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Bitcoin Businesses Security The Almighty Buck The Courts

Chaos and Hackers Stalk Investors on Cryptocurrency Exchanges (reuters.com) 64

From a report: Dan Wasyluk discovered the hard way that trading cryptocurrencies such as bitcoin happens in an online Wild West where sheriffs are largely absent. Wasyluk and his colleagues raised bitcoins for a new tech venture and lodged them in escrow at a company running a cryptocurrency exchange called Moolah. Just months later the exchange collapsed; the man behind it is now awaiting trial in Britain on fraud and money-laundering charges. He has pleaded not guilty. Wasyluk's project lost 750 bitcoins, currently worth about $3 million, and he believes he stands little chance of recovering any money. [...] Cryptocurrencies were supposed to offer a secure, digital way to conduct financial transactions, but they have been dogged by doubts. Concerns have largely focused on their astronomical gains in value and the likelihood of painful price crashes. Equally perilous, though, are the exchanges where virtual currencies are bought, sold and stored. These exchanges, which match buyers and sellers and sometimes hold traders' funds, have become magnets for fraud and mires of technological dysfunction, a Reuters examination shows, posing an underappreciated risk to anyone who trades digital coins. Huge sums are at stake.
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Chaos and Hackers Stalk Investors on Cryptocurrency Exchanges

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  • there is no accounting for... accounting.

  • dont keep money you arent trading on an exchange.

    i thought everyone knew that, obviously not. Those who do not learn history are doomed to repeat it. MtGox says hello.

  • by houstonbofh ( 602064 ) on Friday September 29, 2017 @09:51AM (#55276595)
    "and lodged them in escrow at a company running a cryptocurrency exchange called Moolah"

    So they stuck them in a unregulated bank from some guy no one has heard of and the bank was robbed. Blame the currency! If they would have kept them in their own wallet, not some guys basement, they would have been fine.
    • by rgmoore ( 133276 )

      So they stuck them in a unregulated bank from some guy no one has heard of and the bank was robbed. Blame the currency!

      They aren't blaming it on the currency; they're blaming it on the complete lack of any kind of regulation surrounding the currency. The people who advocate Bitcoin (and similar cryptocurrency) wanted to create a whole new economy without all that pesky government regulation. Now they're learning the hard way how important all that regulation is to having a functioning economy.

      • Now they're learning the hard way how important all that regulation is to having a functioning economy.

        It functions quite well for a lot of people. Not so much for the "investors" trusting random con artists. And this is how the world has been for a long time...

    • by Anonymous Coward

      He put them in an unregulated bank because making bitcoin transactions is a laughable shit-show. The blame falls squarely on the currency.

      You aren't going to run a business out of a wallet any more than you're going to run one with a pile of money under the mattress in the back room

      This type of incident is the rule, not the exception. The number of hacked, scammed, or collapsed exchanges exceeds the working ones by several orders of magnitude and the ones that aren't failed just haven't failed yet.

      Btc is a

      • You aren't going to run a business out of a wallet any more than you're going to run one with a pile of money under the mattress in the back room

        Why? Especially since exchanges are really just a bunch of wallets? The original value of a bank was that money was safer there then at home. (Yes there was lending as well, but it was mainly safety.) With bitcoin, it is the opposite.

    • If they would have kept them in their own wallet, not some guys basement, they would have been fine.

      Are you sure about that [cointelegraph.com]?

      Despite the swift action by Trezor on the attack, the incident still created some doubt among users on the security of hardware wallets.

      • If they would have kept them in their own wallet, not some guys basement, they would have been fine.

        Are you sure about that [cointelegraph.com]?

        Despite the swift action by Trezor on the attack, the incident still created some doubt among users on the security of hardware wallets.

        Yep. I am. Compare that ONE article with the many on exchanges. Also, there are other wallets. A paper wallet in a safe deposit box is possible too.

    • by Anonymous Coward

      This entire article sounds like about half the comments on the one from July 2010 on Slashdot discussing bitcoin 0.3. And the one from Feb 2011 discussing "dollar parity".

      "what sort of guarantees are in place for virtual currency"?
      "It is a ponzi"
      "Stupid idea"
      "Bitcoin is worthless."
      " because anyone can print money (even small amounts) I'm not going to be giving up any of my items today."

      etc

      If anyone had mined or purchased during any of the early Slashdot articles, they'd have millions of USD. Yet, the goal

  • Can't you do everything from your digital wallet on your computer, except convert to real cash ? Sorry, I never got on the cryptocurrency bandwagon.
    • Pretty much, if you run a full node on your own system the only way to lose your money would be if your system got compromised. Putting money in an exchange is potentially more convenient for a number of reasons, but it's certainly not as secure as actually retaining control of your own Bitcoins
      • Can't you do everything from your digital wallet on your computer, except convert to real cash ?

        Pretty much, if you run a full node on your own system the only way to lose your money would be if your system got compromised.

        Which is why you don't run the bitcoin wallet software on your regular computer. You take an old obsolete computer, install Linux on it, install the wallet software on it, and use that machine only for:
        (1) Linux software updates.
        (2) Bitcoin software updates.
        (3) Running the bitcoin software.
        (4) Bitcoin transfers.
        (5) Copying the bitcoin wallet to USB sticks for backups.

      • ... the only way to lose your money would be if your system got compromised.

        So almost negligible risk ...

    • by Baron_Yam ( 643147 ) on Friday September 29, 2017 @10:09AM (#55276703)

      >Can't you do everything from your digital wallet on your computer, except convert to real cash ?

      In theory. However, any anonymous trading between the crypto and something else (even another crypto) will require a trusted middleman. Of course, the middlemen in the crypto space are pretty much never trustworthy.

      > Sorry, I never got on the cryptocurrency bandwagon.

      Buy scratch-and-win tickets at your corner store or gas bar. On average, you'll do better and still get the same rush from gambling in hopes of getting filthy rich for little effort. All the rest is overly complicated window dressing.

  • by Anonymous Coward

    The first mistake was putting the BTC in escrow on a cryptocurrency exchange. The second mistake was leaving it there. Did no one teach these people about digital wallets?

    Do your research on cryptocurrency before getting involved in it, people!

  • by Anonymous Coward

    Seriously, part of the point of bitcoin is that you can do transactions from your own bitcoin wallet. Why do we still have otherwise-intelligent people handing bitcoins worth millions of dollars to a random dude who set up a website on the internet?

    If you had three million dollars in cash and a random guy you met on a street corner promised that if you gave it to him, he'd give it back to you in a few months when you need it... would you really hand it over and then be shocked when you couldn't find that

  • by reanjr ( 588767 ) on Friday September 29, 2017 @10:12AM (#55276727) Homepage

    I've never heard of Moolah, which is the first red flag in entrusting a $3million pile of digital cash to them.

    The whole point of BTC is to cut out middlemen. Like cash, you hand a wad over to someone and they can do whatever they want with it. Why would you give your wad of cash to someone? What the fuck do you think is going to happen if that guy runs off with your cash?

    If you want to hand over a wad of digital cash to someone, use a bank like a normal person. Put your BTC in cold storage in a safety deposit box. This is asset security 101. The fact that these people managing millions of $ in assets don't know the first thing about securing cash is both laughable and sad.

  • FUD (Score:4, Insightful)

    by Artem Tashkinov ( 764309 ) on Friday September 29, 2017 @10:49AM (#55276997)

    I hate all this constant stream of FUD in regard to crypto currencies. Fiat money can be stolen as well and it happens all the time, yet /. rarely if ever features such articles.

    Every passing week brings at least five news pieces featuring five new prominent economists/advisors/CFO/etc. who all declare that Bitcoin is either a bubble or a Ponzi scheme.

    We've all heard that Bitcoin is a fraud at least a thousand times already. Now leave it alone please. People who trade bitcoins or invest in bitcoins perfectly understand their risks. It's true that bitcoin's worth is basically zero unless the market agrees that it has a different price. The market has decided that it costs ~$4200 at the moment. It's true that Bitcoin might become worthless tomorrow. If you think otherwise you need to get a shot of common sense.

    • Normal Fiat money, as you call it, is usually insured by the bank you store it in. Even if they get robbed or go under, the insurance will cover your funds. In the US this is done by the FDIC. AFAICS there is no insurance for bitcoin exchanges, wallets, or anything. Except for the ridiculous ponzi-stock-like value increases, it is much safer to keep cash under your pillow or under a rock on the sidewalk.

    • zed oh muh gawd. artem has dictated. we must obey and not talk bad about this. shyeah.
  • I never had the impression BTC was supposed to be secure, it was supposed to be universal and free of centralized control. Certain aspects of it have security certainly, but who promised BTC in general would be "secure"?
    • BTC as such is secure against tampering. If you keep them in your own digital or hardware wallet, they are totally secure. If you leave them on an exchange, they're only as secure as the exchange.

      • So you could say, BTC is more secure than the US dollar. But the bank's security may not be.
      • by orlanz ( 882574 )

        Generally speaking, the Exchange is probably more secure than your computer. I don't think I would be confident nor comfortable having $3 million dollar's worth of coins sitting in my laptop or USB drive at home. The problem here isn't so much about the security/reliability of the exchanges. I think they are fairly OK considering Bitcoin isn't collapsing. The problem is that the overall system has far less safety checks and nets than normal government backed currencies. Thou Bitcoin is better off than

  • Like the huge sums of money that come in my Monopoly board game?

  • So some butthurt author wrote an article whining about BTC-E. I've got news for you. NOBODY in the bitcoin community trusted BTC-E. They were always the shady exchange and nobody with a brain used them. All the other major exchanges have been around for years with little to no incidents. So the moral of the story actually is do some damn research before choosing an exchange and all the rest are safe. This is such a FUD article I can't even believe it.
  • Hello, random stranger on the internet. Here is a stack of untraceable currency worth $3 million. Please don't run away with them.

This is an unauthorized cybernetic announcement.

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