1051 years to exhaust the 256-bit key space."

https://en.wikipedia.org/wiki/Brute-force_attack

I know, I'm quoting Wikipedia, but the math is sound.

Wed, 10/09/2013 - 04:44 | 4037217 fourchan
fourchan's picture

well that sounds more secure than my passbook saving account ben has access to with his printer.

Wed, 10/09/2013 - 01:11 | 4037087 GoldMeUp
GoldMeUp's picture

Sadly, you need to learn a little more crypto and computers.  256 bit keys are quite breakable these days

 

Umm, lol.  Someone is a bit misinformed. 128-bit keys are beyond brute forcing for the far forseeable future.  256-bit keys are unimaginably impossible to brute force.  It most likely will never be done, even in thousands of years time.  128 is impossible anyway, but 256 is used just in case quantum computers are invented, because 256 will be impossible even with powerful quantum computers.

Tue, 10/08/2013 - 18:18 | 4035830 Bangin7GramRocks
Bangin7GramRocks's picture

N-WORD PLEASE! Sell your wares somewhere else. The FBI hasn't looked very hard. The NSA can crack any code and find anything digital. Deal with their omnipotence! Bitcoin is not secure from the government.

Tue, 10/08/2013 - 18:28 | 4035863 CH1
CH1's picture

The NSA can crack any code and find anything digital.

Tell that to Ed Snowden.

Ignorance is part of life, but acting like you know something - when you have no freeking idea - just exposes you to pain.

Learn something or be quiet.

Tue, 10/08/2013 - 18:36 | 4035914 Bangin7GramRocks
Bangin7GramRocks's picture

And what about Ed Snowden? Do you really believe they had no idea he was stealing data and then took a unplanned trip to Hong Kong? OK Slappy, how about this angle. Hey Silk Road Cyber Punk. Tell us all the details and how to get your stash or we sentence you to life in a SuperMax prison. He will shit his pants and then tell them everything. You want there to be rebels who can beat the system, but it just doesn't exist anymore.

Tue, 10/08/2013 - 18:45 | 4035941 James_Cole
James_Cole's picture

 

NSA always uses backdoor access or courts to get keys. 256 encryption can't be hacked in the cryptography sense. 

 

Tue, 10/08/2013 - 19:26 | 4036158 DCFusor
DCFusor's picture

Ask Bruce Schneieir about that.  Y'all are just wrong about it.  Yes, they can!  Takes awhile, but not "Forever".  Not hardly.

Tue, 10/08/2013 - 19:41 | 4036237 CH1
CH1's picture

Did you even READ Schneier? He says that the algos are good. What he said was that the NSA subverted the certificate authorities.

LEARN BEFORE PONTIFICATING.

Tue, 10/08/2013 - 20:07 | 4036326 sessinpo
sessinpo's picture

apparently, progress is being made.

Andrey Bogdanov, from K.U.Leuven (Katholieke Universiteit Leuven), Dmitry Khovratovich, who is full time at Microsoft Research, and Christian Rechberger at ENS Paris were the researchers

Bogdanov added that the crack works on all versions of AES and dispelled some myths about the technology as well.

"Unlike previous results on AES, we do not need any related keys which was a very strong and unrealistic assumption about the power of the attacker," he explained.

"Our attacks work in the classical single-key setting and, thus, apply in every context, however, with huge complexities so far. The practical consequence is that the effective key length of AES is about 2 bits shorter than expected - it is more like AES-126, AES-190, and AES-254 instead of AES-128, AES-192, and AES-256. We think it is a significant step toward the understanding of the real security of AES."

The attack has been confirmed by the creators of AES, Dr Joan Daemen and Professor Dr Vincent Rijmen, who also applauded it.

Tue, 10/08/2013 - 20:24 | 4036393 Non Passaran
Non Passaran's picture

If he had a copy of the wallet and if he manages to get the message out by the time they crack the confiscated wallet the coins will have been used.

Tue, 10/08/2013 - 19:59 | 4036309 dark pools of soros
dark pools of soros's picture

you are a stooge

 

the feds may have the cold storage but that can be replicated by someone else and unlocked if they have the key from DPR...  then they could be transferred to 10,000 addresses to spread it all around..  they can only do anything once it is exchanged for money and I doubt they would track down someone selling some of those coins on the streets of a few bumfuck cities around the world

 

But, I will say this DPR seems to be a bagholder patsy..  if you are wondering what I just implied, you need to go watch the Princess Bride

 

Tue, 10/08/2013 - 20:59 | 4036492 Simplifiedfrisbee
Simplifiedfrisbee's picture

Why not simply create a new virus and spread to bitcoin sites/merchants? Infect the members.

Tue, 10/08/2013 - 19:46 | 4036248 CH1
CH1's picture

Do you really believe they had no idea he was stealing data and then took a unplanned trip to Hong Kong?

Ah, I see... you got a secret message on your decoder ring.

Tue, 10/08/2013 - 23:17 | 4036904 Ralph Spoilsport
Ralph Spoilsport's picture

LOL!

Tue, 10/08/2013 - 18:41 | 4035908 notquantumdum
notquantumdum's picture

I'm not convinced the NSA can crack "any" codes.  'Maybe most simple ones.  And, I question just how much the NSA shares with the FBI.  And, any public-private keypair encryption codes -- such as many other online financial transactions are typically conducted -- can theoretically be cracked with some ease if one has access to a quantum computer with sufficient qubits.  Does bitcoin use public-private keypairs?  If not, it might not be so easy to crack.

Does the NSA have enough qubits of quantum computing?  'Not sure, but the scientific papers sure don't seem to indicate any such capabilities being out there just yet.

Tue, 10/08/2013 - 19:24 | 4036143 seek
seek's picture

Actually most of the quantum cracking proposals seem to indicate it just halves the difficulty of the keyspace (e.g. makes a 256 bit key as easy as a 128 bit key.)

So even if they had the capability, it probably won't work very well, and likely wouldn't be wasted on small potato efforts.

There is a growing pile of evidence your initial assumption, that the NSA can't crack "any" codes, is valid. Lavabit being just the most recent case, it's pretty clear the NSA relies on technical means to intercept communications, but legal means to compel the disclosure of encryption keys. That certainly makes their supposed code-breaking cajones look rather small, given that they need lawyers handing them the keys to listen in.

Tue, 10/08/2013 - 19:36 | 4036205 DCFusor
DCFusor's picture

Not slamming you, but the difficulty goes up exponentially, not linearly, with number of bits in almost all systems.  Eg, 256 bits isn't twice as hard to crack as 128, but 2^128 times as hard.  Much of the above is ignorance of crypto.  Go buy a book, say Applied Cryptography and learn something.

"Rubber hose" crypto is indeed more popular with the goons in .gov, as it's often faster and cheaper - and they get what they want by claiming to "reduce" the charges.  Kind of like a store that marks up everything 100% one day, then offers a 50% off sale...and suckers fall for it.

Tue, 10/08/2013 - 21:56 | 4036626 MisterMousePotato
MisterMousePotato's picture

DCF is correct. In fact, there is no expectation that any digital computer (or combination thereof) will *ever* be capable of breaking a password with 256 bits of entropy due to currently understood limitations from fundamental physics; in other words, constraints imposed by such things as the total energy output of the sun since the beginning of time and/or the number of atoms in the universe or similar exercises in astrophysics.

And even conceding the point made by sesinpo, supra, so what? Make it 44 upper/lower alphanumeric characters and we're talking - what? - 260? 265? bits of entropy. Even conceding further the reality of quantum computing (which I'll believe when I see) ... so what? Make it an 88 character password (actually, it'd be far less, but you get the point [I'm too lazy to do the math; not easy for me]) and we're back to never, ever 'crackable'.

And what's the difference? Is it really that much easier to copy and paste a 43 character string than an 88 character string? Just gotta hide it, and there's a zillion ways to do that, i.e.:

copy /b [anyimage].jpg + [secretpassword].txt[(encrypted).zip] etc./whatever [son's graduation].jpg

Or how 'bout some random 32/43/44/88 or, oh, say, 83 character piece of one of those keys generated by PGP or OpenPGP (sp?) (and stored openly in your documents's folder)or, for that matter, ever look at the header of some email saved on your disk? Down 2 rows, over 13, and the next 47 characters oughtta do it. Actually, any such 47 characters *will* do it.

Do not let TPTB convince you that they have some magic McGiver computer somewhere that will allow them, no matter what you do, to get at what you don't want them to get to. There isn't, and they can't, provided you don't choose "password123" or "Qeadzcwrsfxv1331" (actually quite clever ... try typing it) as your password.

Make a truly random jumble of sufficient length, and it cannot be broken, and will never be breakable, either. (Unless Ovomit and the GOP-e sit down and negotiate a repeal of the laws of physics.)

Tue, 10/08/2013 - 19:36 | 4036203 notadouche
notadouche's picture

They may be able to crack any code but apparently have problems in tracking internal emails.  That is where the bitcoin is most secure.

Tue, 10/08/2013 - 19:28 | 4036156 TheHound73
TheHound73's picture

"How many characters are a PIN? Shouldn't be hard."

256 bits in a bitcoin private key.

 

Wed, 10/09/2013 - 02:54 | 4037149 Hobbleknee
Hobbleknee's picture

"Since it is not possible to identify them"

Actually, they can identify them.  Straight from Bitcoin's site:

"However, Bitcoin is not anonymous and cannot offer the same level of privacy as cash. The use of Bitcoin leaves extensive public records."

Wed, 10/09/2013 - 08:26 | 4037416 lucyvp
lucyvp's picture

it doesn't matter that they can't get the coins. what else can they get? Can they steal this guy's house, cars, throw him in jail, throw is mom in jail?

BTW I'm sure the NSA has the password :)

Tue, 10/08/2013 - 18:06 | 4035786 Teddy Tenpole
Teddy Tenpole's picture

 

 

FBI is so 1980s.

Tue, 10/08/2013 - 18:13 | 4035798 One And Only
One And Only's picture

I think bitcoin is the closest thing to currency perfection we have.

No one can point to a single flaw in it.

Tue, 10/08/2013 - 18:22 | 4035850 Herd Redirectio...
Herd Redirection Committee's picture

You offer a girl 10 bitcoins, and I'll offer gold jewellry (weighing 1 troy oz), and let her decide.

Tue, 10/08/2013 - 18:27 | 4035871 CH1
CH1's picture

You offer a girl 10 bitcoins, and I'll offer gold jewellry (weighing 1 troy oz), and let her decide.

And if she chooses Bitcoin, don't ever let her go!

Tue, 10/08/2013 - 19:06 | 4035907 JuliaS
JuliaS's picture

If a guy offers you 10 bitcoins and you take them, he won't ever let go of you. He's an FBI agent.

Tue, 10/08/2013 - 18:42 | 4035923 Pladizow
Pladizow's picture

@ One And Only

Bitcoin flaw = At the mercy of the internet!

Tue, 10/08/2013 - 18:54 | 4035966 One And Only
One And Only's picture

Life as we know it is at mercy to the internet.

Most dollars for example exist as 10001010100101010.

Shut off the internet - common currency evaporates as well.

Tue, 10/08/2013 - 18:31 | 4035889 All Out Of Bubblegum
All Out Of Bubblegum's picture

Smart girls would look at some charts and then take five bitcoins based on their performance in the past two years and half an oz. of Au.

Diversity never hurts.

Tue, 10/08/2013 - 18:26 | 4035852 Jump The Shark
Jump The Shark's picture

The currency exchanges are the only things corruptible. The bitcoin is a mathematical certainty.

Tue, 10/08/2013 - 18:53 | 4035964 Jump The Shark
Jump The Shark's picture

Here is the link to blockchain info page where people left messages for the FBIs bitcoin wallet.
http://blockchain.info/address/1F1tAaz5x1HUXrCNLbtMDqcw6o5GNn4xqX?offset...

Tue, 10/08/2013 - 18:23 | 4035853 Teddy Tenpole
Teddy Tenpole's picture

 

 

 

umm, what is it's not backed by gold alex?

Tue, 10/08/2013 - 18:33 | 4035890 ForTheWorld
ForTheWorld's picture

If it's physical, it can be confiscated. Of course, turning off the electricity prevents Bitcoins from being exchanged, but then again, without electricity, we're pretty screwed.

Tue, 10/08/2013 - 19:41 | 4036235 TheHound73
TheHound73's picture

Time to position myself long abacuses ;)

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