
In the Murky World of Bitcoin, Fraud Is Quicker Than the Law - shiftpgdn
http://dealbook.nytimes.com/2013/12/05/in-the-murky-world-of-bitcoin-fraud-is-quicker-than-the-law/
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kristofferR
To be fair to Bitcoin - it is also an excellent way to combat fraud:
[http://imgur.com/aCatTbo](http://imgur.com/aCatTbo)

~~~
shawabawa3
...that has nothing to do with combatting fraud.

~~~
sehrope
Sure it does. With traditional finance you'd give your bank account details so
that they could wire you the money ( _i.e. rob you ..._ ).

With Bitcoin you give them a brand new address that is tied to nothing.

~~~
hbags
In most countries, giving your bank details gives them deposit-only access.

The US is behind the rest of the world on this one.

~~~
malandrew
Even so, anything that allows you to omit one more bit of entropy can make you
safer by making you more anonymous. We've already seen a few high profile
attacks where the attacker exploited a vulnerability that arose out of how two
or more services handle personally identifiable information. The Apple/Amazon
one is one such example. The security professionals at each company choose to
request different bits of entropy to identify someone and may give out other
bits of entropy not among their identity bits. When two or more services
complement each other in this regard, you can contact the first to get
information to give to the second.

Facebook makes this even worse in that is exposes a lots of the commonly
requested bits of entropy. It's not hard to identify someone's mother on
Facebook. From there, you can identify her parents (if still alive) or
brothers and cousins, to get her maiden name. Now if your birthday is visible
or published anywhere, an attacker has yet another bit of entropy. Add enough
together and an attacker now has enough information to walk into a bank agency
with your bank account number and possibly gain access to your account.

TBH, we're at the point where it shouldn't be legal to secure accounts with
any method that involves multiple bits of entropy. Any system that permits
someone close to you (friends or family) to pretend to be you simply isn't
secure. These days you don't even need to bother with power of attorney
because it is so stupidly easy to impersonate one's parents, significant
other, sibling, children, etc.

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aestra
> It's not hard to identify someone's mother on Facebook

This is by design. You can identify "relationships" in Facebook, and they will
display who your mother, brother, sister, even cousins are.

~~~
dllthomas
Yes, of course it is. The point is that different systems can break other
systems.

~~~
malandrew
Thanks for stating my point so succinctly.

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waterlesscloud
'The company said that the Danish police were examining the case but added
that the authorities could “not classify this as a theft due to the current
nonregulation of Bitcoin.” '

This is of course ridiculous. Something doesn't have to be regulated in order
for it to be considered theft if you take it.

~~~
gohrt
"Stealing" a bitcoin involves exchanging messages. There is no physical
movement of objects, no direct financial effect, and not even an obvious
copyright infringement.

The law needs to comprehend what was stolen, and assess the damages. Or treat
this as a computer-hacking (unauthorized access) case.

~~~
dllthomas
I don't expect it'll be hard for the law to comprehend. Sure it's digital
property, but unlike a lot of things digital it actually functions mostly by
the same rules as physical property (only one person has any given bitcoin at
a time, &c).

~~~
socillion
If someone scams you for 5,000 gold in World of Warcraft, did they commit a
crime?

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dllthomas
Is gold in World of Warcraft generally expected to be exchanged for goods and
services and dollars and yen?

Even so, _maybe_ , maybe just not a very serious one, assuming we don't write
it off as "part of the game".

~~~
socillion
There are businesses dedicated to buying, selling and producing it. It can
also be exchanged for goods and services, is easily valued in and converted to
USD and other currencies, and fluctuates in value depending on supply and
demand.

I picked WoW instead of a game like EVE Online because scamming is not an
expected part of the game.

I'm not aware of any criminal proceedings against people who stole WoW gold,
but it is an entirely different matter if actual money (i.e. USD) was taken.

~~~
dllthomas
Sure. Like I said, maybe it's a crime, but not one hugely worth prosecuting.

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salient
NYT doesn't like Bitcoin much, does it?

~~~
rayiner
I don't think NYT has any particular beef against Bitcoin specifically. They'd
call anything unregulated "murky" or some synonym.

~~~
simplemath
NYT, being firmly entrenched with Wall Street, is probably at least slightly
disincentivized from supporting BTC's rise to prominence

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pivnicek
With Bitcoin, fraud may be temporarily outside the law; but with JPMC and
HNBC, fraud is built into the law.

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SilasX
Psst: In the credit card and banking world, fraud is quicker than the law too,
or else no one would be able to get away with it (except by physical cash-
out), given that we know exactly where the money went.

Source: was defrauded through wire transfer.

~~~
lsc
>Source: was defrauded through wire transfer.

how did that happen?

Personally, I associate wire transfers with fraud; I won't accept them as
payment, same as western union or bitcoin.

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SilasX
It happened because I though that if I could point to the exact local address
the wire went to, then the immense paper trail would mean they could reverse
the transfer in case of blatant fraud, hopefully while also arresting the
people responsible.

Now I know better though. But not by listening to the NYT's assurances about
how much more diligently the banking system prevents outright fraud.

~~~
lsc
Ouch. yeah. I do use checks, and those also have unpleasant fraud
implications, but it seems like the response to such fraud usually turns out
better with checks than with wire transfers. Most people I've heard about who
have had people steal money through bad checks just had a big mess to deal
with[1], while most people I've heard about who had money stolen through wire
transfers actually lost the money. Just my impression from hearing about
different folks complaining about it.

[1][http://sunburn.stanford.edu/~knuth/news08.html](http://sunburn.stanford.edu/~knuth/news08.html)

"I cannot in good conscience continue to traumatize the people at my bank, who
obviously have plenty of other things to worry about."

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chime
Doesn't Fontas mainly deal with LTC?

~~~
waterlesscloud
He's mostly moved to the smaller altcoins since Litecoin went up so much.
People would't believe he could move LTC much these days.

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simonebrunozzi
I think that @Fontas on twitter has nothing to do with what the article
claims.

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mkramlich
Bitcoin is much less murky than the NSA. It's completely open software and the
engineers discuss and develop it out in public for anyone to audit. And
nobody's forced to use it or be susceptible to it, again unlike the doings of
the NSA. And my exposure to fraud or PII threat due to Bitcoin is much much
less than due to the mechanisms the NSA has in place, with their massive 24/7
passive/active snooping operation which puts truly gigantic amounts of
ostensibly _private_ communications world-wide at risk of being
leaked/sold/traded-on by bad actors. Furthermore, the way the Bitcoin economic
system, how it stores and transmits money is also much much more open, and
thus less murky, than the legacy banking systems.

But Bitcoin. Yes, that's a "murky" world. Lets FUD and regulate that.

~~~
twoodfin
Is every hn story now an excuse to start complaining about the NSA? The piece
makes no mention of it, nor does there seem to be a good reason why it should.

You could have easily ranted about the murky world of campaign finance, or the
murky world of banking. Neither would be less relevant than beating on the NSA
horse one more time.

~~~
kazagistar
Until it is no longer a problem, I have no issue with everything being an
excuse to complain about the NSA.

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knowitall
Is "pump and dump" illegal? Seems to me all they were doing is selling a lot
of BTC in one go, then buying again?

I actually find this Twitter orchestrated "pump and dump" a rather amusing
concept. I don't think it comes with any guarantees of success, though.

~~~
waterlesscloud
What tends to actually happen in the altcoin pump and dumps (None of the
Twitter pumpers do BTC or even LTC since it would take too much money):

The pumpers build a position in a selected altcoin. They do this slowly, over
a period of time, hoping that no one will notice. Only once they are satisfied
with their position do they announce their "pump". They broadcast the idea of
"pumping" that coin by a massive coordinated buy. The masses intend to buy in,
bidding up the price and then selling off at the higher price.

The problem is that the people coordinating the pump already have their coins.
And so as the people they recruited are buying, they're buying coins from the
coordinators. When that activity starts to taper off, the coordinators will
dump whatever they have left, completely trashing the price, often below the
starting point. So the coordinators are the only ones who benefit at all.

There's various tricks they also use to make it more convincing, with bid
walls and talk of "noob traps", but at this point it's happened so often that
willing dupes are getting hard to find.

Most pumps these days barely move the price at all. Fontas is so infamous that
his pump announcements often result in the price immediately going _down_.

Almost all this activity is on one exchange, BTC-E, which is the only exchange
with a variety of alt-coins and the volume for a pump n dump. There have been
attempts to get them going on Cryptsy, with its much wider variety of alts,
but that site is so awfully coded that it runs too slowly to allow for any
sort of coordinated activity.

There have been rumors that there are less public groups running pump and
dumps on BTC, which would require substantially more money at this point.
There's also clear signs of "dump and pumps" on BTC, where someone will sell a
large amount of BTC in hopes of causing a price avalanche, and then they will
buy in at the resulting cheaper price.

Given the amount of money to be made, those are almost certainly true rumors.

Having said all that, I think some of the smaller pumpers on Twitter are just
looking to drive the price up on certain coins, I don't think they're
necessarily looking to take advantage of their followers.

~~~
Jtsummers
> Fontas is so infamous that his pump announcements often result in the price
> immediately going down.

That could be a useful trick. If you know you can consistently reduce prices,
and have the capital to acquire the now cheaper commodity. Announce the
scheme, prices drop, buy in. Wait for prices to recover and sell off for a
profit.

