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Bitcoin China Crime

Chinese Bitcoin Exchange Vanishes, Taking £2.5m of Coins With It 346

Posted by timothy
from the later-chumps dept.
An anonymous reader writes "A Chinese Bitcoin exchange has vanished without trace, taking more than $4 million of the virtual currency with it and leaving profit-hungry investors out of pocket. GBL, the Chinese Bitcoin exchange was launched in May 2013 and putatively based in Hong Kong, despite its servers being registered in Beijing. However GBL's Hong Kong offices do not exist. GBL mysteriously disappeared in early November taking an estimated $4.1m (£2.6m) of Bitcoins with it." (Beware the auto-playing ads, with sound.)
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Chinese Bitcoin Exchange Vanishes, Taking £2.5m of Coins With It

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  • by Anonymous Coward on Tuesday November 12, 2013 @11:56AM (#45401301)

    Yes. Sad Trombone.

  • by jythie (914043) on Tuesday November 12, 2013 @11:56AM (#45401309)
    I am assuming it is only a minority of exchanges, but doesn't this seem to be a bit of a recurring problem?
    • by medv4380 (1604309)
      Just a recursive one.
    • by skovnymfe (1671822) on Tuesday November 12, 2013 @12:04PM (#45401397)
      Who cares so long as it's only end users that suffer?
    • by slashmydots (2189826) on Tuesday November 12, 2013 @12:21PM (#45401597)
      The only pattern is stupid people losing their money. The last time it was sketchy investments that only a complete idiot would fall for. There's no stopping stupid people from being stupid. Without stupid people, the tiny exchange that is obviously Chinese run and thus obviously a scam would have zero customers.
      • Re: (Score:2, Insightful)

        by Anonymous Coward

        The really stupid thing is that such an "exchange" does not offer "sketchy investments". The "sketchy investment" is the actual Bitcoin. I've seen no sites offer actual interest or anything: they just offer to keep your Bitcoins. And that's profoundly stupid since a Bitcoin wallet is just a private key, all the rest is the public bitcoin chain. There is no point in keeping your wallet anywhere but on your own computer. Or on external storage media. I don't get people who use web services to keep a Bit

    • by Kardos (1348077)

      Fraud is nothing new. How different is this from a fly-by-night operation that takes orders and disappears with your cash?

      • by Anonymous Coward on Tuesday November 12, 2013 @12:39PM (#45401835)

        Oh, ooh, I know this one! The difference is that a fly-by-night website will be taking credit card orders, and you can get a chargeback through your credit card bank when they don't show up with the merchandise.

      • Because the rubes in this case should have been aware of the risks, getting involved in an untraceable currency. It's practically designed for illegal activity, so the news here is fly-by-night should be assumed to be the default.

        • Re: (Score:2, Informative)

          by Anonymous Coward

          It's not untraceable. Why are detractors so uninformed? After 4 years you have still failed to learn anything about it.

          • It's functionally untraceable, or at least trivial of launder, because the envelope only includes encrypted information about previous owners.

          • Re:Recurring theme? (Score:5, Interesting)

            by Immerman (2627577) on Tuesday November 12, 2013 @01:46PM (#45402803)

            Indeed. It's about as far from untracable as you can get - you can trace every bitcoin back through every transaction it has ever been involved in to the moment of its creation - try to do *that* with cash. In fact except for the minor fact that you don't have to attach your name to an account it's a surveillance currency buff's wet dream.

            • Kind of depends what you're trying to trace. When people talk about traceable financial transactions they're generally interested in identifying the people involved in the transaction not the individual monetary units.

              eg the police could give a @!#% that the $100 bill with serial number 12345 was used to buy drugs. What they want to know is that Bill bought $100 worth of drugs.

              In that sense bitcoin is good for untraceable financial transactions since (as far as I understand such things) the best we can de

    • Re:Recurring theme? (Score:4, Interesting)

      by tlhIngan (30335) <slashdot@wor f . n et> on Tuesday November 12, 2013 @01:11PM (#45402273)

      I am assuming it is only a minority of exchanges, but doesn't this seem to be a bit of a recurring problem?

      It's the early days. The early days of banking had similar problems as well.

      A bigger issue though is a LOT of exchanges want a LOT of personal information in order to do the exchange.

      The real risk is not one of these exchanges disappearing, but getting broken in - tons of them ask so much personal information that you're at a real risk of identity theft or having your bank account drained.

      The others, well, can seem sketchy at times.

      • by Immerman (2627577)

        So what I don't get is why people would keep their bitcoins in one of these "banks" at all. Are they paying decent interest rates comensurate with the risk of trusting an unknown entity with your money? I don't see how they could be adding any actual security - if someone can steal my wallet credentials from my personal computer they can just as easily steal my "bank account" credentials.

        • by mbkennel (97636)

          | So what I don't get is why people would keep their bitcoins in one of these "banks" at all.

          So they can trade bitcoins frequently.
  • by Mitsoid (837831) on Tuesday November 12, 2013 @11:59AM (#45401339)

    Why not just follow the bitcoin trail? Perhaps call the local authorities and ask them for help?

    >.>

    Actually, I do feel sorry... Just had to say it.

    • I agree, why don't people report bitcoins as stolen property. Then if anyone else tries to spend them they can be flagged as stolen and a court order made to force the current holder to turn them over to the legal owner, or pay damages if they refuse. Bitcoins are far more traceable than gold. If mining pools refused to add stolen bitcoins to blocks unless the transaction fee was >1BTC it would become infeasible to hide them by splitting them into many small transactions.
  • by bobbied (2522392) on Tuesday November 12, 2013 @12:03PM (#45401393)

    Another exchange bites the dust, millions lost!

    BitCoin has some *serious* problems, mostly caused by not being officially sanctioned currency that is regulated... But then, that's it's strong point too. But, being a pirate has it's down days. So, if you sleep with dogs, you wake up with fleas (or in this case, w/o your BitCoin. ..

    Oh the humanity... Yawn.

  • by ElitistWhiner (79961) on Tuesday November 12, 2013 @12:05PM (#45401409) Journal

    Bitcoin was advertized as the virtual currency NOT stored in one place with NO detrimental reliances upon any ONE server, person or gov't. WTF?

    • Re: (Score:3, Informative)

      by Anonymous Coward

      You need to use exchanges to trade the bitcoins for real money, and these represent a handful of large points of failure.

    • Bitcoin was advertized as the virtual currency NOT stored in one place with NO detrimental reliances upon any ONE server, person or gov't. WTF?

      I don't know about this exchange, but there are a few Bitcoin management services, where they keep the wallet for you and you don't have to worry about running bitcoin yourself.

      It's almost exactly like how a bank will hold cash for you, except these banks are typically uninsured.

      • by bobbied (2522392)

        Bitcoin management services, where they keep the wallet for you and you don't have to worry about running bitcoin yourself.

        And people fall for this? Well, if you are speculating in BitCoin you are into high risk or a sucker... PT Barnum was right.

        Hey, anybody out there who doesn't like holding your own BitCoin wallet, I'll take care of that for you. Just let me hold *your* money...

    • by Sockatume (732728)

      It has no inherent dependencies of the types you describe, but there's no barrier to people adding them in because they simply don't understand what was supposed to be so advantageous about it in the first place.

  • by Kardos (1348077) on Tuesday November 12, 2013 @12:06PM (#45401421)

    Autoplaying ads with sound? No thanks, the summary will have to do.

    This disappearing-with-all-the-funds is becoming SOP for exchanges.

  • by sirwired (27582) on Tuesday November 12, 2013 @12:08PM (#45401439)

    BitCoins are not incompatible with a normal regulatory and law enforcement apparatus that might prevent some of this. That said, due to their extreme utility for money laundering, tax avoidance, etc. I'm pretty sure they'd rather the things disappear and therefore may direct law-enforcement resources elsewhere in the case of a BitCoin theft.

  • by petteyg359 (1847514) on Tuesday November 12, 2013 @12:09PM (#45401451)

    What idiot stores their cash in somebody else's wallet with no guarantee of that somebody's legitimacy and no insurance? Maybe these morons will have finally learned their lesson, and will keep their cash in their own wallets in their own pockets.

  • by janeuner (815461) on Tuesday November 12, 2013 @12:09PM (#45401453)

    For those curious, there are currently 12 million bitcoin in existence, with a net value of about $4.3 billion.

    Source: http://coinmarketcap.com/ [coinmarketcap.com]

  • by Anonymous Coward on Tuesday November 12, 2013 @12:10PM (#45401463)

    It's the 1% who spoil it for the rest of the honest people.

    And actually, it goes deeper than that. A capitlaist system requires trust. Rules and regulations build trust into the system. Without these rules and regulations you don't have capitalism, you have a Wild West financial system that no one would invest a dime in except suckers.

    • by tom229 (1640685)
      You don't need to regulate the production and control of the currency. The problem here is the banks holding the bitcoins in trust can't be... well... trusted. Do they need to be regulated? Probably. However, if your bitcoin wallet was at home hidden under your virtual mattress you're still fine. This is the same problem we currently have with traditional banks and traditional money. The only difference is federal governments, and private banks themselves, don't have the ability to manipulate bitcoins like
    • A "Wild West financial system" might be okay - in the Wild West. If somebody cheated you, you could track him down and shoot him. That doesn't work so well when the person cheating you is somewhere in Russia/China/Nigeria.

  • who stands to lose the most in the long run if Bitcoin takes hold and really gets a large strong userbase, the established central banks that print state currency like the Federal Reserve, i am sure the People's Republic of China has their own central bank too, these central banks are more than likely wanting to kill Bitcoin more than some gang of criminals
  • by Joining Yet Again (2992179) on Tuesday November 12, 2013 @12:13PM (#45401497)

    In a real market, no matter how dysfunctional, people want to make money - so stuff like this causes the value of whatever is being traded to go down.

    But the biggest bitcoin enthusiasts are just a little religious, so they'll go frantically buying bitcoins to raise the value to prove this isn't really a big deal.

    Almost like it's all a scam trying to pretend that TANSTAAFL doesn't apply and that you can really generate wealth with only speculation and no production.

    • by Sockatume (732728)

      The purpose - the very designed-in function - of Bitcoin is not to create wealth but to be an ephemeral unit of transaction, which is why investors get eaten alive but also why it's not a flaw. It's like the difference between investing in US treasury bonds and investing in big piles of ones.

      • What is an ephemeral unit of transaction? Apart from one that has a habit of going missing.

        • by Sockatume (732728)

          You're supposed to buy it, use it as payment, and never think about that particular bitcoin again. Not hoard them like Scrooge McDuck in the mistaken belief that they're a thriving growth industry as almost every Bitcoin user seems to want to do.

          • So, like a prepaid single usage Visa/Mastercard number? Or cash in an envelope?

            • by Sockatume (732728)

              That's what I'm trying to convey, yes. (Whether that's an accurate picture, well...) You can see from this analogy why buying thousands of dollars worth of those and giving them to some random organisation in China might not be the savviest business move, while having one or two around for when you need them might be useful.

  • by martijnd (148684) on Tuesday November 12, 2013 @12:27PM (#45401675)

    All the ISK scams that went on in EVE Online are now here in "real" world Bitcoins. In fact, you can probably predict the next scandal from what dirty deeds were done before.

    But it it just me wondering if those involved think the punishment in the real world will be the same (none) ? I can imagine people being a little bit more upset after losing millions in real cash as opposed to losing some in-game fantasy currency.

  • by Rambo Tribble (1273454) on Tuesday November 12, 2013 @12:33PM (#45401755)

    It was not that long ago that banks generally were subject to little or no regulation. Banks would fail, investors would lose all, only for the process to repeat itself again, and again. Eventually, in an effort to protect their economies, governments stepped to limit the risks that banks could take with their investors' money and, often, to insure the investors against loss, thereby engendering confidence.

    Bitcoin has made its stock in trade the fact that it is unregulated by anything but a few algorithms. Like Adam Smith'e "invisible hand", we are to trust to these algorithms to provide a certain Deus ex Machina for providing security.

    The reality is that until Bitcoin exchanges are regulated by credible authorities, security will be a fantasm.

    • Bitcoin has made its stock in trade the fact that it is unregulated by anything but a few algorithms. Like Adam Smith'e "invisible hand", we are to trust to these algorithms to provide a certain Deus ex Machina for providing security.

      The algorithms provide quite a bit of security. It's not Bitcoin's security that is an issue, it's websites, people's computers, and people's trust. In this case, it was the latter. People trusted a 3rd party with their Bitcoin, and that 3rd party proved that trust to be mis

      • You make a credible point, but then take it too far. The exchanges are the problem and the algorithms, which are the only security provided in the process, cannot address that. Therefore to assume the algorithms can provide the necessary level of security to the entire process, is fallacy.
  • Non Banking Entity (Score:5, Insightful)

    by Demonantis (1340557) on Tuesday November 12, 2013 @12:55PM (#45402069)
    This is like all the people that get mad when paypal jerks them around. Don't use a non banking entity as a bank. There is huge history reinforced reasons why the industry is regulated.
  • by H0p313ss (811249) on Tuesday November 12, 2013 @01:04PM (#45402183)

    I'm shocked, *SHOCKED* to find criminal activity happening in this unregulated currency exchange!

  • It's unregulated and anonymous- a perfect set-up to steal with impunity. Why would a sane/intelligent person have anything to do with bitcoin?

  • by monk (1958) on Tuesday November 12, 2013 @03:48PM (#45404411) Homepage

    I've never heard of GBL.

    The big Chinese exchange is BTC China.

  • by Animats (122034) on Tuesday November 12, 2013 @04:40PM (#45404961) Homepage

    "Take the money and disappear" is normal behavior for Bitcoin exchanges. Sometimes they just disappear, sometimes they get broken into and robbed, and sometimes you're not sure whether the robbery was an inside job.

    The list of failed Bitcoin exchanges is long. Bitcash.cz just closed yesterday. There's an academic paper with a list. [fc13.ifca.ai] 18 of the 40 exchanges on the list had failed. But that was last January. Since then, Bitfloor and Bitme shut down, and Intersango and Mt. Gox stopped paying out customer funds on demand.

    Not one Bitcoin exchange is a bank or a registered broker/dealer in its home jurisdiction. That's part of the problem.

    This is why anarchy sucks. What anarchy looks like is Somalia, not L. Neil Smith fiction.

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