The Strategist

New breed of cyber criminals: Five scams with bitcoins

07/27/2017 - 12:52

Only a lazy start-up does not plan to enter the ICO with a new revolutionary solution nowadays. Crypto currencies and blockchain - these are two cherished words that give a startup more chances to be shown in the media and get a cherished investment.

Those who managed to make money on the blockchain boast of their successes. Those who lost money and failed are silent and try not to stand out. Blockchain became a new religion, and Bitcoin became a prophet.

Sometimes, however, a crypto currency can be used to obtain illegal profits – just like any money.

5. A not credible bank of new generation

A new "international bank" called NextBank has been working for several weeks. Some consider it a miracle, others say it’s a pure fraud. The bank offers to store savings in 135 fiat currencies, precious metals and in a crypto currency. Next Bank has a wide range of services, such as international debit cards and escrow service.

In fact, the organization claims that it provides all possible services that the bank can provide. Moreover, NextBank also offers technical support in 50 or more languages. However, if you study the information more closely, it turns out that NextBank simply lures credulous investors, but the company does not have any infrastructure, personnel, or the right skills to provide all the services the company writes about in its press release.

4. Illegal online games 

Founder of Seals With Clubs, a poker room that accepts bitcoins, was convicted in a courtroom in Las Vegas in 2015 for running an illegal gambling system. For this, he would pay a large fine, but avoid imprisonment.

Bryan Micon was sentenced to two years in prison and a fine of $ 25,000, but he escaped imprisonment after pleading guilty.

In addition to the fine, Micon refrained from 3.0996 bitcoins, as well as from $ 900 in cash and various computers that he used for his business. If Maicon fails to meet conditions of his probationary period, he will face two years of imprisonment.

The case of Micon is unique in that his house was raided by authorities of Nevada at the beginning of 2015. After that, he fled from extradition to Antigua. In the end, Micon’s lawyers came to a deal with the authorities, and Micon actually received a warning and returned to Nevada to face the charges.

3. Charlie Shrem and bitcoins

Shrem was arrested in early 2014 on suspicion of money laundering on his own bitcoin exchange. Shrem began serving his sentence in March 2015.

In 2016, Charlie Schrem, former director of BitInstant and co-founder of Bitcoin Foundation, announced that he had left prison.

He still remains an outstanding personality in the bitcoin world, despite his arrest. The government accused Schrem of laundering money for Robert Faiella, who acted under the name of BTCKing.

Faiella sold bitcoins to users of Silk Road, so that they could use the website. Judge Jed Rakoff sentenced Schrem to 24 months in a federal prison and three years of police supervision.

2. Silk Road’s fiasco

Silk Road is an anonymous online trading platform that was located in the .onion zone of the anonymous Tor network and operated from 2011 to 2013.

Most of the goods sold were illegal, but the website’s owners banned sale of stolen bank card details, counterfeit money, child pornography, personal data, killer services and weapons.

The website was best known as a place to trade illicit drugs, which accounted for 70% of the goods. Besides, Silk Road allowed selling other products, including legal ones, for example pornography or electronic copies of non-banned books.

Buyers and sellers conducted all cash transactions in bitcoins, which, in combination with Tor, can ensure anonymity of bargain participants and impossibility of blocking payment.

October 2, 2013, William Ross Ulbricht was arrested in San Francisco. He was accused of drug trafficking, hacker attacks and conspiracy to launder money.

The agents seized him thanks to a package found by the Canadian government with nine forged documents sent to San Francisco. Ulbricht planned to use the papers to lease servers for Silk Road.

On May 29, 2015, a judge sentenced Ulbricht to life imprisonment.

1. The founder of all fraudulent bitcoin schemes

Mt.Gox was a digital currency exchange that performed operations bitcoin and national currencies. Mt.Gox was founded in 2007 by Jed McCaleb.

On June 19, 2011, a security breach caused value of bitcoin’s nominal price to fall to 1 cent. It was alleged that the intruder used credentials from a compromised computer of Mt.Gox’s auditor to illegally transfer a large number of bitcoins to himself.

He used Mt.Gox’s software to sell at a lower par value, bidding for sale at any price. In a few minutes, the price was reduced to the value established by legal trading of customers. Accounts with more than $ 8,750,000 in the currency equivalent suffered the most.

In March 2013, the bitcoin transaction log was temporarily divided into two independent journals with different rules for accepting a transaction. Mt.Gox briefly suspended accounts in bitcoin.

On April 15, 2014, Mt.Gox filed an application for liquidation to the Tokyo court.