June 11, 2023

Murders, hacks, arrests and exit scams - how the bitcoin industry survived the hectic 2019

In 2019, the word "shitcoins" was first spoken in the US Congress, and bitcoin was not only discussed by Donald Trump, but also representatives of the G7. Of course, they did not talk about the advantages of the first cryptocurrency, but about all kinds of control methods, since every year Bitcoin's resistance to censorship only grows.

The market waited for the launch of institutional giants Bakkt and Fidelity Digital Assets, survived the boom of IEO and DeFi, and also enjoyed another, if not protracted, bitcoin rally.

Strong players have become even stronger: Binance decided to launch bitcoin futures and provide fiat gateways for almost every country on the planet, Coinbase became the largest custodian, and the Chinese Canaan entered an IPO in the United States, adorning New York and the Chinese metropolis of Hangzhou with Bitcoin advertising.

The weak became even weaker or left the industryat all. Summing up, ForkLog recalls the most scandalous stories of the year, including arrests, coups in companies, sensational hacking of exchanges and even murders. Including we will tell about a roundup on darknet and the collapsed companies and, of course, we will not forget to tell about curiosities.

Who was hacked?

At the end of November, the analytical company CipherTrace calculated the losses from fraud and theft in the cryptocurrency industry for 2019. They amounted to $ 4.4 billion.

For 12 months, hackers broke into seven cryptocurrency exchanges and stole over $ 100 million. The most resonant case was the attack on Binance, which cost her 7,000 BTC.

Murders, hacks, arrests and exit scams - how the bitcoin industry survived the hectic 2019

In an exclusive ForkLog interview, the head of the siteChangpeng "CZ" Zhao said that attackers attack Binance five to ten times a day, but May 7 was a fateful day. Zhao even considered reorganizing the Bitcoin network to roll back a hacker transaction, but abandoned the idea amid fierce criticism from the community.

Exchange reimbursed users for losses fromSAFU special fund and strengthened security measures, but in the summer fell into another scandal related to the May hack. A hacker under the pseudonym Bnatov Plato said that the insiders were helping the attackers. He also demanded a reward of 300 BTC for the information and threatened to drain users' KYC documents. He never managed to reach an agreement with Binance, after which Plato began to publish user documents registered in February 2018 in closed Telegram chats.

In a conversation with ForkLog, Zhao emphasized thatThe source of the leak was most likely one of the KYC contractors that the site was working with then. All identified victims received lifetime VIP accounts. This is where the story ended.

Nevertheless, the attack on Binance is inferior to hackingSouth Korean Upbit at a loss. The latter lost 342,000 ETH (over $ 48 million at the time of the attack) at the end of November. After this, the funds immediately began to crush and move. Browsers suggested that someone helped the attackers from the inside, because they chose the perfect time: Upbit just planned to move funds.

The next victim was the Japanese BitPoint. In July, hackers stole $ 32 million in Bitcoin, Litecoin, Ethereum, Bitcoin Cash and Ripple from its users. The exchange almost immediately promised to compensate for the losses, but nothing is known about the payments.

Shortly before, $ 4 million was lost orientedon XRP Singaporean Bitrue. Then the hackers took over the balances in ADA and XRP. The site promised to cover the damage. In March, another Singapore-based DragonEx platform lost $ 7 million and offered users a compensation plan involving payments in USDT and native Dragon Token.

Most unlucky are Cryptopia from New Zealand. Hackers stole user funds for $ 16 million, an attempt to restart the exchange failed and she had to announce the liquidation of the business.

“Despite the efforts of management to reduce costs and return profitability to the business, it was decided in the interests of customers, employees and other stakeholders to appoint liquidators.”

The liquidators then discovered the debts of Cryptopia.to creditors in the amount of $ 2.378 million. And although the exchange has enough funds left to repay - $ 10.9 million, payments to users have not yet begun. It turned out that all the assets were stored in one wallet, and the customer database with the assets was not checked at all.

Serial loser can be recognized as South KoreanBithumb. In March, her hot wallets devastated again, stealing 3 million EOS and 20 million XRP. Insiders could be involved in the attack. In the summer, the prosecutor's office in South Korea charged the exchange with a violation of the law on managing information networks and the law on the protection of information, which led to a similar hack in 2017.

Who is it?

In mid-June, Bitsane Irish Bitcoin Exchangecarried out exit scam, and its users lost assets of millions of euros. During the investigation, ForkLog discovered that behind the site was a group of natives of Belarus associated with the dubious cryptocurrency project Azbit, which received support from Roger Vera.

From Dublin with love: where are the traces of the Bitsane bitcoin exchange disappearing with millions of euros

In the same month, a similar fate befellusers of the BiteBTC exchange, which was considered a Singapore platform before it was discovered that the operator listed on the site does not know anything about any exchange. First, the organizers froze the accounts of traders and requested more KYC-documents, and then finally blocked them.

But the biggest exit scam of this year, which in theory even threatens the Bitcoin exchange rate, is rightly the Chinese PlusToken. The damage from the activities of this pyramid is already estimated at a fantastic $ 3 billion.

PlusToken positioned itself as a wallet with a referral system that allows you to invest in cryptocurrencies and receive passive income.

According to Managing Partner of Primitive Ventures, Dovi Wang, the concentration of bitcoins on PlusToken addresses was one of the reasons for the Bitcoin rally, which began in April.

In June, some of the organizers were arrested in Vanuatu, but those who remained at large began to sell portioned loot.

According to Chainalysis, they have already gotten rid of 25,000 BTC, but have left at least another 20,000 BTC on hand in addition to 789 525 ETH.

After mixing, the bitcoins were distributed at 8700 addresses, so the estimates should be considered only approximate.

Who left the market?

This year, the market was unfavorable to a number of players who, for one reason or another, not related to fraud or crime, had to close the business.

In India, under pressure from regulators and because of failurein banking services, the country's largest bitcoin exchange Koinex has closed. This was preceded by the liquidation of the Coindelta trading platform for the same reasons. The authorities have long been considering the possibility of a complete ban on cryptocurrencies and the introduction of criminal liability even for the ownership of digital assets, but have not yet decided on this step.

Despite the favorable regulatory environment,Thailand's largest exchange Bitcoin Co. closed Ltd. (BX.in.th). She did not name the reason, but, according to ForkLog, the decision could be influenced by pressure from the authorities with the assistance of a new aggressive competitor.

A similar fate befell the South KoreanCoinnest, where they said they could not cope with changes in the industry. Observers attributed this to the charges against the two directors of the site in a large bribe, but it is not known whether this was the true reason.

Decentralized CryptoBridge and CoinExchange also left the industry - they were unable to ensure profitability.

The same reason was voiced in DX.Exchange, which used Nasdaq technology. Then the site was associated with the Israeli company SpotOption, which the FBI considered to be involved in multi-billion dollar binary options fraud.

Under rather mysterious circumstances, it closedand Polish Coinroom. Many users did not even have time to withdraw their assets and accused the exchange of an exit scam, but over the next months its representatives notified users of the bankruptcy procedure and liquidation of the company's assets. The latest news on the exchange’s website appeared on September 30 - it indicated the bankruptcy application number assigned to the company.

Murders, hacks, arrests and exit scams - how the bitcoin industry survived the hectic 2019

Coinroom Data

At the beginning of the year, Liqui Ukrainian Exchange statedwhich can no longer provide liquidity and does not see the point in continuing to work. At the same time, the American mining company Giga Watt, which previously filed for bankruptcy, suspended its activities.

In April, the Token-as-a-Service (TaaS) hedge fund decided to distribute assets among the initial participants of its ICO (3942 investors) and token holders, and then close.

A bit earlier, in March, the Bitcoin futures marketleft the Chicago Options Exchange (CBOE), refusing to renew contracts. But a holy place does not happen empty - the institutional has got an alternative in the person of Bakkt and all the same CME.

Who disappeared from the darknet?

2019 can be called extremely successful for the fight against darknet markets of illicit goods, in which most of the payments are made in bitcoin.

Europol and German law enforcement in springauthorities closed the Wall Street Market with a user base of 1.15 million people. At that time, Finland covered the Silkkitie (or Valhalla) market, which has been working in Tor since 2013. A few days before these events, the largest marketplace at that time, Dream Market, was suspended.

Immediately after the operation with Wall Street Market werearrested alleged administrators of the Dark Dot Web darknet information resource who were charged with money laundering in the United States. Their allegedly illegally acquired capital was estimated at 8155 BTC. The main administrator, Tal Prihar, a citizen of Israel, did not admit his guilt. According to him, the resource advertised only gambling bitcoin services, cryptocurrency exchanges and VPN providers, and not drug markets.

Already in October, German police installedcontrol of the so-called “cyberbunker” (a decommissioned NATO bunker in Traben-Trarbrach) with hundreds of darknet drug market servers and child pornography, and arrested seven suspects. According to law enforcement, it contained the servers of the Wall Street Market, Cannabis Road and Orange Chemicals markets.

In the same month at the other end of the world put forwardcharges against the organizer and users of the largest darknet market for child pornography, through which more than 1 million videos were distributed. Marketplace operated from June 2015 to March 2018, and its users were scattered around the world, including the UK, Germany, the UAE and other countries.

In the Netherlands, closed the popular servicemixing Bestmixer, accusing him of money laundering. A few days later, a similar service Bitcoin Blender announced the cessation of work, anticipating an unenviable fate.

Against the background of a real raid in the West marketplaceHydra announced an ICO to develop new anonymization technologies and international expansion, but many in the community took it as preparation for an exit scam. And for good reason.

Who died and who was killed?

Unfortunately, in 2019, the industry did not costwithout resonant and even mysterious deaths. Perhaps, the death of the co-owner of the Polish Bitcoin exchange BitMarket Tobias Niemiro was most of all sensational. His body with a shot head was found in a forest near the town of Olsztyn just two weeks after the site was suddenly closed due to a "lack of liquidity."

Co-owner of the Polish Bitcoin exchange Bitmarket found in the forest with a shot through

The exchange didn’t work out a few weeks before the close: it forced users to change passwords and API keys, and asked some to go through an additional KYC procedure.

It is known that Niemiro fell into the midst of unscrupulous businessmen whose names and possibly even secrets were revealed to businessman Adam Soch in a letter that he passed to the prosecutor's office.

According to local media reports, user damageBitMarket from premature closure was 2300 BTC. The partner of the deceased, Niemiro Marchin A. (Marchin Ashkelovich), the Polish prosecutor’s office subsequently charged with fraud and misappropriation of funds, despite the fact that, as he claimed, he did not have access to the site’s assets.

Tragic stories do not end there. In June, Hui Yi, the head of the Chinese analytical service BTE.TOP, committed suicide. He opened a short position on bitcoin with a leverage of 100x and lost 2,000 BTC when the market went against him. All the money belonged to customers, and Hui Yi decided to part with his life, according to his partner.

It later turned out that the company’s office closed formonth before the suicide, and users suggested that it could be a staging. On this story, mainly discussed in Chinese on WeChat, ends.

In India exit cryptocurrency pyramid schemestragically ended not only for investors, but also for its founder Abdul Shakur. He was tortured and killed by his own accomplices after he informed them of the loss of the stolen bitcoins as a result of a hacker attack. The suspects did not succeed in hiding; they were arrested almost immediately.

No less frightening story of torturehappened in the Netherlands - there armed robbers dressed in police uniform burst into the house of a bitcoin trader in Drent. They tortured a man for an hour in front of his four-year-old daughter.

Another mysterious incident occurred on the night ofHalloween in 2018, but the Norwegian media only spoke about it at the beginning of 2019. We are talking about the abduction of Anna-Elizabeth Falkevik, the wife of one of the richest businessmen in the country, Tom Hagen. Her alleged abductors demanded 9 million euros from her husband at Monero, without providing any evidence that she was alive.

Already in the summer, the police concluded thatFalkevik was most likely killed, and the ransom demand is an attempt to confuse the investigation and hide the traces. Despite the fact that the abductors claim otherwise, the police are investigating the murder case.

If we talk about Russia, then this year is tragicallythe founder of Yam Mining, Alexander Marugov, died - his motorcycle collided with a car on the Frunze Embankment in Moscow. In March, the founder of the CryptoBazar venture cryptocurrency fund Andrei Yudin passed away.

Who was arrested and who was already sentenced?

The number of fraudulent projects in the cryptocurrency industry is enormous not only because of the lack of clear regulation, but also because of a lack of understanding of the nature and purpose of bitcoin by ordinary people.

However, justice does not sleep, especiallyAmerican Federal law on US securities is dreamed of by every organizer and participant of ICO campaigns, and large fraudsters and money launderers are constantly waiting for the FBI to come to them.

This year, the arrest of one ofthe organizers and leaders of the OneCoin pyramid, Konstantin Ignatov, the brother of the founder of Rugia Ignatova. He was charged with several charges and subsequently pleaded guilty to several, including money laundering, and testified against pyramid lawyer Mark Scott. The court found the latter guilty of laundering $ 400 million and bank fraud.

Now Ignatov faces 90 years in an American prison, and Scott - 50, but the secret of the disappearance of Rudge Ignatova still remains unsolved.

The Scam of the Decade: How the Doctor of Law organized the OneCoin pyramid and went missing with billions of euros

It is also encouraging that in December the site of the pyramid finally went offline after several years of uninterrupted operation.

US authorities estimate the damage from OneCoin at $ 4 billion, but one of the top pyramid members cited the figure of 15.4 billion euros, which potentially makes it the largest in the last decade.

Another high-profile arrest was carried out in Poland - thereCrypto Capital President Ivan Manuel Molina Lee was detained on charges of participating in a drug cartel and money laundering through the Bitfinex Bitcoin exchange. In the US, Arizona resident Reginald Fowler and Israeli citizen Ravid Jozef were charged with providing shadow banking services for bitcoin exchanges and bank fraud through the same Crypto Capital.

The accounts of this processing were frozen inseveral countries, and with them over $ 800 million owned by Bitfinex users. The latter had to take a loan from Tether, which led to a high-profile lawsuit by the New York State Attorney General against Bitfinex in the spring.

Justice overtook several organizersICO: AriseBank CEO Jared Rice admitted $ 4.2 million in fraud, and programmer Maxim Zaslavsky from Brooklyn has already been sentenced to 18 months in prison, which was the first such sentence in US court practice.

Up to 20 years of imprisonment in the USA now faces the organizers of the BitClub Network mining pool. They were accused of appropriating cryptocurrencies in the amount of $ 722 million. BitClub itself has operated since 2014.

Not without blows to the reputation of Ethereum. In September, one of the many co-founders of the project, Stephen Nerayoff, was arrested in the United States and charged with extortion. He allegedly blackmailed an ICO startup, which he himself promoted. Already at the end of November, law enforcement authorities detained Ethereum Foundation employee Virgil Griffith, who was accused of collaborating with the DPRK. At a conference in Pyongyang, he allegedly explained to representatives of the regime how to use cryptocurrencies to circumvent sanctions. Both face up to 20 years in prison.

Distinguished this year and representativesRussian community. In April, the Almaty Police Department opened a search case against Dmitry Vasiliev, the former owner of the WEX cryptocurrency exchange, and in July he was arrested in Italy. How exactly he was released after this is unknown, but now the unlucky entrepreneur is actively promoting the alleged Prizm cryptocurrency pyramid and advising everyone to practice psychotherapy to "find happiness within themselves."

“DNR”, MMM and Prizm: how a follower of Sergey Mavrodi created a “holy” cryptocurrency, and what does Dzhigurda have to do with it

According to media reports, in the Moscow pre-trial detention centerex-hockey player Igor Musatov, who was detained in September in a $ 800 thousand fraud case with Bitcoin, continues to sit. He faces up to 10 years in prison.

In Yekaterinburg, law enforcement officers arrestedthree organizers of the alleged Bitcoin pyramid Pro100Business, the damage from which is already estimated at $ 150 million, but then the court, in the best tradition, refused to detain them. How exactly events developed further is still unknown.

Not yet convicted twice, but already twice arrestedYang Zuoxing, a former senior Bitmain employee, is now the founder of the competitive MicroBT firm. Little is known about Joshin, but it is equally annoying to both Jihan Wu and Mikri Zhang (the founders of Bitmain). The latter, by the way, did not agree on a vision for the future, and Zhang was unilaterally removed from all posts, despite the fact that his share in the business is greater than Wu. The community called it a real palace coup.

A curious incident happened in the Altai Territory,where in May, police officers detained a citizen of Kazakhstan, who is accused of organizing a cryptocurrency pyramid at home. He crossed the border on a ... horse. But in terms of epicity, Brazilian special forces won in 2019: they involved 20 cars and even a helicopter in an operation to capture the organizers of bitcoin scam for $ 359 million.

Hope but don’t be bad

It is always worth remembering that justice is notpreventive measures are characteristic. In most cases, they are held accountable after committing crimes, while in different countries at different speeds - depending on the level of bureaucracy and corruption.

In the new year, new hacks, new exit scams and new pyramids are waiting for us, but getting into them is not necessary.

Here are some tips to keep your facilities and nerves SAFU:

  • there is no exchange that cannot be hacked. Not your keys - not your money;
  • fabulous passive income without effort and the need to understand something - this is a sure way to give money into the hands of scammers;
  • Do not open a deal with a leverage of 100x not with your own money (most often it’s also not worth your own);
  • do not count on what you have time to earn in the pyramid - if you are not the founder or his friend, you will not have time;
  • don’t take the word to celebrities if they advertise a financial product or service - most often they don’t use them and don’t even understand what they are promoting (for example, Mike Tyson);
  • do not organize a pyramid or trick people into deceiving people - one way or another, the white bar ends, you will be caught and put on trial (at best).

Despite the abundance of negativity, in 2019 the industry has noticeably grown and gained strength. And let the Bitcoin exchange rate not renew the historical maximum, and you don’t buy a brand new lamb, you can’t stop progress.

Nick schteringard