This page has been archived and commenting is disabled.
FBI Launches Probe Into "Criminal Violations" By Mt.Gox
It does not appear that things are getting any better for the virtual currency exchange named after "Magic: The Gathering."
- *FBI SAID TO BE PROBING POSSIBLE CRIMINAL VIOLATIONS BY MT. GOX
- *U.S. SAID TO REQUEST DOCUMENTS FROM BITCOIN SERVICE PROVIDERS
- *MANHATTAN U.S. ATTORNEY SAID TO BE REVIEWING MT. GOX SHUTDOWN
No real reaction yet in price across Bitcoin exchanges.
As Bloomberg reports,
The office of Manhattan U.S. Attorney Preet Bharara and the Federal Bureau of Investigation are probing possible criminal violations tied to the shutdown of Tokyo-based Mt. Gox, once the world’s largest exchange for digital currency transactions, two people familiar with the matter said.
...
Bharara’s office has requested documents from businesses that provide Bitcoin services and the FBI is reviewing the matter, said the people, who requested anonymity because the matter isn’t public. One of the people said that the matter is in its preliminary stages and isn’t yet a formal investigation.
Bloomberg BusinessWeek summarizes "where did the bitcoins go?"
How did the once-largest Bitcoin exchange lose hundreds of millions of dollars’ worth of the digital currency?
Two words: transaction malleability. A hacker can tinker with the code that makes a Bitcoin transaction happen, so that it looks like it didn’t go through. The person who was supposed to receive a payment then asks again and, in Mt. Gox’s case, is paid again automatically. Mt. Gox has acknowledged this was happening. It seems that someone has been slowly bleeding it for months, leaving it without the funds to pay out legitimate withdrawals. But with the company being pretty tight-lipped about it for now, that’s only the best theory.
Was this a shot from the blue?
Not quite. Mt. Gox has been having problems for months, and people have been complaining about not being able to get their money out of the system since late last year. The company halted withdrawals altogether in early February. So while the number of lost Bitcoins is striking, many people have seen the failure of Mt. Gox as imminent for a while.
...
Where did the lost Bitcoins go?
In theory, Mt. Gox could begin to track their path by identifying the fraudulent transactions and searching for the wallets the coins ended up in. But no one is putting much faith in the accounting expertise over there at the moment. In any case, many of the tainted coins have likely moved beyond their initial destinations. If there really has been a slow leak from Mt. Gox for a long time, then the coins could have spread to the ends of the earth by now. One thing is certain: They are probably all over the place, just based on the sheer number of coins alleged to have been stolen. They’d amount to about 6 percent of the Bitcoins in existence.
Is this a security problem with Bitcoin itself?
When Mt. Gox described the issue as a bug in the Bitcoin protocol, people didn’t appreciate it. The technical issue at the root of Mt. Gox’s problem didn’t just crop up recently; it seems that Mt. Gox was left vulnerable because it didn’t protect itself against the issue.
»
- 10277 reads
- Printer-friendly version
- Send to friend
- advertisements -
proletariat casual is one of the hardest fashion statments to make.. hard being a regular jane and still be famous...
still like them and bode no insult or ill will but i have to answer the question and max K and crew are very very savvy and know what it takes to be media darlings..
that said i still feel they are as advertised and give more than they take which is a high praise from me..
So the FBI now has jurisdiction in Japan? It's a great planet.
http://www.fbi.gov/contact-us/legat/asia
it gets better. they are the NSA for the world, somehow.
Where did the lost Bitcoins go?
In theory, Mt. Gox could begin to track their path by identifying the fraudulent transactions and searching for the wallets the coins ended up in. But no one is putting much faith in the accounting expertise over there at the moment. In any case, many of the tainted coins have likely moved beyond their initial destinations. If there really has been a slow leak from Mt. Gox for a long time, then the coins could have spread to the ends of the earth by now. One thing is certain: They are probably all over the place, just based on the sheer number of coins alleged to have been stolen. They’d amount to about 6 percent of the Bitcoins in existence.
...
And there is a clear forensics trail in the blockchain ANYONE unlike SWIFT can backtrack to find out since it is open to EVERYONE who has the tools to parse through unlike SWIFT. Law enforcement only needs to tie the wallet addresses to individuals to find out WHO owns those wallet addresses. Which is their fucking job in the first place when criminality happens in a manner like this. Not only that customer ripped off has a better claim in court because ANYONE not just law enforcement or either counterparty can show exactly what happened through the block-chain. Tha trust no one allows for independent verification of movement that all sides can agree happened.
That is the beauty of the block-chain based payment system.
because ANYONE not just law enforcement or either counterparty can show exactly what happened through the block-chain.
this begs the question: for a community that brands itself as being an alternative to centralized banking systems & government control, why hasn't anyone in the community shown what exactly happened yet and allow the federales the opportunity to steal the thunder of policing the community?
Cui bono? I'll give you a hint neither side based on the arguments they make for and against. Everyone gets NSA level access the transactions in bitcoin the way the block-chain is implemented in bitcoin, other currencies use different implementations. The protection is in the privacy of who belongs to the particular wallet address when you peer into the block chain. The reality is though you can through association find in many case link anonymous addresses to not so anonymous addresses aka things like a wallet address registered at an exchange that is tied to a real person/business, bank, store like overstock.com.
Think of it this way you and me make an agreement to exchange some sort of good or service. We've essentially created a contract with 2 counter parties. We agree the medium of exchange is bitcoin to facilitate that trade of said good or service. If one counterparty reneges the other can prove without law enforcement that the transaction happened or didn't. It is a matter of contract law. I don't provide the good or service the counter party can prove using the blockchain that they paid for said transaction and the counterparty didn't deliver. It is up to law enforcement to prove then delivery didn't happen. Now on the other hand delivery does happen and the counterparty doesn't pay you can prove payment didn't happen without law enforcement and it is up to law enforcement to prove you actually provided said good or service. Laws are already in place to deal with this sort of thing concerning violation of contracts...
The best way to do exchanges is decentralized using an interation above bitcoin with the coins being contracts and when the trade is settled automatic transactions in crypto-coins only between the counter parties. Exchanges shouldn't be money transmitters in the sense of sovereign nation currencies. The individuals horse trading shouldn't be able to cash those crypto-coins out at the exchange.... It solves all these problems plus the block-chain in that setup makes it hard to cheat a trade or naked-short.
Transaction maleability can also be sniffed through a combination of open block-chain wallet address association and complaints by people scammed in this manner. There are analog equivalents and scammers almost never tend to do it once and then stop if they get away with it. They always slip up sooner or later. The technology part here allows for easier detection even when code is malicious along with community help and cooperation which in turn breeds mutual respect in policing than the old analog equivalents. Doing that though would require less resources and control of law enforcement while being moar efficient and moar empowerment to less equal entities. We can't have that now can we...
accepted possible function of blockchain...now add in reality...moore's law? how many different blockchains will be need to really have functionality? or is my customer level product going to contain elements such as
"just a a few more days for that transaction to clear mrs.jones... the blockchain crashed the european servers again and we have to use fiberoptics. yes i do agree something should be done ma'am.. i will call as soon as the blockchain arrives.." or to a supplier, " i need that memory module today! the blockchain is arriving and i dont have enough memory for the expansion after china bought america!"....
a bit mirthful but data load is just that...a load.. needs system time, bandwidth..one chain will not bind them all...(tolkien would agree)
one chain will not bind them all...(tolkien would agree)
And that is the beauty they don't.
For example you and I we use Reggie's Ultracoin for example to so in that block chain the contract is between you and I. Let's say for arguments sake it is a BTC/LTC bet. So depending upon if you both sides transfer into Ultracoin first you have the following.
Contract agreed upon coins move directly between 2 counterparties.
BTC Wallet address -> Ultracoin blockchain wallet association
LTC Wallet address -> Ultracoin blockchain wallet association
Contract taken out 2 Utracoin wallets associated by said contract.
Contract time expires
Ultracoin Wallet address -> BTC blockchain wallet association update to reflect the contract expiring
Ultracoin Wallet address -> LTC blockchain wallet association update to reflect the contract expiring
LTC and BTC block chains also update since that contract triggers an automatic transaction between both wallets.
There are other setups but you get the idea. It is self referencing many rings intertwined not one ring to rule them all. One specific blockchain to rule one specific crypto-currency or specific contract system intertwined not all contracts or crypto-currencies.
That system can be easily dealt with digitally to track including the self referencing and makes it harder to cheat because of the self referencing.
Because it is decentralized the blockchain can be spread across many machines it is parallel in nature and can be stored, searched, accessed in an unstructured decentralized manner. It is an optimization problem and when it grows to too large there needs to be criteria for parring and no storing everything in perpetuity offline. That problem is something that needs to be dealt with also is how to optimize offline storage the 'national security' agencies like the NSA have this problem how to do offline store the pertinent stuff and weed out all the cat pictures on facebook. When something like 10 gig of new content each day is coming in and 3 to 4 gigs of it are cat pictures do you really need to store all this stuff along with the added overhead used to associate it with people when it has no real value to what you are trying to do....
Please explain this step in more detail:
Is this "automatic" transaction the same thing as an "automagic" transaction?
What service will provide the data feed for the official numbers of the BTC/LTC bet? We bet X BTC to Y LTC. Which exchange will provide the official numbers to compare X and Y against? I assume Mt. Gox II is out of the question? So which exchange will be the central one in the distributed system?
As Ultracoin is nothing but Vaporware, what hypothetical year does this hypothetical transaction occur?
I am humbled to be quoted ! I like some of Mr. Middlton's ideas and with a good idea a good solution is not far behind.Your explanation goes to the spirit of my comment very well and i see a very positive outcome with the right folks and infrastructure doin as you suggest . In this crypto currency space there is still room for correction to the strength of "coins" et al. that said, without wide spread merchant adoption one is left to attempting derivative financial models. And with global use as a goal, blockchain data management may be a weak link in that scenario;{[. I agree that open ledger accounting is a value in and of itself also that properly approached, "coins" can assist small business and entrepreneur alike. But what role and what side of history originators and early adopters fall on is yet to be seen. Imho..
verbot, check out the "Open Transactions" protocol.
there's a couple utoobs on it, fascinating stuff right down this alley.
The obvious solution is we should use a system which uses no blockchain.
Another Carlin saying paraphrased , sometimes a cigar is a cigar and sometimes it is a big brown dick.
When you have tyranny of the few over many once the sides are sufficiently polarized by the few this is what happens with both sides of the polarization. These are nothing more than human fidos rationalzing not being rational on both sides both having been sufficiently dog trained by the few that pull the strings.
agreed amigo agreed.
thanks for the tech talk.
Yeah, the beauty of the situation is what laws apply to the theft of crap that did not in fact exist? A legal minefield prosecutors will avoid. Unless of course, some politician or banker lost a dime, if that is the case, behold the fury of justice in action!!!
Found him. Senator Joe Manchin (D-W.Va.) has called for a ban on Bitcoin.
http://www.businessinsider.com/senator-calls-for-bitcoin-ban-2014-2#ixzz2uTSJdLas
I just ordered popcorn in bulk from Overstock.com using bitcoin.
So hackers stole it all. Let that be a lesson. The only safe money is in your pocket.
That's impossible. The encryption was unbreakable. Even the NSA's Stellar Wind would be repelled.
The only way to lose your bitcoins was if you lost your hash...I mean hashtag .
/s
Why aren't banks reporting millions and billions of losses due to hackers? Simple answer, because it's not that easy as BTC clowns would like you to believe.
Yep, the Christmas Target hack didn't happen, conspiritards. Neither did 24 U.S. banks fail in 2013. The root of Mt.Gox's problem is incompetence. Any "stolen" coins were sent out of Mt.Gox through perfectly valid signed transactions by Mt.Gox's software. The Bitcoin protocol has no way to test for incompetence and doesn't discriminate.
I hear those drum beats calling for regulation on bitcoin exchanges growing louder.
" Obama smugly asked Eric Schmidt if Bitcoin was anything he had to worry about ".
That's all you need to know to see where this is going.
There was silk road now this Mt.Gox situation, I doubt they will let the opportunity to intervene slip by for much longer.
yea, everyone will just fall in line, when they snap their fingers.
like everyone stopped downloading music, movies, games and software. the pirate scene is....dead.
If TPTB ban bitcoin, then bitcoin will never go mainstream.
If bitcoin never goes mainstream, you ainT never gonna be rich!
Aww shucks, back to the drawing board.
Criminal facilitation ... Money laundering ....breaking Patriot Act.....etc,etc
PATRIOT Act will be applied in all of its Glory to stem "terristy" activity.
It just seems bizarre that FBI would waste it's resources on Bitcoin.
No one had to buy Bitcoin.
So the LIBOR scandal enveloped every person on the planet who has dealings with a bank.
You'd think they'd go after that target rich environment.
Bitcoin?
Puleeeeze.
Q: Who sends the blood hounds?
A: Whoever got burnt and has enough influence.
Libor and Corzine obviously didn't afflict any "hardship" on this group. Madoff on the other hand did and he was a convenient patsy to cover the larger crimes.
Odd, the FBI jumps right on potential criminality in the fiat bitcoin ponzi, BUT Corzine walks without a raised eyebrow from the MFG theft....
Welcome to MuriKa!!!
Certainly looks...dead.
http://bitcoincharts.com/markets/currency/USD.html
"No real reaction yet in price across Bitcoin exchanges."
There shouldn't be. There is a problem at MtGox. They should deal with it. Why would the price of bitcoin drop because of a problem at a business?
Why DID the price of bitcoin drop because of a problem at a business?
FIFY
The price dropped from $800 to $500/600 in February on Mt Gox news. You tell us please, why DID the price drop?
because the fiat value of the bitcoins has NO VALUE but what that business & others like it purport it to have in the form of a price. Price isnt' value. Real value is anything but price & bitcoin has none. It's vaporware & this is how you can see it proven.
So. FBI investigating bitcoin possible fraud is bad for bitcoin. FBI doing diddly squat about gold manipulation is great for gold bulls?
Like I said before, I wouldn't bet my house on bitcoin, but why not take a shot and see where it goes? Isn't some risk taking part of economics fundamentals? It's something new, who knows where it will lead to. I have some bitcoins I bought at $20. They are now at $600 or so. Worse that could happen is I lose less than $1000. But the reward on the other hand...
And yes I own metals also.
Simply clearing the path for the bankers and regulators
The Bitcoin protocol is not entirely blameless in this. The transaction database, of which each participant must keep an updated copy, is growing exponentially -- from 1GB to 15GB in a mere 18 months. Searching this haystack for a specific transaction gets harder all the time, tempting programmers to take shortcuts that hackers can then exploit.
Since the early days of the internet, visionaries have dreamed of micropayments enriching worthy content providers a few pennies at a time. It'll never happen, because economies of scale favor thieves over thief-catchers. Only by charging ten dollars per transaction can banks muster the resources to prevent theft, and even then it's an endless battle. It sucks but it's true!
They should have put Jon Corzine in charge of it. The Just Us department would have looke the other way.
Want to succeed with a crimonal enterprise hire the big boys. Their pricey but are well connected.
Boating accident.
Davey Jone's wallet?
So "if" stuff was stolen it has to show up on the blockchain right?
Probably all stolen by the NSA, that's what the cool kids were doing while Snowden was emptying their ash trays.
Next up, JPMorgan coin. JPM to BRIICs: Thanks for the free market research and pump and dump! Think Seer is right they'll be implicated on operating a frac reserve. Can't have that competitor ever getting off the mat.
For the next few years anyways, the memo is "Your innovation gets funded and goes through us. Or else..." Best to take JPM's money and steer the big ship one or two degrees in the right evolutionary direction than stagnate on JPM's stale banking models and merely complain.
I know saying that won't get me green arrows but best to understand how the investment world really works as an innovator and make a small contribution (like gaining a couple yards on a football field) to mankind then think one can change the world overnight.
Kudos to Bitcoin for that small but important contribution toward making banking a bit more utilitarian and forcing existing banking to compete.
Funny how the FBI will launch an investigation like this mere hours into the situation... but oh how the months have passed on things like Fast and Furious, Behghazi, etc.
Create some physical coin/token currency here in the US and you're never heard from again. Create a vaporware-currency and the government appears to not be concerned.
What does that tell ya?
"You see what happens? This is what happens when you fuck a central bank in the ass!".
"Bharara’s office has requested documents from businesses that provide Bitcoin services and the FBI is reviewing the matter"
I smell a RICO case shaping up. IIRC in the Silk Road charges, exchange facilitators were later lumped in with what the BTC was used for. Dollars for BTC later used to buy drugs = criminality. As if an ATM withdrawal from Wells Fargo embroils WF in a drug case.
They're looking for leverage. Sen Manchin (D-WV) has called for a federal crackdown on BTC.
wondercoin powers ACTIVATE
form of ... EPIC FAIL
The last time I checked, Japan was outside the FBI's jurisdiction. Just saying.