Posted on

Ten-Year Jail Term Looms Large for Former Mt. Gox Chief

Japanese Prosecutors are clamoring a 10-year jail term for former CEO of defunct Japanese Bitcoin exchange, Mark Karpelès. This comes in the midst of the extension announced for civil rehabilitation claims.

More Trouble for Former Mt. Gox Chief

The nightmare does not seem to end for Mark Karpelès, as the Nikkei Asian Review today (December 12) reported that Japanese prosecutors at the Tokyo District Court, called for a 10-year jail term for the Mt. Gox CEO for embezzlement. According to the prosecutors, Karpelès embezzled 340 million yen from accounts belonging to customers in the last quarter of 2013.

Furthermore, the Japanese prosecutors claim that Karpelès used the embezzled funds for personal purposes, such as rent and business acquisitions. The prosecutors are also accusing the Mt. Gox Chief of forging the company’s data, thereby manipulating accounts illegally.

However, during the court proceedings, the defendant, Mark Karpelès, denied the accusations leveled against him. Karpelès responding to the embezzlement accusations stated that the funds acted as a temporary loan.

In response to the former CEO’s statement, the prosecutors at the court said:

There was no documentation of loans, and there was no intention of paying back the money.

The prosecutors went further to demand a harsh sentence for Karpelès. According to the Japanese prosecutors, the Mt. Gox Chief betrayed his clients’ confidence and misused most of their funds.

Former French CEO of defunct Japanese exchange, Mt. Gox, was initially arrested in 2015 for forging the exchange’s system to inflate its account. The Mt. Gox Chief stood trial two years later in July 2017 for the collapse of the company and embezzling funds. Karpelès in a later interview likened the experience of the company’s hack to falling from a building.

Mt. Gox’s Attempts to Pay its Debts

The collapsed Japanese Bitcoin exchange, Mt. Gox, has made moves to compensate its victims following the massive hack in 2014. Former clients of the defunct company called for civil rehabilitation proceedings in 2017, with the courts granting their claims in 2018.

Rehabilitation trustee for the defunct Japanese exchange, Nobuaki Kobayashi, announced  the commencement of the civil rehabilitation proceedings. Initially meant for individual creditors, the rehabilitation process later extended to corporate creditors. The deadline for filing claims was October 22, 2018.

However, Kobayashi announced an extension for filing claims to December 2018 for creditors who were yet to file claims. Although, the rehabilitation officer emphasized that only the court had the power to accept further claims after the initial deadline.

Image courtesy of Shutterstock.

The post Ten-Year Jail Term Looms Large for Former Mt. Gox Chief appeared first on Ethereum World News.

Posted on

Kidnapping of Bitcoin Exchange Executive Showed Importance of Financial Privacy

The recent abduction of UK-based Bitcoin and cryptocurrency exchange Exmo Operator Pavel Lerner has demonstrated the importance of financial privacy for cryptocurrency users.

Earlier this week, BBC initially reported that Lerner kidnapped outside of his office in Kiev, Ukraine, on Dec. 28, by a group of individuals who dragged him at knife point to a black Mercedes and drove off the scene. At the time, Anatoliy Larin, the spokesperson of the exchange, stated:

“Despite the situation, the exchange is working as usual. We also want to stress that nature of Pavel’s job at Exmo doesn’t assume access either to storages or any personal data of users. All users’ funds are absolutely safe.”

Within two days after the disappearance of Lerner, Financial Times revealed that Lerner has paid more than $1 mln to an armed gang as a price for his freedom. The advisor to the Ukrainian interior minister Anton Gerashchenko told FT:

“He was kidnapped by an armed gang for the purpose of extorting Bitcoins. We have operative information that he paid more than $1 mln worth of Bitcoins. [After one and a half days, he was] then released in a state of shock. … He got very lucky that he remained alive.”

The Ukrainian National Police has officially opened a criminal case to investigate into the abduction of Lerner and to disclose the identities behind the attack.

While Exmo is a small Bitcoin exchange with only 94,000 active investors and a $125 mln daily trading volume, less than one percent of leading exchanges like Bithumb, Coinbase’s GDAX and Bitfinex, both the company and Ukrainian authorities believe that Lerner became a target of the armed gang because of his involvement in a Bitcoin venture.

Over the past 12 months, the price of Bitcoin has surged from $900 to $14,000, by nearly 14,000 percent. Thus, an increasing number of hackers and criminals have started to target large-scale cryptocurrency businesses and executives of Bitcoin companies.

Importance of financial privacy

During a presentation given at the Coinbase headquarters, Monero Lead Developer Riccardo Spagni, better known to the cryptocurrency community as FluffyPony, emphasized the importance of financial privacy for users and investors of all types.

He noted financial privacy on public Blockchain networks and cryptocurrencies is crucial in preventing sensitive information of users from being used for criminal activities, such as direct attacks, blackmailing, targeted advertising, and unwanted disclosure of assets, wealth and holdings.

In January 2017, when he gave the talk to Coinbase employees, FluffyPony jokingly stated that investors could become kidnapped for purchasing large amounts of Bitcoin at a local exchange.

“If we don’t have financial privacy, there are bad things that can happen. We might end up with targeted advertising based on spending habits. [Another example is] targeted crime against the wealthy. You go to a local Bitcoin exchange and next minute you’re held up at knife point. Even worse, you go and pay with Bitcoin for an item and now, the owner knows your bank balance,” said FluffyPony.

Dumbfoundingly, FluffyPony’s statement became a reality in Kiev, Ukraine, as Lerner became a direct target of an armed gang with a pre-established plan of extorting ransom in Bitcoin from the exchange operator.

However, the lack of privacy measures in Bitcoin also means that the criminals that have abducted Lerner cannot easily spend the money or sell it for cash because the transaction can be traced using the public Bitcoin Blockchain.

Posted on

World’s Largest Bitcoin Exchange, Bitfinex, Threatens Critics With Legal Action

Bitfinex, the world’s largest Bitcoin exchange by daily trading volume, has vowed to pursue legal action against critics including the anonymous blogger “Bitfinex’ed.”

Bitfinex Accounts For Over 12 Percent of Global Bitcoin TradesStuard Hoegner, Bitfinex’s in-house counsel, stated:

“To date, every claim made by these bad actors has been patently false and made simply to agitate the cryptocurrency ecosystem. As a result, Bitfinex has decided to assert all of its legal rights and remedies against this agitator and his associates.”

Kyle Samani, a partner at Multicoin Capital, stated that Bitfinex had made a critical mistake by initiating a lawsuit against Bitfinex’ed and other potential “bad actors” in the cryptocurrency space.

Bad decision

Over the past few months, Bitfinex’s involvement with Tether, the US dollar-backed cryptocurrency, has been questioned, given that a long-promised third party audit on the USD reserve of Tether was never performed. Critics such as Bitfinex’ed claimed that not all of the Tether issued are backed by US dollars. Tether (the company) shares many of the same owners as Bitfinex.

Charlie Lee, the creator of Litecoin and former executive at Coinbase, also urged Bitfinex to conduct a third party audit on Tether, to put an end to the controversy.

A third party audit would be beneficial for both Bitfinex and the cryptocurrency sector, as it would calm many investors who fear that Bitcoin’s price is being manipulated. It would also reassure holders of Tether that the cryptocurrency is backed by a USD reserve.

However, as Samani noted, instead of performing a third party audit, Bitfinex chose to pursue legal action against its critics.

Reserve of ether

Several analysts and experts have recently questioned the USD reserve of Tether. Tim Swanson, the founder at OfNumbers and a risk analyst for Blockchain firms, stated that a serious problem could emerge in the short-term if Tether is not backed by USD by a 1:1 ratio.

“Is there anything backing this? If these aren’t backed 1-to-1, then what is the contagion risk if one of these exchanges goes down?”

Given that Bitfinex remains as the largest cryptocurrency exchange in the global market and Tether has evolved into a $813 million cryptocurrency, Bitfinex and Tether should conduct a third party audit to prove their solvency in the upcoming months. Failure to do so will continue to ignite more controversy within the global cryptocurrency community, which is not beneficial for any party involved.

Attacks against Bitfinex

On November 19, Bitfinex revealed that the exchange was targeted by a coordinated attack designed to disrupt the market. The Bitfinex emphasized that both fiat and cryptocurrency withdrawals are functioning as normal, and that the exchange is solvent, after several inaccurate reports circulated in online Bitcoin communities.

The company also encouraged the cryptocurrency market to request for evidence before drawing any conclusion in regards to the insolvency of Bitfinex.

Currently, the stance of the Bitfinex team is to defend the exchange and its trading platform against “bad actors” in the cryptocurrency sector and inaccurate allegations.

Funny money?

Tether has previously come under criticism for claiming that their tokens aren’t money at all. The “legal” section of Tether’s website states:

“Once you have Tethers, you can trade them, keep them, or use them to pay persons that will accept your Tethers. However, Tethers are not money and are not monetary instruments. They are also not stored value or currency. There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.”

The company responded, saying they cannot legally guarantee redemption for dollars, even though they have every intention of honoring redemption requests:

“Our Terms of Service have been carefully picked apart by various malcontents and twisted to suggest that Tethers would not be redeemable for currency on some bizarre, malicious whim by Tether. That is untrue. While we reserve the right not to redeem for any particular customer, as we must, we will not do so for no reason. We have a duty to try to ensure that our service is not being used by persons from sanctioned countries, that is otherwise on a sanctions list, or that has some background check problem. In short, redemptions will not be unreasonably denied, but we reserve the right to selectively deny redemption and creation of Tethers on a case-by-case basis.”

Posted on

Nepalese Police Arrest Bitcoin Traders Despite Lack of Cryptocurrency Regulation

The Nepalese police have arrested at least seven individuals for allegedly being involved in virtual currency trading activities in the country as of early October 2017. The arrests were made despite the absence of regulations covering the trading of cryptocurrencies in the country.

Based on local press reports, the suspected traders were arrested by members of the Central Investigation Bureau (CIB) in Kathmandu and Chitwan. Among those arrested were Prashant Pratap Shah of Kathmandu, Bida Dhakal of Nuwakot, and Mingmar Tamang of Sindhupalchok.

According to the CIB’s DSP Jeevan Kumar Shrestha, this is the first time that cryptocurrency exchange operators were arrested in the country.

“They have been kept at the police custody. The traded amount will be discovered after further investigation.”

Possible ban

The arrests made by the CIB are expected to raise more questions than answers, as the trading of Bitcoin and other cryptocurrencies is not considered illegal, because of the absence of regulations on the issue in the country. Due to the situation, it is still unclear what offenses will be filed against the arrested individuals.

Meanwhile, the Nepalese government is already drafting regulatory guidelines covering digital currency trading. Among the possible regulations that will be imposed by authorities is a total ban on the trading of cryptocurrencies.

Due to this possibility, digital currency exchange operator Bitsewa has already ceased its operation in early October. The exchange is considered as the Nepalese version of LocalBitcoins.

Although digital currency activities in Nepal are not so big, any form of regulation against cryptocurrencies may set a dangerous precedent and hinder innovations in the sector. Due to these developments, it is very interesting to see how the virtual currency industry in the country will develop in the short term.

The country has also previously notoriously seized all relief funds in bank accounts ‘to ensure all donations are not misused’.

Posted on

OKEx Responds to Bitcoin Theft, Says Exchange is Safe

The news about OKEx accounts being attacked has spread quickly in the last 48 hours and caused heated discussions in China. Consequently, OKEx published an official announcement on Oct. 2. In the announcement, the exchange expresses confidence in its security system, explains the possible causes of the theft, and requires users to improve their security settings.

OKEx states that its security is reliable and it has blocked all withdraw operations done by attackers. However, in order to better protect accounts, users should enable Google authentication. What’s more, OKEx lists several possible causes for the theft and provides suggestions about how to avoid other potential security threats.

The full content and translation of OKEx’s announcement are provided at the bottom of the article.

A little history

Security has been a serious issue since Bitcoin’s birth. For instance, in December 2013, some cyber thieves broke into Sheep Marketplace and stole 96,000 Bitcoins which were worth about $56.4 mln. Because of the very nature of Bitcoin, it can be quite difficult to store safely. This goes for exchanges, too.

Unlike the traditional financial system, there is no third party that can reverse a charge or restore your account balance if you lose Bitcoins or have them stolen. Users are responsible for their own security. Bitcoin holders without professional knowledge about cryptocurrency should choose a reliable platform to save and trade their Bitcoins and other cryptocurrencies.

Secondly, Bitcoin holders with a large number of Bitcoins should be more vigilant about not only their accounts’ security but also their personal computers’ security. They should install the latest antivirus software and change passwords regularly. Last but not the least, Bitcoin holders should encrypt their accounts to improve the security of accounts.

Full text of OKEx announcement

Below is the full text of the announcement:

Several reminders about improving OKEx accounts’ security

Dear OKEx Users:

Lately, we have noticed some unusual login activities of a few OKEx accounts. With our security system, all withdraw operations failed. However, attackers still caused some losses by randomly operating.

Several reasons might cause unusual login activities:

  1. Password is inappropriately kept or is too simple;

  2. Personal computer is infected with the virus, or the account is logged in on public computers;

  3. The user uses the same password on different websites and password is leaked on another website.

Users can improve security settings to ensure accounts’ safety:

  1. Use Google authentication, and turn on secondary verification:

How to use Google authentication:

1)    Download the APP: search and download Google Authenticator in APP Store with your phones;

2)   Use Google authentication: Google Authenticator will generate PINs based on time information. Please make sure time information is accurate on your phones. Select “My Account” – “Security Center” – “Set Google Authentication” – “Setting” by the sequence in OKEx website, the platform will generate a QR code. Open Google Authenticator APP and select “Accounts Settings” – “Scan QR code.” You will get a six-digit verification code. Fill in code in OKEx to finish setting.

  1. Change password regularly and try to avoid using the old passwords. Do not use the same password for different websites.

  2. Improve security awareness. Do not login accounts on public computers. Download and install the latest antivirus software to avoid personal computers being infected with the virus.

  3. Use the trading PIN to prevent random trading behaviors.

OKEx has a strong security system, but it requires users to turn on and enable some services. We strongly recommend users to activate those services following our instructions above to ensure your accounts’ security.

OKEX Technology Company Limited

September 30, 2017

OKEx’s announcement in Chinese:

https://support.okex.com/hc/zh-cn/articles/115001833312-

Posted on

Is China Really Banning Bitcoin Exchanges, Or is it Fake News?

Amid a swirl of speculation and assumptions, mainstream media outlets in the West are reporting that China will indeed be banning Bitcoin exchanges.

This comes after the Chinese government placed a blanket ban on ICOs earlier.

The reports in publications like the Wall Street Journal and others are quoting ‘anonymous’ sources that were not providing too much detail.

Anonymous sources

According to the Wall Street Journal, and their unverified and anonymous sources, the regulators were not even sending clear messages on the details of the ban – such as when it would occur.

Apparently, one regulator told an exchange that the decision had already been made, while another said that it could take a few months.

Despite the foggy nature of these proclamations, the Bitcoin price has taken a second dip after recovering from the news of the ICO ban in China.

Bloomberg also reports on the claims about exchange bans but says:

“The ban will only apply to trading of cryptocurrencies on exchanges, according to people familiar with the matter, who asked not to be named because the information is private.”

The apparent reason for the exchange ban?

Bitcoin has been a major disruptor in China and its socialist monetary policies.

As such, it is believed that the Chinese government has perceived the growing interest of the digital currency as a threat especially as Chinese investors have been seen to buy up Bitcoin and bet against the yuan.

The anonymous source cites “too much disorder” as the reason for the alleged shutdown, echoing the Chinese central bank’s words last week criticizing ICOs for disrupting the country’s financial order.

Highly skeptical

Many hardline beliefs in Bitcoin are rightly skeptical about the perceived ban from China as there has been no official word, and no one brave enough to put their name on the news.

CEO and founder of Chinese exchange BTCC has put up a twitter poll asking if people believe that the ban is real with over 80 percent of people saying no.

OKCoin responded to this news saying:

“‘Till now we haven’t been informed by any authorities about closing BTC exchanges, if that happens, we will show notifications on our website in no time. Even if that’s the case, we would be running offline trading for users, and your balance of coins in your account will be absolutely safe.”

Posted on

Weeks After Seizure, Troubled Bitcoin Exchange BTC-e Is Back Online

BTC-e, the bitcoin exchange charged by US authorities last month with a host of money laundering crimes, has launched a new website weeks after its original one was seized by law enforcement.

The site is accessible through the domain btc-e.nz, though it appears that users in some parts of the world, including the U.S., are not able to log in. CoinDesk was able to access the domain through the use of a virtual private network, or VPN.

For now, users appear to be limited to being able to check their funds balances and post messages in the BTC-e chat box.

In a post on the Bitcoin Talk forum yesterday, a representative for the exchange said that user access would form part of a broader relaunch plan that will see BTC-e rebrand under the auspices of what they say will be a regulated investment firm.

At press time, 3,239 users of the site are logged in, according to statistics posted on the BTC-e page.

As CoinDesk previously reported, Greek authorities – acting on a US warrant – arrested a Russian national last month who they alleged helped operated the BTC-e exchange – an accusation that representatives for BTC-e later denied.

After its domain had been seized and an indictment was handed down by US prosecutors, those left in control took to a long-used Bitcoin Talk account to announce a revival plan. Part of that plan, as reported at the time, involves the launch of a debt token aimed at recouping some of the losses for users.

An update on the new BTC-e page recommended that users reset their security settings, given the recent moves by US authorities.

“Because of the seizure of the data, there is a high risk that it has been compromised. That is why in order to protect your funds, you need to refresh the security settings,” the message states.

CoinDesk will continue monitoring this developing story. 

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [email protected].