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

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The discussion highlights significant security issues surrounding Bitcoin exchanges, particularly focusing on the infamous Mt. Gox, which suffered a major theft leading to its bankruptcy. The exchange's management ignored critical warnings about its software's security flaws, resulting in millions lost and a tarnished reputation for Bitcoin. Other exchanges like Flexcoin and Canadian Bitcoins also reported substantial losses due to hacks and social engineering attacks. The conversation underscores the ongoing risks associated with Bitcoin transactions and the need for improved security measures in the cryptocurrency space. Overall, these incidents illustrate the vulnerabilities within the Bitcoin ecosystem that can lead to significant financial losses for users.
  • #661
Reuters reports Feds seized nearly $700 million from FTX founder Bankman-Fried
https://www.reuters.com/technology/...million-ftx-founder-bankman-fried-2023-01-21/
Jan 20 (Reuters) - Federal prosecutors have seized nearly $700 million in assets from FTX founder Sam Bankman-Fried in January, largely in the form of Robinhood stock, according to a Friday court filing.

Bankman-Fried, who has been accused of stealing billions of dollars from FTX customers to pay debts incurred by his crypto-focused hedge fund, has pleaded not guilty to fraud charges. He is scheduled to face trial in October.

. . .
The ownership of the seized Robinhood shares, valued at about $525 million, has been the subject of disputes between Bankman-Fried, FTX, and bankrupt crypto lender BlockFi.

The most recent asset seizure reported by the DOJ took place on Thursday, when prosecutors seized $94.5 million in cash from an account at Silvergate Bank which was associated with FTX Digital Markets, FTX's subsidiary in the Bahamas. The DOJ seized more than $7 million from other Silvergate accounts associated with Bankman-Fried and FTX.

It would seem cryptocurrency is only of value if it can ultimately be exchanged for actual government-issued currency, or some tangible asset such as real estate, equity in a business, or some other physical asset that represents value in government-issued currency.
 
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  • #662
Astronuc said:
It would seem cryptocurrency is only of value if it can ultimately be exchanged for actual government-issued currency, or some tangible asset ...
Well, yeah, but it's actually also true that government issued currency is also only of value if it can ultimately be exchanged for a tangible asset. It CAN of course, because that's the system we use but it has no more intrinsic value than does cryptocurrency. It is protected by the "full faith and credit" of issuing governments which crypto is not and THAT is the big difference, not the intrinsic value, which neither one has.
 
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  • #663
phinds said:
Well, yeah, but it's actually also true that government issued currency is also only of value if it can ultimately be exchanged for a tangible asset. It CAN of course, because that's the system we use but it has no more intrinsic value than does cryptocurrency. It is protected by the "full faith and credit" of issuing governments which crypto is not and THAT is the big difference, not the intrinsic value, which neither one has.
Exactly, if I am left on a deserted island then any currency is of no value , and dollars too are just green little papers one can wipe his behind with.
What has value then is food and resources to build stuff, but then again in the ordinary world food and resources also have pretty much the same value so in other words the only real value is in "stuff".
So one could say dollars are just a better "means to an end" if compared to crypto and that's it.

One doesn't have to look far to see that every dirty oligarch who has some smarts always tries to pour his dirty dollars into everything from real estate to yachts to gold bars to expensive jewelry etc.
Gemstones and expensive items are somewhat easier to conceal and more practical than money I think especially crypto given how it has lost it;s value just recently
 
  • #664
phinds said:
Well, yeah, but it's actually also true that government issued currency is also only of value if it can ultimately be exchanged for a tangible asset. It CAN of course, because that's the system we use but it has no more intrinsic value than does cryptocurrency. It is protected by the "full faith and credit" of issuing governments which crypto is not and THAT is the big difference, not the intrinsic value, which neither one has.
Crypto is ''protected'' by cryptography and a rather complex system involving blockchain, which governements aren't. I can see pros and cons for both sides.
 
  • #665
fluidistic said:
Crypto is ''protected'' by cryptography ...
What does that even mean in terms of its value?
 
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  • #666
fluidistic said:
Crypto is ''protected'' by cryptography and a rather complex system involving blockchain, which governements aren't. I can see pros and cons for both sides.

As we've seen so many times that crypto protection and blockchain are as effective as a wet tissue in protecting the actual value of some random crapcoin. IMO a cultist like Faith in Bitcoin keeps Bitcoin from crashing. A stable governments "full faith and credit" with the added ability to officially punish those that forge/devalue government currency and/or cheat is much more of a pro than crypto.
 
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  • #667
typical digital money transactions are also protected by various methods depending on the institution doing them, I too can't see why would that make the value of the money higher or lower
 
  • #668
There is no such thing as intrinsic value - water is worth nothing to me today as it flows free from the tap, but with 6 of us on a lifeboat at sea…

Value comes from marginal utility

https://en.wikipedia.org/wiki/Marginalism

As mentioned above, money gets its value from the credit of the issuer, which is why USD is worthy more than Venezuelan Bolivars
 
  • #669
phinds said:
What does that even mean in terms of its value?
It means that as long as we're unable to exploit a potential flaw in how they (the cryptos) work, they have a value in that they can be used to prove ownership of addresses on a blockchain.
 
  • #670
fluidistic said:
It means that as long as we're unable to exploit a potential flaw in how they (the cryptos) work, they have a value in that they can be used to prove ownership of addresses on a blockchain.
What does that have to do with their VALUE? I can own a bucket of mud but that doesn't make it valuable.
 
  • #671
phinds said:
What does that have to do with their VALUE? I can own a bucket of mud but that doesn't make it valuable.
Imagine a Wikipedia in which every article is a bank account statement, anyone can access to any page. However, people can only edit specific articles, their own "bank accounts", thanks to cryptography. When you buy a good or do a trade with someone else, both articles get updated with a new line indicating the transaction.
Elon Musk + Bill Gates +whoever else you can imagine, won't be able to update your article(s) and take control of it. A possible hacker or group of states, might, however, especially over decades or hundreds or years (or possibly more). In this regard, it is a gamble.

People value the fact that they have control over their own article, they can prove to the world of what they own, and they can do trades with such a system.
 
  • #672
fluidistic said:
People value the fact that they have control over their own article, they can prove to the world of what they own, and they can do trades with such a system.
Not many, apparently. And based on the volatility there doesn't seem to be much agreement about what that value should be.

The thing is, most new, groundbreaking technologies are obviously useful. This one isn't. Indeed, I'm pretty sure I don't want those things. They don't sound like useful features to me.

My Visa card, on the other hand, is very useful.... but I'm not buying and selling visa bucks for the privilege of using it. That would be weird.
 
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  • #674
russ_watters said:
Not many, apparently. And based on the volatility there doesn't seem to be much agreement about what that value should be.

The thing is, most new, groundbreaking technologies are obviously useful. This one isn't. Indeed, I'm pretty sure I don't want those things. They don't sound like useful features to me.

My Visa card, on the other hand, is very useful.... but I'm not buying and selling visa bucks for the privilege of using it. That would be weird.
A couple million people "only". Yes, the volatility is extremely high, although it used to be much higher in the past.
I agree that cryptocurrencies are very limited in their current usecase, I cannot buy a piece of bread with them, although it would work without issue (I don't mean Bitcoin, but others). Adoption is extremely low, there is a lot of room for improvement in that aspect.

If you were paid in cryptos, the visa story would be different. Adoption is so low that it's currently a hassle to deal with cryptos vs visa. But if common stores, and a new Amazon-like website would pop up, one that accepts several kinds of cryptos, things would be quite different.

By the way, I am not a Bitcoin maximalist, or a crypto advocate. I am not like /r/Buttcoin people either. But I do think that cryptos offer an interesting alternative to the current monetary system. I haven't been convinced by logical arguments that they are worthless.
 
  • #675
fluidistic said:
I haven't been convinced by logical arguments that they are worthless.
Well they aren't worthless but then again who likes a currency that fluctuates that much.
A currency needs to be made stable by something and that something can't be the currency itself. That would be like claiming your a "good person" and then providing your own comment about yourself also as the proof for that.

As safe as blockchain is , USD safety in most banks is also rather high so I don't see that as a problem. When was the last time anyone participating in this thread got robbed in their bank account? I think never would be the correct answer with 99% probability.

I guess as long as bitcoin isn't accepted in the mainstream and used by some 50+ % of population it is safe to say it will remain an outsider. Trust is hard to earn especially if peoples livelihoods are at stake. And given the latest events like SBF etc that sure hasn't helped to gain trust.
Most people don't go into detail they just hear that some scumbags have run with billions of dollars in their crypto pyramid schemes and they are turned off and rightly so.
If a product or a certain market can be that exploited from all kinds of lowlife crooks then why would honest folks want to participate even if the system itself has nothing to do with it?
This then begins the topic of "regulation" and oversight but I won't go into it, theres plenty of discussion about it already.@russ_watters VISA on the other hand is much more safe because it's established technology that works and has plenty of oversight so to speak, sure I can't see a reason why he should abandon it and many think the same it seems
 
  • #677
artis said:
who likes a currency that fluctuates that much.
Historically, Zimbabwe. Brazil. Argentina. Weimar Germany. Venezuela.

In cryptios case, people who plan to exchange fiat currency for crypto now, and exchange it back when it's worth more. They don't want stability.

artis said:
I guess as long as bitcoin isn't accepted in the mainstream and used by some 50+ % of population it is safe to say it will remain an outsider.
"Election close in battleground states"

This is true, but it's true by construction.
 
  • #678
Vanadium 50 said:
Historically, Zimbabwe. Brazil. Argentina. Weimar Germany. Venezuela.
I don't think that's true. I think you answered the wrong question/have it backwards: They had instability, but I don't think they wanted it.
In cryptios case, people who plan to exchange fiat currency for crypto now, and exchange it back when it's worth more. They don't want stability.
So...not a currency, but and appreciating asset. The book I keep recommending, "The Only Investment Guide You'll Ever Need", tells a story from the '80s of people converting their dollars to Mexican Pesos and holding them in Mexican banks due to the higher interest rate of the banks and pegging of the Peso to the dollar. Not exactly the same thing but close....well....close to what the more dubious exchanges are promising. Anyway, that worked great until dollar peg was removed.

Crypto might, however, appeal to those in 3rd world countries at risk of hyperinflation. But it isn't clear to me why they couldn't just store their money as dollars.
 
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  • #679
fluidistic said:
If you were paid in cryptos, the visa story would be different. Adoption is so low that it's currently a hassle to deal with cryptos vs visa. But if common stores, and a new Amazon-like website would pop up, one that accepts several kinds of cryptos, things would be quite different....

I haven't been convinced by logical arguments that they are worthless.
Certainly, I use dollars because I have to, and if I had to use bitcoin I'd use bitcoin. But that doesn't provide a path or reason to get from point A to point B. It's a cart before the horse argument. Steve Jobs didn't sell a lot of iPhones by asking people "why not?" and saying they should prove it to him, he sold them by showing him why they should.

The features claimed aren't ones most people want, they are counter-culture political arguments that in the real world are not good features:
  • Nobody else really wants their bank statements to be public.
  • Nobody else wants to keep their money under a literal mattress. They want banks.
I had a co-worker in 2009 who was literally burying gold and ammunition in his back yard (doesn't telling people defeat the purpose?). He's no longer with the company, but I'm sure that guy owns and believes in crypto, and if I wanted to steal it from him I could just look under his mattress for the flash drive.

A thing doesn't need a reason to be proven worthless it needs a reason to be proven to have value. People forgetting that is how you get $10,000 Beanie Babies.

Anyway, I was googling adoption/use rates, and there isn't much out there, but I did find that Bitcoin currently does about 300,000 transactions a day. Visa does 150 million (not including the back-side) and unlike Bitcoin where we know most transactions are not for commerce, we know all of Visa's are. iPhones were 18% of the global cell phone market share (where they currently remain) in 5 years.
 
  • #680
russ_watters said:
They had instability, but I don't think they wanted it.
I see your point, but they "wanted" it in the sense that they made decisions known to lead to it, to avoid making other more difficult decisions. Like governmental financial responsibility. ("That's just crazy talk!")

As for BTC and its ilk being a currency, it is in the sense that one can use it to buy things unavailable elsewhere, like illegal drugs, and having one's mother-in-law whacked. And people are shocked, shocked, to finding out there is fraud, theft and other criminal activity going on.
 
  • #681
Vanadium 50 said:
I see your point, but they "wanted" it in the sense that they made decisions known to lead to it, to avoid making other more difficult decisions. Like governmental financial responsibility. ("That's just crazy talk!")
The governments, yes. This is an argument for why the people might want crypto. Of course, these are people rebelling against the government. Cryptobros make that argument about why we shouldn't trust fiat in general, but it only really could apply to unstable countries. Is that enough? I think it's unlikely, and that may hurt a lot of people in those 3rd world countries.
Vanadium 50 said:
As for BTC and its ilk being a currency, it is in the sense that one can use it to buy things unavailable elsewhere, like illegal drugs, and having one's mother-in-law whacked. And people are shocked, shocked, to finding out there is fraud, theft and other criminal activity going on.
Yup, counterculture-ers always believe they are morally righteous, even when they're stealing long distance phone service (Jobs) or buying drugs.
 
  • #682
russ_watters said:
Nobody else really wants their bank statements to be public.
This is a really good point.
It's enough that the IRS equivalent in my country and the government scans my purchases for potential fraud once the sums get larger, I wouldn't want some guy across the street with a youtube channel to do the same.

russ_watters said:
I had a co-worker in 2009 who was literally burying gold and ammunition in his back yard
Reminds me of those that build their own "backyard bunkers" , hasn't anyone told them that the modern day nuclear war would be so devastating that such bunkers and basements full of stuff make almost no difference.
Or maybe that was for a less global event like a civil war against the US government?
 
  • #683
russ_watters said:
Cryptobros make that argument about why we shouldn't trust fiat in genera
By example!
 
  • #684
Bankrupt crypto lender BlockFi accidentally reveals it had over $1.2 billion in assets tied up with FTX
https://www.yahoo.com/finance/news/bankrupt-crypto-lender-blockfi-accidentally-111733176.html

The redacted sections include "trade secret(s) or confidential research, development, or commercial information," one of the filings show.

The findings show BlockFi's exposure to Sam Bankman-Fried's collapsed crypto empire was greater than previous disclosures had indicated.

As of January 14, unredacted filings show BlockFi had $415.9 million worth of assets linked to FTX and $831.3 million tied to Alameda. However, lawyers representing BlockFi previously said the firm had $355 million in digital assets stuck on FTX, and loaned $671 million to Alameda.
Meanwhile on Coindesk - Bloomberg reports Binance Mistakenly Mixed Crypto Exchange's Customer Funds With B-Token Collateral
https://www.yahoo.com/finance/news/binance-mistakenly-mixed-crypto-exchanges-125822255.html
Binance, the world’s largest crypto exchange by trading volume, mistakenly kept collateral for some of the crypto assets it issues in the same wallet as funds belonging to its customers, Bloomberg reported Tuesday, citing an unidentified Binance spokesperson.

The exchange issued 94 so-called Binance-peg tokens (B-Tokens), and reserves for almost half of those are stored in a cold wallet called Binance 8, Bloomberg said. The wallet contains more tokens than required for the number of B-Tokens issued. Since the tokens are supposed to be backed 1:1, the excess indicates the collateral is being mixed with customers’ tokens, according to Bloomberg.
So customers' dubious assets get replaced by even more dubious (volatile) assets.
 
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  • #685
Astronuc said:
accidentally reveals
Accidentally? Or is he laying the groundwork for the defense "nobody this dumb could pull off a swift caper like this."
 
  • #686
Hackers stole $3.8 billion from crypto investors in 2022, a 13% increase from 2021 and marking a new all time high for annual theft of digital coins.

This rise in crypto hacks is just the latest indicator to underscore how security within the digital asset market, especially Decentralized Finance (DeFi), remains a major obstacle for the industry.

According to a new report by blockchain forensics firm Chainalysis, DeFi protocols accounted for $3.1 billion, or 82%, of all crypto stolen by hackers, up 9% from 2021.
https://finance.yahoo.com/news/hack...-from-crypto-investors-in-2022-132405068.html

"Bridges are an attractive target for hackers because the smart contracts in effect become huge, centralized repositories of funds backing the assets that have been bridged to the new chain," Chainalysis said in its report.

Notable cross-chain bridge hacks last year included Nomad ($190 million) in August, Harmony ($100 million) in June, Ronin ($625 million) during March, and Wormhole ($326 million) at the beginning of February.
 
  • #687
This is getting so technical I would need a special course on what is a "cross chain bridge" before I can understand the importance of whatever was hacked.

Notable cross-chain bridge hacks last year included Nomad ($190 million) in August, Harmony ($100 million) in June, Ronin ($625 million) during March, and Wormhole ($326 million) at the beginning of February.

Whoever came up with those names must be a cosmology enthusiast.
 
  • #688
artis said:
This is getting so technical I would need a special course on what is a "cross chain bridge" before I can understand the importance of whatever was hacked.

A cross chain bridge is basically an atm for crypto. If you have bitcoin and you want ethereum, one way to do that is sell your bitcoin for dollars, then buy ethereum with dollars, all on a centralized exchange. That's annoying, so the exchanges will do you one better and let you trade bitcoin for ethereum directly. But using an exchange sucks (see ftx). A cross chain bridge is a decentralized protocol that works kind of like any crypto thing works - the rules are well defined, and everyone agrees on what operation is happening. The operation in this case is you can send bitcoin to an address, and specify where you want your ethereum, and it willsend ethereum to you. To support this is needs a pot of ethereum (and bitcoin, since it permits moves both ways). Investors put their coins "in the bridge", and the bridge makes money by charging you a fee for your transfer.

Of course i haven't said what the relative value of ethereum and bitcoin is on this bridge. They usually just look at on- exchange trading I believe (I'm a bit fuzzy on how this actually works in practice in a decentralized way). The traditional way to hack a bridge is to manipulate on exchange trading prices, and then do a big swap at a price that everyone agrees is dumb, but the bridge doesn't know that.

Bitcoin and ethereum are actually a really bad example for this - You want to pick a really illiquid alt coin that's worth nothing, buy a bunch, then manipulate the price up, then swap is at a bridge for bitcoin.

I'm very much an amateur so the details here are questionable, but I think this is the broad stroke description of what is happening. I believe there are other attacks that look more like real hacks, where you carefully understand the protocol and figure out some way that the bridge will get confused by what ratio to swap at.
 
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  • #689
The bridge seems to be a classic case of solving the wrong problem.

The problem is you have zillions of illiquid cryptocurrencies. Like 100x as many as national currencies, Proping up the system is unhelpful. Propping it up in a manner that permits fraud doubly so.

If I wanted to exchange Iranian Riols for Vietnamese Dong, I would probably have to go through a major currency like Euros or Yen. Annoying, yes, but is this really a problem?
 
  • #690
Vanadium 50 said:
The bridge seems to be a classic case of solving the wrong problem.

The problem is you have zillions of illiquid cryptocurrencies. Like 100x as many as national currencies, Proping up the system is unhelpful. Propping it up in a manner that permits fraud doubly so.

If I wanted to exchange Iranian Riols for Vietnamese Dong, I would probably have to go through a major currency like Euros or Yen. Annoying, yes, but is this really a problem?

It is easy to manipulate the exchange rate between mango coins and bitcoin, so requiring one side to be a major currency doesn't help things. The main issue is the bridge is just running a very bad market making strategy that has no risk controls or manual oversight.