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Bitcoin Crime The Almighty Buck

Bitcoin Exchange Flexcoin Wiped Out By Theft 704

Posted by timothy
from the in-the-movie-version-it'll-be-the-feds dept.
mrspoonsi writes "Joining MtGox, Flexcoin today announced they have had their vault wiped out, to the tune of some 896 BTC (about $615,000) by hackers. 'On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. The attacker made off with 896 BTC, dividing them into these two addresses: 1NDkevapt4SWYFEmquCDBSf7DLMTNVggdu [and] 1QFcC5JitGwpFKqRDd9QNH3eGN56dCNgy6. As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.'"
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Bitcoin Exchange Flexcoin Wiped Out By Theft

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  • by BitZtream (692029) on Tuesday March 04, 2014 @11:54AM (#46396791)

    rocks ... doesn't it.

    This is what you wanted right?

    Seriously, if you come here to talk about how this isn't a fundamental bitcoin problem, you deserve to have your noise smacked with newspaper like a dog.

    The only 'benefit' bitcoin has is that its unregulated and not as well watched by the government ... which means its easy for people to just steal your money and lie about it ... I'm sorry, its easy for someone to setup an exchange and let someone else steal the coins from the 'hot wallet', whatever the fuck that is.

    Before you open your mouth to defend bitcoin ....

    THIS WHAT WE'VE BEEN TELLING YOUR STUPID DUMB ASSES ABOUT, NOW SHUT THE FUCK UP, ITS A SHITTY IDEA.

  • by gstoddart (321705) on Tuesday March 04, 2014 @11:56AM (#46396811) Homepage

    So what we have is a bunch of startups who think they know how to be like a bank, but are failing utterly.

    Is this is a systematic flaw in Bitcoin itself, or Schadenfreude by companies who have yet to learn they are nowhere near ready for holding onto something like this?

    It just seems like this is the kind of thing which sounds great on a whiteboard, but in reality is anything but.

  • by X0563511 (793323) on Tuesday March 04, 2014 @11:56AM (#46396813) Homepage Journal

    It's funny how they want it both ways, eh? No regulation, but then they want dependable banks.

    Choose one or the other. You do not need to use an exchange, just like you don't need to use a bank.

  • Why? (Score:1, Insightful)

    by Anonymous Coward on Tuesday March 04, 2014 @11:58AM (#46396841)
    By stealing so much from these exchanges that they end up closing... they are just destabilizing the currency and cause the price of bitcoins to plummet. Any hacker doing this for profit is likely quite retarded. I can see why a government who does not like the idea of a cryptocurrency would perform such a theft, however.
  • Re:From the FAQ (Score:1, Insightful)

    by Anonymous Coward on Tuesday March 04, 2014 @12:04PM (#46396925)

    Liable for what?

    If you breeak into an imaginary bank and steal imaginary currency who do you imagine will care?

  • by whoever57 (658626) on Tuesday March 04, 2014 @12:07PM (#46396947) Journal

    So what we have is a bunch of startups who think they know how to be like a bank, but are failing utterly.

    Is this is a systematic flaw in Bitcoin itself, or Schadenfreude by companies who have yet to learn they are nowhere near ready for holding onto something like this?

    There is another possiblity: that these exchanges are operating as designed.

    Who can most easily rob a bank? The people running it, of course.

  • by jythie (914043) on Tuesday March 04, 2014 @12:10PM (#46397003)
    Well, one issue is how much to the governments actually care? BTC adherents believe they are a huge futuristic threat to the world order and have states quaking in their boots, but as far as I can see, outside worries about money laundering and tax evasion, the various states do not really care all that much.

    Control over currency is important, it allows governments to make adjustments based off the needs of the economy, which increases stability. BTC would need to get much, much larger to even make a dent in the overall stability of the economy and THEN states might actually worry, but we are about as close to that as interstellar travel.
  • by hodet (620484) on Tuesday March 04, 2014 @12:12PM (#46397025)

    Ok, well I know you are a bit emotional about this but I will chime in anyway. All the problems we have seen with thefts have had nothing to do with the Bitcoin protocol. The problems have been in trusting your stash with companies that have no business being trusted. It's the equivalent of leaving your bag full of cash with Lenny down at the bowling alley because he has a safe in the basement. Flexcoin, Gox et al., -- Why would anyone trust their funds to these people? These fly by nights are either a bunch of incompetents or just plain old crooks.

    Bitcoin itself is not a shitty idea. The problem right now is that bitcoin is very young and there is a 'wild west" aspect to it. The infrastructure will mature.

    If you feel so strongly about it then just don't use it. What's the problem? But to say a system that offers frictionless payments is a shitty idea and should not even be attempted is stupid. There is a huge need in the world for this right now. The ride will be bumpy so buckle up.

    One last thing and more of an open comment to people who have bitcoin. "Don't be a dumbass and let Lenny hold your bag of cash for you!" Geez does it even need saying?

  • Re:From the FAQ (Score:3, Insightful)

    by gstoddart (321705) on Tuesday March 04, 2014 @12:13PM (#46397033) Homepage

    Ah, but it's in the terms of service. And those have been upheld by the courts.

    Which means people who lost money in this are out of luck, because all they really claim is they'll do their best effort but otherwise make no guarantees about their ability to do anything.

    In other words, there's zero basis on which to trust them, it's spelled out in the license, and if you trusted them and lost it's caveat emptor.

    You might as well ask the wino on the corner to hold onto your money, because he's about as accountable if your money goes missing.

  • by LostOne (51301) on Tuesday March 04, 2014 @12:24PM (#46397133) Homepage

    This is not a failure of bitcoin. Suppose you had a stack of companies whose purpose is to store your physical gold and prevent it from being stolen and to serve as an exchange allowing customers to trade gold for currency. Then, it turns out that some of them had inadequate security or were outright crooked and the gold they were storing went missing. This would not be a failure of gold itself. Sure, if sufficient quantities of gold were affected, it would affect the price of gold, but it does not change gold itself. This is the same situation.

    The real problem here is the notion that bitcoin is a currency. It really isn't. It's a virtual commodity much like gold, with similar properties save for the fact that gold is physical and bitcoin is not. (Sure, the odds that everyone suddenly decides to pack up their toys and ignore bitcoin are much higher, mostly because there are no "real" uses to bitcoin, unlike gold which has actual uses other than being somewhat "rare" and looking pretty.) The same things that make gold less than idea as an actual currency (or a backer to a currency) apply to bitcoin. Sure, you can use either one as a place holder in a transaction if both parties agree, but you could just as easily use a common fiat currency, chickens, or grains of sand.

  • by Agent0013 (828350) on Tuesday March 04, 2014 @12:26PM (#46397157) Journal
    I don't really understand why people are keeping their Bitcoins in these online "bank" accounts. The point of Bitcoin is that it is digital cash. It has the negatives of cash, easily stolen, along with the positives, hard to track. Being a form of cash rather than a credit account allows you to store it on your own hard drive or USB drive. Hell, put it in your Dropbox and it would be safer than having it in one of these online Bitcoin "banks". The money should only be in these online accounts for the time it takes to change it from US$ (or whatever currency you use) to Bitcoins or in reverse. It should be treated as an exchange not a bank account. I don't go to a currency exchange in another country, change my US$ to Pesos (for example) and then leave the money there in the exchange for months at a time.
  • by snsh (968808) on Tuesday March 04, 2014 @12:29PM (#46397187)

    "Unregulated and not watched by the government"

    You mean like silver and gold?

  • by DocSavage64109 (799754) on Tuesday March 04, 2014 @12:30PM (#46397207)
    Yet... Now is probably a good time to start a Flexcoin exchange which you can then "rob" and shut down in a years time for some easy $500,000.
  • by serviscope_minor (664417) on Tuesday March 04, 2014 @12:32PM (#46397231) Journal

    He wasn't talking about protocol, just the dumb libertarian ideas behind it.

    The ideas behind the protocol are number theory. "dumb libertairianness" is just hype read into it by you and others.

  • surprised!!!! (Score:5, Insightful)

    by globaljustin (574257) <<moc.liamg> <ta> <labolgnitsuj>> on Tuesday March 04, 2014 @12:38PM (#46397293) Homepage Journal

    Not!
    Which one is next?

    right. fine. I'll give you the benefit of the doubt...but hilariously, all the rabid Bitcoin defenders have all gone away here on /. only to be replaced by its critics.

    i can't help but think that some of the posters who are saying "I told you so" were also big time Bitcoin fanbois a few months ago

    look at this discussion, from early December, when I **dared** to ask if Bitcoin had peaked: http://yro.slashdot.org/commen... [slashdot.org]

    look at the mods...

    I want /. to do better on this...MtGox and Bitcoin were hype, and sockpuppets on /. helped build that hype & it pisses me off

    real techies should have seen this a mile away! now everyone thinks we're idiots

  • Re:surprised!!!! (Score:5, Insightful)

    by Immerman (2627577) on Tuesday March 04, 2014 @12:40PM (#46397319)

    Why are you assuming the ones who created Stuxnet *aren't* criminals. Government backing does not an honest man make.

  • by JaredOfEuropa (526365) on Tuesday March 04, 2014 @12:45PM (#46397385) Journal
    Why do some people get so emotional over Bitcoin? Is it bitterness over the fact that they dismissed it as a "stupid idea" back when they could have mined 1600 BTC in a couple of weeks on their laptop?

    BTW I don't own and never owned more than a couple of them either.
  • Re:surprised!!!! (Score:3, Insightful)

    by Ralph Wiggam (22354) on Tuesday March 04, 2014 @12:50PM (#46397447) Homepage

    You think "governmental actors" care about $615,000? That's adorable.

    Did those "governmental actors" prevent Mt. Gox from ever auditing their accounts? It's been obvious for a year that Gox was amateur hour. Or was that part of the elaborate conspiracy?

  • by Archangel Michael (180766) on Tuesday March 04, 2014 @12:53PM (#46397485) Journal

    Dependable banks require that those running them, and those depositing money into them are not GREEDY BASTARDS, who do stupid things to make a bigger profit. Having a government behind them doesn't fix the problem. Take for example the latest Mortgage Backed Securities, that ended up being nothing but phoney scam to leverage profits, and hence the housing bubble that resulted. Government bailed out the immediate problem, but the real problem was that the fake securities were valued at more than the whole world's GDP, and that has not yet cleared the books. And it will take quite a bit of time to do so.

    AND the people who perpetrated this scam are not going to be prosecuted for any crimes.

    The point is, even GOVERNMENT isn't big enough to back banks that are greedy. And don't even get me started on the FED. This is why we need to have the corporate death penalty and revoke the corporate charters, rather than bail out the criminals^H^H^H^H^H^H Banks

  • by DeathMagnetic (1365763) on Tuesday March 04, 2014 @12:53PM (#46397491)
    What you're saying may all be true, but the value of any currency is based on people's faith in it. It doesn't matter if it's just corrupt or incompetent companies failing and not the "Bitcoin protocol" itself. When the average person turns on CNN and sees story after story about Bitcoins disappearing, falling in value, or just general chaos in the Bitcoin market, they're going to avoid it like the plague. Fewer reputable businesses will devote the effort and take the risk of accepting Bitcoins as payment. Any chance of it ever becoming a ubiquitous global currency, not just a plaything for computer geeks, is quickly dying and no reasoned defense of the concept is going to change that. Hand waving away the problems by blaming individuals just misses the point that this system will not ever work on a wide scale until it is regulated, likely to the point where any value it has over other real currencies is lost.
  • by Archangel Michael (180766) on Tuesday March 04, 2014 @12:58PM (#46397541) Journal

    How did all the regulations help the Mortgage Backed Securities from begetting a housing bubble that eventually collapsed? And if you say it was de-regulation you're only partially right, the other side is DNC backed regulations requiring banks to make unsafe loans to people who couldn't afford to pay them back. Guess what happened, the perfect storm of RNC and DNC stupidity and an economy that is still suffering the consequences.

    Sometimes, even the government isn't big enough to fix our problems.

  • Re:surprised!!!! (Score:2, Insightful)

    by jamstar7 (694492) on Tuesday March 04, 2014 @12:58PM (#46397543)

    Why is anyone assuming this is being done by 'criminals'?

    Because currently Bitcoin is small potatoes, and the exchanges are so far doing some of the work for them, and because if there's money to be had criminals will go after it.

    Keep in mind that private currencies undermine government monopolies. Governments back 99.999% of the currencies out there. Bitcoin had no such backstop, was getting popular, and was considered a 'threat' because it had no government behind it. I've read quite a few anti-Bitcoin raves by government spokespeople, mostly decrying it because it's outside of their system and thus not subject to taxes.

    Is it possible this is some grand conspiracy? Sure it is. Is it more likely that the people running these things have failed at security and actually been ripped off? Sure. Is it also possible that the exchanges are really just scams and these were inside jobs? Sure.

    I just don't see the need to assume governments undermining the credibility of these -- it seems to be happening just fine without the need for government help on that front.

    I'm reminded of the old bumper sticker that said "Don't steal. The government hates competition". Governments hiring hackers after they've been convicted of cybercrimes is common. Could it be a case of criminals in a government being behind this? Likely, governments have the most to gain if private currencies fall.

  • by Hast (24833) on Tuesday March 04, 2014 @01:01PM (#46397571)

    When buying, selling and trading bitcoins there are two things which make it work.

    Exchanges, where you can buy or sell bitcoins to "normal" money.
    Wallets, where you store your bitcoins.

    Some sites are both (like mtgox) and others are only one (from what I can tell Flexcoin was a wallet, not an exchange).

    When you buy and sell bitcoins at an exchange you tend to need to transfer money to them and have it sit in an account until you want to exchange it to bitcoins. (This is similar to buying tokens at a casino or something like that. You don't have bitcoins yet but your money is still on their server.)

    Once you have bitcoins you can transfer them to a different wallet (which can be another site or just a digital file on your PC).

    Both this and the Mt Gox case have a similar problem and resolution. Don't leave your money with people you don't trust. That is a good life lesson to learn, and hopefully it won't cost you too much. The same goes for putting a bunch of money into other shady businesses like online casinos and similar.

    It seems like most people who are angry about how "obviously broken" bitcoins are just don't understand how they work. (And to be fair, most websites don't really explain it well either.)

    You can still make a perfectly valid argument that putting your money into bitcoins can be a terrible investment. But the same goes for a lot of things. (Like the people who stocked up for food cans before Y2K.)

  • by pla (258480) on Tuesday March 04, 2014 @01:04PM (#46397601) Journal
    Seriously, if you come here to talk about how this isn't a fundamental bitcoin problem, you deserve to have your noise smacked with newspaper like a dog.
    [...] This what we've been telling your stupid dumb asses about, now shut the fuck up, its a shitty idea.
    [...]I'm sorry, its easy for someone to setup an exchange and let someone else steal the coins
    from the 'hot wallet', whatever the fuck that is.


    Assertion 1) You understand BitCoin enough to discuss its "fundamental" problems.
    Assertion 2) You've known that from the beginning and warned people about it.
    Assertion 3) You know the difficulty involved in setting up an exchange.

    And yet, you have no clue what "hot wallet" means?

    Wow. Sing it, brother! Tell me again how a sheep's bladder may be used in the prevention of earthquakes?
  • Re:surprised!!!! (Score:5, Insightful)

    by gstoddart (321705) on Tuesday March 04, 2014 @01:08PM (#46397651) Homepage

    Keep in mind that private currencies undermine government monopolies.

    As I said, small potatoes. The magnitude of bitcoin isn't enough to really concern most governments, and certainly not the ones with the resources to do what you suggest.

    Could it be a case of criminals in a government being behind this?

    Sure. Could it be alien space monkeys trying to destabilize our currencies and use us for slaves to harvest tasty bananas? Sure, I guess

    There's about as much evidence for either of those, which means there's zero evidence at all.

    I generally tend to fall a little on the tinfoil-hat end of the spectrum -- but in the absence of evidence, I fall back to "Never attribute to malice that which is adequately explained by stupidity."

    You're well into just claiming it could be a conspiracy, but I just don't see the need. It could be if you want to be paranoid enough. But there's nothing real to suggest it's true, which makes it just pure imagination for the moment.

  • Re:surprised!!!! (Score:2, Insightful)

    by fustakrakich (1673220) on Tuesday March 04, 2014 @01:08PM (#46397669) Journal

    The only difference between a cop and a crook is the badge.

  • by Curunir_wolf (588405) on Tuesday March 04, 2014 @01:16PM (#46397775) Homepage Journal

    Dependable banks pretty much require somebody large enough backing them. That is generally governments who can print money.

    What good is it to have "dependable banks" when the only thing they have is wholly undependable fiat currency? Petro-dollars are not sustainable. Maybe Bitcoin isn't, either, but at least its value isn't determined by a small group of wealthy oligarchs [washingtonsblog.com].

  • by Rob Riggs (6418) on Tuesday March 04, 2014 @01:17PM (#46397787) Homepage Journal

    Dependable banks require that those running them, and those depositing money into them are not GREEDY BASTARDS

    Let me re-write that for you in a simplified form:

    Dependable banks require that those running them, and those depositing money into them are not Human.

  • by cream wobbly (1102689) on Tuesday March 04, 2014 @01:20PM (#46397825)

    Your regulations did what, exactly, for the rest of us?

    This is a good point, but not for the reason you think it is.

    We should consider Bitcoin's repeated failures due to its unregulated nature a warning against deregulating the banks.

  • by sjbe (173966) on Tuesday March 04, 2014 @01:24PM (#46397883)

    Why would anyone trust their funds to these people?

    Good question. The answer is that they have a poor appreciation of economics and a worse appreciation of risk.

    Bitcoin itself is not a shitty idea.

    We disagree on that point. I think bitcoin is an idiotic solution in search of a problem. The rather narrow problems it purports to solve (money transfer fees, etc) are done by externalizing a great deal of risk and cost. If you really account for all the costs and all the risks it isn't actually cheaper than currencies like the dollar. In reality it is used mostly by those who are either ideologically motivated or find the idea of it romantic or (unfortunately) by those who are engaging in illegal activities of one sort or another. A lot of people are involved too as a get rich quick scheme.

    But to say a system that offers frictionless payments is a shitty idea and should not even be attempted is stupid.

    Bitcoin is anything but "frictionless". It carries very real and significant costs including opportunity costs, exchange rate risk, security costs, liquidity problems, volatility costs, and more. It is not widely accepted, requires a computer, has essentially no physical payment infrastructure, etc. Any merchant that accepts bitcoin and doesn't charge some fairly hefty fees to use it is being incredibly irresponsible given the risks involved.

    One last thing and more of an open comment to people who have bitcoin. "Don't be a dumbass and let Lenny hold your bag of cash for you!" Geez does it even need saying?

    Yes it does unfortunately. Many of the people involved with bitcoin are smart but too many are not financially sophisticated and certainly don't seem to appreciate the risks involved.

  • by anagama (611277) <obamaisaneocon@nothingchanged.org> on Tuesday March 04, 2014 @01:34PM (#46398021) Homepage

    Exactly how would a consumer figure out whether to trust a coin exchange? From their website? Do you look for a plain jane web 1.0 site under the notion that they are using solid technology without a bunch of zero day exploits -- or do you avoid it under the notion that they obviously aren't keeping up and are incompetent? Do you take the word of random forum posters? Call up customer service and expect them to say anything but your money is safe?

    It's very easy to say something like "use a trustworthy exchange" -- but I would think it quite hard to actually figure out if an exchange is trustworthy, even for geeks, and next to impossible for other users.

  • by Shakrai (717556) * on Tuesday March 04, 2014 @01:44PM (#46398123) Journal

    That seems to be the problem all around. Read a Federal Reserve note sometime. There is nothing backing it but the government's promises. There isn't a hard currency on the entire planet at the moment. The difference between Bitcoin and a government currency is, Bitcoin didn't have a government 'guaranteeing' the cash.

    The United States of America has 314 million people with a near 100% literacy rate, a highly educated workforce, diversified economy, and 5,000 nuclear weapons. What does bitcoin have?

  • Re:Hell Of It Is (Score:4, Insightful)

    by Registered Coward v2 (447531) on Tuesday March 04, 2014 @02:02PM (#46398429)

    I never cease to be amazed how often suckers fall for it, even when you mention the LAST scam in the channel they're advertising in.

    Having spoken to number of Bitcoin true believers; their argument basically was "Bitcoin is different. None of the real world rules apply to it. You don't understand." followed by an assertion that they were going to get rich.

    Which proves the old maxim that you can never go broke underestimating the stupidity of the public; or as a corollary the gullibility.

  • by Raenex (947668) on Tuesday March 04, 2014 @02:16PM (#46398629)

    If it's server-accessible, it's hackable and subject to theft. If you think you can make something hack-proof purely out of software, let me introduce you to Kurl Godel.

    You don't know what you are talking about. Godel's theorems were specifically about mathematical axiom systems, consistency, and completeness. It does not say it is impossible to write hack-proof software.

  • Re:surprised!!!! (Score:4, Insightful)

    by Shadowmist (57488) on Tuesday March 04, 2014 @02:49PM (#46399171)

    You think this could only be about money? That's adorable.

    This could be about decentralized currencies & their ability to control our money. Considering how much involvement they've had in undermining almost all aspects of the internet recently, I'd bet it was them.

    Besides, its very nice and easily to "plant" evidence to keep for a later date.

    Or maybe the cypherphunks can't accept the idea that it's most likely they're being attacked by their own kind with the same lack of respect for regulation and disdain for law that they have?

  • That is really the point here - if you destroy a currency the currency is worthless, so why steal it unless you don't care about the value?

    1. Steal currency
    2. Convert into another currency
    3. Time passes
    4. People realise that a theft has occurred
    5. Currency devalues
    6. Theives don't care because they already cashed out in (2).

  • by 1s44c (552956) on Tuesday March 04, 2014 @05:22PM (#46401257)

    And that's the basic problem. Fools keep giving their bitcoins to anonymous internet people to hold then act all shocked when those anonymous people disappear.

    It's like giving a bundle of bank notes to a random stranger to hold for you. Anyone can see that's not going to end well.

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