Posted on

Bitpoint Reveals Amounts Stolen, Pledging to Reimburse Users in Crypto

Japanese exchange Bitpoint has published the breakdown of crypto assets stolen in the $27.8 million hack of its platform earlier this month.

Japanese exchange Bitpoint has published the breakdown of crypto assets stolen in the ¥3 billion (~$27.8 million) hack of its platform earlier this month.

A document published by Bitpoint’s parent firm Remix Point Inc. on July 16 reveals that five crypto assets in total were stolen by the attackers. The breakdown provided by the company compares the proportion of stolen customer assets with assets belonging to the firm:

  • 1,225 Bitcoin (BTC) worth ¥15.3 billion — ¥1.28 billion belonging to customers and ¥250 million to the firm; 
  • 1,985 Bitcoin Cash (BCH) worth ¥70 million — ¥40 million (customers) and ¥0.2 billion (firm);
  • 11,169 Ether (ETH) worth ¥330 million — ¥240 million (customers) and ¥0.8 billion (firm); 
  • 5,108 Litecoin (LTC) — ¥0.5 billion, of which ¥40 million (customers) and ¥0.0 billion (firm); 28,106,323 XRP — ¥10.02 billion, of which ¥2.6 billion (customers) and ¥960 million (firm).

Out of the ¥3.02 billion stolen in cryptocurrencies overall, ¥2.6 billion belonged to customers and ¥960 million were company assets. XRP accounted for the highest share of total losses, with stolen XRP accounting for over ¥10 billion — roughly a third of the lost funds.

Bitpoint has moreover revealed its plans to compensate customers in cryptocurrencies rather than in their equivalent fiat value.

The exchange reiterates its belief that the breach occurred due to unauthorized access to the private keys of its hot wallets, and that it now plans to move all holdings into cold storage. 

It confirms that no breach of its cold wallets has been detected, but states that it continues to monitor the situation and is also suspending all services until more comprehensive security measures have been undertaken and the firm has completed its tracking of the stolen funds.

The document reveals that Bitpoint is cooperating with the Japan Virtual Currency Exchange Association (JVCEA) — a self-regulatory crypto exchange association that formed in March 2018 to help establish industry-wide investor protection standards — and has requested that the association monitor any suspected ill-gotten funds and wallets potentially associated with the incident. The exchange is also reportedly in close communication with the Ripple Foundation.

As reported yesterday, Bitpoint discovered over 250 million yen ($2.3 million) in crypto that was stolen during the hack, bringing the total sum of lost funds down to its initial estimate of ¥3.5 billion ($32 million) to ¥3.02 billion ($28 million).

Posted on

Bitcoin Lightning Nodes Claimed 2.22 BTC in ‘Justice’ Against Thieves: BitMEX

Bitcoin Lightning Network nodes have claimed 2.2 BTC in “justice transactions” to deter potential thieves since Dec. 2017, according to BitMEX Research.

Bitcoin (BTC) Lightning Network nodes have claimed 2.2 BTC in “justice transactions” to deter potential thieves, a BitMex Research analysis revealed on July 15.

A so-dubbed “justice transaction” is a punitive mechanism involving the closure of a lightning channel that is suspected to be attempting theft. As the report outlines:

“… by design, when a thief attempts to steal funds on the lightning network, if caught, they do not only lose the money they tried to steal, they lose all the funds in the relevant channel. This “punishment” is expected to act as a deterrent and is sometimes called “justice”.

BitMEX researchers claim to have potentially identified 241 justice transactions since the second-layer network’s in December 2017 — all the while noting that there is a possibility the data “includes false positives” and that other, more robust tools exist to identify such transactions than the “basic search methodology” used for their report.

BitMEX’s data apparently reveals that the highest number of justice transactions — over 60 apparent instances — occurred in October 2018. April 2018 saw the second-highest number of justice transactions — over 30.

Notably, while the period from February to April 2019 saw a relatively high number of justice transactions — between 20 and 30 instances — it eclipsed both October 2018 and April 2018 in terms of the absolute value in BTC claimed by honest nodes via the mechanism. February 2019 alone represented the absolute peak in terms of monthly total, at roughly 0.67BTC:

BTC reclaimed by honest nodes using justice transactions

BTC reclaimed by honest nodes using justice transactions. Source: BitMEX Research

BitMEX’s report further qualifies the findings by noting that 2.22 BTC does not necessarily indicate that thieves tried and failed to steal that amount — given that potential thieves may have been punished by an amount larger than the value they tried to steal. 

Instead, the figure represents:

“… the total funds claimed by honest non channel closing nodes, part of this value is funds originally owned by the dis-honest nodes and part of the value will be the value they tried to steal.”

In conclusion, the report notes that the total number of justice transactions on Lightning since its inception represent just 0.7% of the number of currently active channels: while an optimal proportion of justice transactions is hard to determine, BitMEX Research notes, this current level appears to be a reasonable figure sufficient to prevent the risk of “large systemic channel thefts” in future.

As reported, Bitrefill has recently made it possible for users of major American crypto exchange Coinbase to access its full suite of Lightning services directly from within their native exchange accounts. 

A couple of crypto payment processors have meanwhile this year released intermediary services to enable Lightning payments for products sold on Amazon.

Posted on

Texas Court Orders Defendants to Pay $400K for Fraudulent Bitcoin Scheme

A Texas Federal Court has ordered two defendants to pay $400,000 for allegedly conducting a fraudulent scheme to solicit Bitcoin from members of the public.

A Texas Federal Court has ordered two defendants to pay $400,000 for conducting a fraudulent scheme to solicit Bitcoin (BTC) from members of the public, the United States Commodity Futures Trading Commission (CFTC) announced on July 10.

Judge Reed C. O’Connor of the U.S. District Court for the Northern District of Texas filed an Order and Default Judgment on June 28, 2019, alleging that U.S. citizens Morgan Hunt and Kim Hecroft engaged in a fraudulent scheme to solicit Bitcoin from the public to invest in trading products like binary options, diamonds and foreign currency contracts. The defendants allegedly did business through entities called Diamonds Trading Investment House and First Options Trading.

The order specifically claims that the defendants “falsely claimed that they would use customer funds to invest in trading for the benefit of the customers, misrepresented their experience and track record as traders and portfolio managers, falsely told customers that they could not withdraw their purported investment profits without first paying a tax to the CFTC, and misappropriated customer funds.”

The court now requires that Hunt and Hecroft pay restitution and a $180,000 civil monetary penalty each, as well as imposing permanent trading and registration bans. According to the announcement, the defendants may be unable to repay victims due to a lack of sufficient funds.

In mid-June, the CFTC filed a complaint with the New York Southern District Court against the now-defunct United Kingdom-based entity Control-Finance Ltd, which allegedly defrauded more than 1,000 investors to launder at least 22,858 BTC.

As a recent report from Chainalysis revealed, the amount of Bitcoin spent on illegal transactions in 2019 could hit a record high of $1 billion, even as the ratio of illegal to legal transactions is shrinking.

Posted on

Japanese Crypto Exchange Bitpoint Suffers $32 Million Hack

Japanese crypto exchange Bitpoint has suspended all services after losing $32 million in a hack involving XRP, Bitcoin and other cryptocurrencies.

Japanese crypto exchange Bitpoint has suspended all services after losing $32 million in a hack involving XRP, Bitcoin (BTC) and other cryptocurrencies.

In an official announcement on July 12, Bitpoint revealed that it had lost around 3.5 billion yen (~$32 million) — 2.5 billion yen (~$23 million) of which belonged to customers and 1 billion (~$9.2 million) to the exchange.

Bloomberg reports that shares of Bitpoint’s parent firm Remixpoint Inc. shed 19% following news of the incident, and were untraded in Tokyo as of 1:44 p.m. “on a glut of sell orders.”

Alongside XRP and Bitcoin, a total five different cryptocurrencies had been stored in the affected hot wallets, including Litecoin (LTC) and Ether (ETH).

The exchange’s cold wallets are not reportedly thought to have been compromised, Bitpoint’s announcement indicates.

Bitpoint was one of multiple domestic crypto exchanges to have been served a business improvement order from Japan’s financial regulator, the Financial Service Agency (FSA), during its wide-ranging inspections of industry businesses, per Bloomberg.

As previously reported, the industry record-breaking hack of $534 million of NEM from Japan’s Coincheck exchange in January 2018 had been attributed to the fact that the coins were stored in a low-security hot wallet.  

In 2019, May’s $40 million hack of top crypto exchange Binance has loomed large over the industry — at least eight crypto exchanges have been the target of large-scale hacking incidents in the first half of this year, most recently Singapore-based Bitrue.

Posted on

$515 Million in Bitcoin Spent on Illicit Activity This Year

$515 million in Bitcoin has been spent on illegal activities in 2019, but this only accounts for 1% of total BTC transactions.

Recent research by Chainanalysis suggests that the amount of bitcoin (BTC) spent on illegal transactions this year could hit a record high of $1 billion, even as the ratio of illegal to legal transactions is shrinking, according to a report by Bloomberg on July 1.

As per the report, the total flat value of BTC spent on illegal activity so far this year is thought to be $515 million. The research suggests that by the end of the year, this figure will double to reach $1 billion.

However, the amount of BTC spent on illegal services as opposed to legal ones is on the decline. Chananalysis executive Hannah Curtis says that just 1% of BTC activity this year is illegal activity, which is down from 7% in 2012.

As per the report, the $515 million spent on illegal activities was used in transactions on the dark web: a small subsection of the deep web, which is in turn subsection of the internet that doesn’t appear in search engines (e.g. Google).

The largest illegal dark web marketplace for spending BTC is reportedly “Hydra.” BTC is apparently the cryptocurrency of choice on such marketplaces, and Monero (XRM) comes in second, according to the report. Oftentimes, these marketplaces are involved in the distribution of drugs and/or illegal pornography

As previously reported by Cointelegraph in April, for instance, two men behind the dark web marketplace NextDayGear pled guilty to selling steroids and controlled substances and to money laundering. The website apparently offered injectable and oral steroids, as well as Xanax, Valium and Viagra as a means to stymie unwanted side effects.

Posted on

Exit Scam? Dublin-Based Exchange Bitsane Vanishes With Users’ Funds

Ireland-based cryptocurrency exchange Bitsane has apparently vanished, taking as many as 246,000 users’ crypto deposits with it.

Ireland-based cryptocurrency exchange Bitsane has apparently vanished, taking as many as 246,000 users’ crypto deposits with it. The news was reported by Forbes on June 27.

Launched in 2016, Dublin-registered Bitsane LP was formerly listed as one of Ripple’s approved exchanges — a January 2018 CNBC article had also pitched the exchange as an option for investors seeking to trade XRP ahead of its listing on major platforms such as Coinbase.

According to Forbes, user withdrawals on Bitsane began faltering in May of this year, with allegedly technical reasons cited as the reason for their temporary disabling. By June 17, both the Bitsane site and its social media accounts had been deleted, with emails to Bitsane accounts bouncing back as undeliverable.

Moreover, neither the exchange’s CEO — Aidas Rupsys — nor its chief technology officer, Dmitry Prudnikov, could be reached by Forbes during the magazine’s investigation into the case. At press time, Prudnikov’s LinkedIn profile appears to have been deleted.

As of May 30 2019, Bitsane counted 246,000 registered users, with a daily traded volume of just over $7 million on March 31, per CoinMarketCap.

User groups on messaging platform Telegram and Facebook reveal users claiming to have typically lost up to $5,000, with Forbes citing an anonymous U.S. resident who says he had $150,000 in XRP and bitcoin (BTC) on the exchange prior to the company’s disappearance.

Forbes further reports on a separate firm, incorporated in the United Kingdom as Bitsane Limited by Maksim Zmitrovich in August 2017, which apparently attempted to purchase the intellectual rights to Bistane’s code and use it as the basis for its own platform, dubbed Azbit. 

According to Zmitrovich, the firm has assumed the Bitsane name to fulfil a condition set by Bistane’s developers, yet the desired partnership between the two firms failed to materialize. 

In a blog post published earlier this month, Zmitrovich has vehemently denied any substantive link between Azbit and the apparent exit-scam, noting that the Bitsane team has failed to respond to any of his correspondence since April of this year.

While Forbes notes that multiple Bistane users based in the U.S. have reportedly filed complaints with the F.B.I., solutions for those affected by the platform’s disappearance currently remain unclear.

Earlier this month, reports surfaced that Polish crypto exchange Coinroom reportedly shut down its operations and disappeared with customer funds, having notified users they had just one day to withdraw funds before their contracts would be terminated.

Posted on

Singaporean Exchange Bitrue Gets Hacked, Losing $5 Million in XRP, Cardano

Singapore-based cryptocurrency exchange Bitrue has suffered a major hack, losing 9.3 million XRP and 2.5 million cardano (ADA) from its hot wallet.

Singapore-based crypto exchange Bitrue has suffered a major hack, losing 9.3 million XRP and 2.5 million cardano (ADA) from its hot wallet. The news was revealed in an official statement from the exchange published as a twitter thread on June 26.

At the time of the breach — 1 a.m. GMT+8 June 27 — the stolen funds would have been worth over $4.5 million in XRP (valued at $0.488) and $237,500 in ADA (valued at $0.095), according to CoinMarketCap data.

The exchange states that a purportedly single hacker first “exploited a vulnerability in our Risk Control team’s 2nd review process to access the personal funds of about 90 Bitrue users,” subsequently using this first experience to access the exchange’s hot wallet and steal the cryptocurrency. 

According to Bitrue, the attack was swiftly detected and the hacker’s activity suspended by the exchange. Bitrue reportedly notified the receiving exchanges of the incoming ill-gotten funds — specifically Huobi, Bittrex and ChangeNOW — whom it credits with helping to freeze the relevant transactions and accounts.

The statement assures exchange users that “their personal funds are insured,” and that all those “affected by this breach will have their funds replaced by us as soon as possible.”

Currently, Bitrue says it is conducting an emergency inspection of the platform and aims to return to live service functionality as soon as possible — with log-in and trading support expected to relaunch sooner than withdrawals, which will remain offline for a longer period.

Bitrue provides the public with a link to trace the flow of funds on the XRP block explorer, and also states that it has contacted the Singaporean authorities to seek help in identifying the perpetrator.

An update is expected from the exchange once more has been learned of the incident.

Just this week, two Israeli brothers were arrested in connection with the 2016 hack of crypto exchange Bitfinex and other crypto-related phishing attacks.

The $40 million hack of top crypto exchange Binance has loomed large over the industry this year — a reported total of seven crypto exchanges suffered large-scale hacking attacks prior to Bitrue in the first six months of 2019.

Posted on

Russian Central Bank: Criminals Rarely Use Crypto to Withdraw Stolen Funds

In Russia, fraudsters rarely use cryptocurrency to withdraw stolen money, according to the country’s central bank.

In Russia, fraudsters rarely use cryptocurrency to withdraw stolen money, according to the country’s central bank. The news was reported by local news outlet TASS on June 21.

The first deputy director of the Information Security Department of the Bank of Russia, Artem Sychev, told TASS that the central bank monitors methods of withdrawing funds and develops additional protective measures. Per the bank, criminals prefer to cash stolen money out rather than withdraw them with digital currency. Sachev said:

“In the Russian Federation, this [withdrawing of stolen funds with crypto] is used very rarely. Yes, sometimes cryptocurrencies are used to withdraw funds, but now it is not widespread, because it is much easier for an attacker to get cash.” 

Sychev added that fraudsters use a bank card to withdraw stolen money, however not more than two to four times, at which point they subsequently get rid of it. Sychev continued:

“It is not so important what technology will be developed in the near future — artificial intelligence or robotization. It is more important for us to understand what technologies and methods an attacker can use not only for an attack, but also for withdrawing money. Our vector of attention will be turned to that direction. For example, if we see that attackers learn to quickly withdraw money through some specific channel, we will accordingly build additional measures of protection.”

As recently reported, blockchain intelligence firm Chainalysis claimed that 64% of ransomware attack cash-out strategies involve the laundering of funds through cryptocurrency exchanges. Among other ransomware cash-out strategies analyzed, 12% involved mixing services and 6% involved peer-to-peer networks, while others went via merchant services providers or dark web marketplaces. 9% of ransomware proceeds reportedly remain unspent.

Another report by Chainalysis revealed that at least 95% of cryptocurrency crimes investigated by law enforcement involve bitcoin (BTC). The company’s COO Jonathan Levin said that law enforcement needs to take more sophisticated approaches to tackle darknets and warned that the crypto industry was starting to see the beginnings of terrorism financing.

Posted on

Researchers Uncover Threat of ‘Unusual’ Virtual Machine Crypto Mining

Cybersecurity firm ESET has detected what it describes as an unusual and persistent cryocurrency miner distributed for macOS and Windows since August 2018.

Cybersecurity firm ESET has detected what it describes as an unusual and persistent cryocurrency miner distributed for macOS and Windows since August 2018. The news was revealed in a report from ESET Research published on June 20.

According to ESET, the new malware, dubbed “LoudMiner,” uses virtualization software — VirtualBox on Windows and QEMU on macOS — to mine crypto on a Tiny Core Linux virtual machine, thus having the potential to infect computers across multiple operating systems.

The miner itself reportedly uses XMRig — an open-source software used for mining privacy-focused altcoin monero (XMR) — and a mining pool, thereby purportedly thwarting researchers’ attempts to retrace transactions.

The research revealed that for both macOS and windows, the miner operates within pirated applications, which are bundled together with virtualization software, a Linux image and additional files.

Upon download, LoudMiner is installed before the desired software itself, but conceals itself and only becomes persistent after reboot.

ESET notes that the miner targets applications whose purposes are related to audio production, which usually run on computers with robust processing power and where high CPU consumption — in this case caused by stealth crypto mining — might not strike users as suspicious.

Moreover, the attackers purportedly exploit the fact that such complex applications are usually complex and large in order to conceal their virtual machine images. The researchers add:

“The decision to use virtual machines instead of a leaner solution is quite remarkable and this is not something we routinely see.”

ESET has identified three strains of the miner targeted at macOS systems, and just one for Windows thus far.

As a warning to users, the researchers state that “obviously, the best advice to be protected against this kind of threat is to not download pirated copies of commercial software.”

Nonetheless, alongside high CPU consumption, they offer several hints to help users detect something might be awry, included trust popups from an unexpected, “additional” installer, or a new service added to the startup services list (Windows) or a new Launch Daemon (macOS).

Network connections to unusual domain names — due to scripts inside the virtual machine that contacting the C&C server to update the miner’s configuration — are another giveaway, the researchers add.

Yesterday, Cointelegraph published an in-depth report analyzing various malware deployments within the crypto industry, including for stealth crypto mining.

Posted on

Craig Wright Failed to Disclose Bitcoin Holdings in Court Case, Says Lawyer

Craig Wright has failed to disclose his bitcoin holdings in a high profile court case, says a plaintiff’s legal counsel.

The legal counsel for a plaintiff in a bitcoin (BTC) theft case involving Australian computer scientist Craig Wright, said that Wright — the defendant — failed to disclose his bitcoin holdings per court order. Devin Freedman of law firm Boies Schiller Flexner made his statements in a tweet on June 21.

As Cointelegraph previously reported, in May a United States court ordered Wright to produce a list of his public bitcoin addresses as of Dec. 31, 2013. Freedman declared that, since he has not complied, “he remains under an order to show cause why [Judge Florina] Reinhart shouldn’t issue sanctions” and order him to appear before Judge Beth Bloom and “explain why he shouldn’t be held in contempt.”

The order is part of an ongoing case against Wright — who self claims to be bitcoin creator Satoshi Nakamoto — that was filed by the estate of David Kleiman.

David Kleiman was a cyber-security expert and computer scientist, whom many believe  to have been one of the first developers behind bitcoin and its underlying blockchain technology.

Kleinman’s estate brought the case to court in February 2018, claiming that Wright stole hundreds of thousands of BTC worth over $5 billion following Kleiman’s death. The estate claims that Kleiman’s friends and family were unaware of the wealth he had accumulated and that Wright “forged a series of contracts that purported to transfer Dave’s assets to Craig and/or companies controlled by him. Craig backdated these contracts and forged Dave’s signature on them.”

Earlier this month, Wright was ordered to appear personally at mediation to address the accusations against him, after having requested permission to appear by video conference, arguing that physically attending the courtroom would have caused him “unjustifiable hardship.”

In May, Wright filed a copyright claim with the U.S. Patent and Trademark Office to a part of bitcoin’s code and its white paper, but its legal weight is disputed.