Category Archives: Crime

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Mt Gox Founder Guilty of Data Manipulation, No Jail Time

Mt Gox Founder Guilty of Data Manipulation, No Jail Time

Mark Karpeles, former head of the collapsed bitcoin exchange M tGox, at one time the largest Bitcoin intermediary and the world’s leading Bitcoin exchange, has been convicted by a Japanese court.

The Tokyo District Court sentenced Karparles to a suspended jail sentence of two and a half years for date manipulation for his role in the disappearance of 850,000 Bitcoins, but acquitted the French one-time-IT-engineer of the charge of embezzlement.

Mt Gox filed for bankruptcy on 28 February 2014. Some 750,000 of customers’ Bitcoin had been lost along with 100,000 BTC of the exchange’s own funds — at the time equivalent to USD 473 million. Karpeles blamed the loss on internal fraud at the time. Over a year later, he was arrested by Japanese authorities and formally indicted for embezzling customer funds by November.

Japanese prosecutors were looking for a punitive sentence of up to 10 years for Karparles, so clearly the sentence passed down would have been a disappointment to investors affected by the affair. In Karparles’s defence, the District Court judge maintained that business owners often borrow funds without clear accounting, and felt that the ex-owner had every intention of returning the funds. He added that no financial damage had been caused to the company as a result of the missing Bitcoin.

At one stage in the trial which began in 2017, Karpeles apologized to customers but stated:

“I swear to God that I am innocent.”

He claimed that he had found 200,000 bitcoins later in a cold wallet unconnected to the company’s computers. “Most people will not believe what I say. The only solution I have is to actually find the real culprits,” he told reporters at his trial hearing in July 2017.

During his time on bail, Karpeles was active on social media, criticizing Bitcoin, until raising bail of JYP 10 million in 2016, pending trial.

 

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Istanbul Cryptocurrency Firm Loses $2.47 Million, Hackers In Custody

Istanbul Cryptocurrency Firm Loses .47 Million With Hackers In Custody

An undisclosed cryptocurrency exchange in Istanbul, Turkey was hacked this week of a reported USD 2.47 million.

The company was attacked by a group which has now been detained by Turkish authorities after a nationwide investigation across 8 provinces, and so far has only recovered USD 256,000 of the stolen funds.

The exchange alerted the authorities at the time, reporting that a large amount of Bitcoin, Ethereum, and XRP had been stolen. The Istanbul Cybercrime Branch Officer later clarified that two companies had been targeted in a theft which amounted to 13 million Turkish lire (USD 2.47 million). The stolen funds had been transferred from both companies’ wallets into wallets in the hackers’ possession.

It transpires that hackers had been using the ‘Player Unknown’s Battlegrounds’ (PUBG) online video game as a means of communication. It is clear that the compromised security of both companies could have been avoided if the necessary security measures had been incorporated into their trading systems, an issue which often befalls smaller exchanges, despite warnings from regulators.

Most larger exchanges have far better security, which makes the success rate of such hacks uncommon, limited to smaller exchanges without rigid security procedures. However, the recent misfortunes of QuadrigaCX prove that no measures are completely infallible after CEO Gerald Cotten died having moved funds from the company hot wallet into cold storage for security purposes, protecting his clients’ funds from potential hackers.

The now insolvent crypto exchange QuadrigaCX was left unable to access USD 190 million of funds stored in the cold storage due to the CEO having sole responsibility for the private key.

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Cryptopia Gets Green Light to Reopen After Hacking

Cryptopia Gets Green Light to Reopen After Hacking

New Zealand cryptocurrency exchange Cryptopia, which was hacked almost exactly a month ago, has been given the green light to reopen as local police wind up their inquiries.

Cryptopia has over 2 million global users and offers trading for one of the world’s largest range of cryptocurrencies. January’s hacking resulted in the loss of some $USD 6 million worth of cryptocurrency which warranted the company notifying its users that it had “suffered a security breach which resulted in significant losses”.

The body investigating the breach, New Zealand’s High Tech Crime Group, have indicated that although the exchange if free to open, some of its team will be remaining on site to complete their investigations. The police have not expressed any indication of laying any charges at this stage.

Experts from data company Elementus believe the stolen cryptocurrency could amount to USD 23 million dollars which comprise Ether and ERC20 tokens, and reports indicate that the attack could have even continued even after the investigators arrived on the scene in January.

Cryptopia surprised New Zealand’s crypto and banking community at the end of last year when it announced that it had plans to relaunch the New Zealand dollar stablecoin (NZDT) in Q1 2019. The NZDT was originally launched in 2017, with daily trading volume rallying to NZD 1 million per day. This spooked ASB, the bank that Cryptopia was working with, since proper know your customer (KYC) and anti-money laundering (AML) laws were not in place. Fortunately, the orderly termination of the NZDT stablecoin gave customers a month to convert their tokens back to NZD.

Despite the green light, Cryptopia founders Adam Clark and Rob Dawson have not indicated exactly when they plan to resume services for its huge customer base.

 

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Fake Photo Scams Largely Ineffective but Illustrate Need for Cold Storage

Fake Photo Scams Largely Ineffective but Illustrate Need for Cold Storage

With reported instances of the latest ploy for hackers to access user funds, photo scamming is further proof that cryptocurrency cold storage is by far the safest way to keep digital assets secure.

Doctored images are now for sale on dark web forums according to research by Hold Security and warnings from Bank Info Security, and can be purchased for as little as USD 50. A recent example published by the latter showed an anonymous individual holding up a passport and note showing the words “Reset 2FA” along with the date.

Hold Security, LLC is an information security company helping businesses of all sizes to stay secure. Its Chief Information Security Officer, Alex Holden, says that some exchanges’ security is far too lax, not requiring photographic ID at initial registration. He commented:

“Some companies have no ability to assert what their client looks like… It’s not like hackers publish success rates,…But because we know that [hackers who] we are monitoring are actually making money off of it.”

Most larger exchanges have far better security, which makes the success rate of such hacks uncommon, limited to smaller exchanges without rigid security procedures. Most exchanges require new clients to verify their identity with a passport or drivers license before trading on the platform, although with exchanges unwilling to talk about photo scamming events, it could be that even the larger exchanges have seen attempted security breaches through this method.

Hold Security has reported that the dark web is awash with some 10,000 doctored photos which are used as fake verification purposes. The idea is to convince the exchange that a request to reset the often-mandatory two-factor authentication security process required to gain access to accounts is a legitimate one and is coming from the owner of the account. Cryptocurrency exchange giant Binance admitted that they had seen some attempts to breach their security in this way, commenting:

“Unfortunately, we’re no stranger to these types of malicious attempts to gain access… Given the measures we currently have in place, I don’t believe this threat is something for Binance to be particularly worried about at the present time.”

 

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