Wednesday, February 8, 2023

Bitcoin Crime and Punishment: Who’s Looking After the Users?

Bitcoin Crime and Punishment: Who’s Looking After the Users?

A lot has changed since Bitcoin was thrust upon the world about eight years ago. A world that once criticized, scorned, and mocked this technology has had to take notice — and embrace what is possibly the greatest paradigm shift of the 21st century. The scandals and controversies of the past have taken a backseat to progress and prestige. On the other hand, these last few weeks have been filled with stories of enterprising young men operating criminal organizations that would put Tony Soprano to shame.

Also read: Genesis Mining Promises to Pay Users After Hot Wallet Hacked

Vinnik May Be the Biggest Bitcoin Gangster of All

In late July authorities in Greece arrested Alexander Vinnik, a thirty-seven year old Russian citizen accused of laundering over $4 billion USD worth of bitcoin through the exchange he allegedly operated, BTC-e. Authorities also claim that Vinnik is the primary suspect behind the missing 650,000 BTC taken from Mt.Gox.

BTC-e logoWith a street value of almost $2 billion today, this is the largest reported heist in history, only comparable to Saddam Hussein’s $1 billion withdrawal from Iraq’s central bank back in 2003, as he attempted to flee from coalition forces.

Since this news broke BTC-e has gone down, and users of the exchange have been left without access to their funds. On top of that, FinCEN has fined the exchange over $100 million for failing to follow AML/KYC regulations.

And… It’s Gone

Also in July, federal agents arrested Ted Price for allegedly stealing over $50 million worth of bitcoin. Price even admitted to the crime once in custody, claiming that he designed malicious wallet software that would divert transactions to wallets he controlled.

If these allegations and admissions are true, then Price is quite possibly one of the first pickpocket millionaires in the world.

Crime Does Pay, Until Suddenly It Doesn’t

The digital currency space seems to be the place to quite literally see it all. The criminals in this domain operate with a mobster’s level of bravado sometimes only seen in the movies.

This was the case for twenty-five year old Alexandre Cazes, alleged Alphabay operator. Cazes supposedly acquired a net worth of over $20 million from his business, and spent large sums of his gains on luxury homes and exotic vehicles.

Investigations show that Cazes even considered himself a “professional cheater” — as he had a live-in wife, as he described her, but also another home where he would take his goomahs.

If You’re a State, on the Other Hand…

If July wasn’t hot enough already, threat intelligence group Recorded Future reported that North Korea had begun mining bitcoin right around the start of the WannaCry ransomware attacks.

Desperate for any and all income it can muster due to sanctions over a rogue nuclear program, it seems North Korea has joined the Internet of money and the 21st century of crime.

Regulated Systems Still Better When Things Go Wrong

So where are we going in the crypto space? Crime is nothing new in our society, and in fact represents part of the careful balance that is our ecosystem.

security fenceCoincidentally enough, I had my own run in with a digital Jesse James in the course of writing this piece. I was on my computer when I heard my phone chime — when I glanced down, I saw my bank app letting me know that I just spent $179.64 at the Apple Online Store — what a treat I thought.

Needless to say, I spent the next hour dealing with my bank and Apple. Both were able to resolve my issues for the most part. Apple reversed the charge in their system as it was still pending, and my bank allowed me to get money out of an ATM. A new card is on its way.

In stark contrast, I’ve never had a good experience with a bitcoin exchange support issue, and I’ve been fortunate enough to not have had any digital money stolen. Those that have been cyber-swiped in crypto have come to feel a burn that is rarely felt in regulated markets.

Users Need More Protection

Perhaps the big killer apps missing in crypto are consumer protections and practical security.

The issue with cryptocurrencies is that the money at stake isn’t insured, users aren’t guaranteed anything — and there still isn’t a system in place for recourse once a person has been taken advantage of.

As we progress through this new paradigm we’ll begin to see many flaws and failed hypothesis in the space. But we’re clearly all heading in the same direction — gangsters, rogue nations, and the common man — all on a trajectory to the moon.

Do you agree with these thoughts? Let’s hear yours in the comments.

Images via Pixabay

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