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California Judge Orders Accused Hacker to Pay Bail in Crypto

A Serbian and Italian national has been ordered to pay bail in cryptocurrency while he faces charges that he hacked the computer network of a San Francisco game company.

According to a news release from the United States Attorney’s Office, an FBI investigation found that an individual, later alleged to be Martin Marsich, had illegally breached the gaming firm’s network, gaining access to around 25,000 accounts through which users could buy in-game items.

As well as allegedly using stolen information to buy and sell in-game items, Marsich is also accused of selling access to the accounts on dark market websites, in total causing claimed losses of $324,000 to the company. The firm apparently closed the affected accounts after the intrusion was discovered, the report says.

The accused made an initial appearance at a federal court in San Francisco on Aug. 9, after reportedly being arrested at San Francisco International Airport while trying to board a flight to Serbia.

At the hearing, Magistrate Judge Corley said Marsich could be released to a halfway house on the condition that he hands over bail of cryptocurrency to the value of $750,000.

According to a report from The Daily Post, Assistant District Attorney Abraham Simmons said it was likely not the first time cryptocurrency had been allowed to be put up for bail, since judges can accept other assets such as real estate.

Simmons was quoted as saying:

“It really is quite broad. The judge could order just about anything. What the objective is is to get the defendant to comply with an order to appear later.”

Marsich faces a maximum sentence of five years’ imprisonment and a fine of $250,000 if found guilty, the Attorney’s Office says.

Handcuffs and bitcoin image via Shutterstock

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Court Sides With Crypto Exchange Despite Allegation It Violated China Ban

A Chinese cryptocurrency trader who was sent bitcoin in error must repay an exchange even if it broke domestic rules, a Beijing court has ruled.

In a judgement made on July 31 and released on Thursday, an intermediate Beijing court upheld a decision made by a district court early this year that a bitcoin trader named Li Jianfeng must return the proceeds he received from selling five bitcoins he obtained by accident.

The case reportedly stemmed from a system bug on a China-based bitcoin exchange named Coinnice, which mistakenly sent five bitcoins to Li on March 10, 2017.

Based on the court document, Li subsequently liquidated the bitcoins for around $6,100. After Li declined Coinnice’s request that he return the funds, the company brought a lawsuit against him in a Beijing district court.

During the case, Coinnice argued that Li had no legal right to possession of the assets and, as such, should return the proceeds to the exchange.

The plaintiff further presented the bitcoin address that was assigned to Li on the exchange, proving the transactions to the court. The judge consequently ruled in favor of the plaintiffs in March 2018, saying that by signing up on Coinnice, Li agreed by default to the contractual terms listed on the platform.

However, Li later appealed to the intermediate court making the counter-argument that Coinnice was based in China and should have been be regarded as an illegal operation to begin with, since the People’s Bank of China has explicitly prohibited bitcoin trading platforms from providing services to domestic investors.

However, the judge in the appeal ruled that, based on China’s civil law, anyone that has made profits without a legal ground and resulted in other people’s loss must return the unauthorized assets.

The court went to explain:

“In this case, whether or not Coinnice’s establishment as a bitcoin trading platform has violated relevant rules, does not have any impact on Li’s liability to return the profits he received with no legal basis. … As such, the court denies his appeal and the decision is final.”

Although codified statutes predominate in China’s civil law system, the judgement may still offer a window into the thinking of courts in the country when dealing with disputes involving cryptocurrencies.

In a similar case, crypto exchange OKEx is also facing a lawsuit in which a bitcoin trader is claiming for 38 bitcoin cash that he did not receive after the cryptocurrency’s hard fork from bitcoin in August 2017. The divergence meant that anyone with bitcoins at the time would, in theory, also own the new bitcoin cash to an equal amount. However, not all exchanges passed the free coins onto customers.

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Court Sentences Bitcoin Ransomware Creators to Community Service

The developers behind the CoinVault and BitCryptor ransomware were sentenced to 240 hours of community service in a Dutch court on Thursday.

Melvin and Dennis van de B., aged 25 and 21, were convicted of accusing 1,259 computers in the Netherlands and other Western European countries with the ransomware and demanding bitcoin payments as a ransom to fix the computers. The two reportedly made roughly 10,000 euros each between 2014 and 2015, Dutch website NU.nl reported.

CoinVault would cut off victims’ access to files on their computers and demand 1 bitcoin as a ransom – equivalent to several hundred euros at that time. Almost a hundred victims paid the fee, according to NU.nl.

After the news of the malware spread, cybersecurity firm Kaspersky Lab tipped the Dutch police on the names of the hackers. The firm said it had found a bug in the CoinVault code and could see “one of the suspect’s first names in the pdb path.” Kaspersky also issued around 14,000 decryption keys for the victims of the attack, as previously reported by CoinDesk.

The men told the court they just wanted to experiment and challenge their technical skills, but the judges noted that the brothers would always ask for payment, including when some victims were asking for the return of files related to their deceased parents, the Dutch website NRC.nl reported.

Some of the victims are now demanding compensation in bitcoin, 2-spyware.com wrote.

The Public Prosecution Service had previously demanded a suspended prison sentence of one year, but the judges took into consideration that the brothers had no previous criminal record and hadn’t commit any new crimes while waiting for the trial since their arrest in 2015.

Editor’s note: some of the statements in this article were translated from Dutch.

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Former Indian Lawmaker Declared 'Offender' in Bitcoin Extortion Case

A former Indian legislator who was allegedly involved in a $1.3 million bitcoin extortion case has been declared a “proclaimed offender” by a local court.

According to The Indian Express, a sessions court in Ahmedabad granted an application from the state Criminal Investigation Department (CID) on Monday to declare Nalin Kotadiya an absconder from justice. According to Indian law, can now be arrested by any resident and is banned from leaving the country.

The decision comes after Kotadiya – a former Member of Legislative Assembly – failed to appear in court despite repeated summonses and after the CID could not reach him with an arrest warrant.

As previously reported by CoinDesk, Kotadiya’s name surfaced when the CID started investigating the case in which businessman Shailash Bhatt accused 10 policemen of extorting 200 bitcoin (then worth around $1.7 million) from him by force in February.

According to the new report, Kotadiya is believed by the CID to have helped the police officers kidnap Bhatt.

In an intriguing twist to the tale, the CID is also accusing the apparent victim, Bhatt, and an associate, Kirit Paladiya, of extorting around $22 million – including cash and over 2,000 bitcoin – at gunpoint from a member of BitConnect, an alleged bitcoin Ponzi scheme which reportedly closed in India in January. Another report said Bhatt had previously invested in the scheme.

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LA Bitcoin Trader Faces 30 Months in Jail for Illegal Money Business

A Los Angeles bitcoin trader faces more than two years in jail for having operated what prosecutors say is an illegal money transmitting business.

Fifty-year-old Theresa Tetley, who worked under the name “Bitcoin Maven,” made at least $300,000 a year from trading bitcoin on Localbitcoins.com between 2014 and 2017, according to NBC Los Angeles. She also made transactions over that time worth from $6 million to $9.5 million.

Tetley has already pled guilty to operating an unregistered money transmission business and exchanging around 80 BTC for $70,000 in one transaction that prosecutors allege involved the proceeds of drug trafficking, according to court documents.

The ex-trader now faces a 30-month federal jail sentence for the crimes, if the government gets its way in court on Monday, although her defense team is pushing for a lesser sentence of one year. Federal prosecutors also hope to seize 40 BTC (currently worth $270,000), $292,264 and 25 gold bars seized by law enforcement agents in March, according to the report.

The Prosecutors Office said in court documents that Tetley’s activities “fueled a black-market financial system in the Central District of California that purposely and deliberately existed outside of the regulated bank industry.”

While the case is thought to the first of its kind in Southern California, according to NBC LA, other bitcoin traders have run afoul of authorities in other parts of U.S. in the last year.

A Detroit bitcoin trader was sentenced in December 2017 to 366 days in jail for similarly operating an unlicensed money services business. Sal Mansy funneled bitcoin transactions – also using localbitcoins.com – through a corporation he owned, ultimately conducting $2.4 million-worth of bitcoin transactions over a two-year period.

In another case linked to Localbitcoins, father and son trading team Randall and Michael Lord were last May handed down jail sentences of 106 months and 46 months, respectively, for running an unlawful money business. Michael Lord also pled guilty to a charge involving narcotics distribution.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.