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Hacked BitCoin Exchange Sued By Customers
judgecorp writes "Bitcoinica, an exchange for the BitCoin virtual currency, is being sued by former customers, after it was hacked. Thieves stole around $180,000 worth of BitCoins in two attacks. The site is now closed, and customers are suing to get their money back."
But Bitcoins are secure and stuff! Not like that stoopid fiat currency.
why would anyone willing to put their life saving in something that is not even FDIC insured?
I wish them the best of luck, they will need it!
That is a problem a virtual currency not official backed by any government, bank, or mega-corp, and is not legally tied to any hard valued currency, fungible commodity, or hard product.
Maybe Bitcoinica will offer a store credit good for their own non-transferable virtual currency?
+/- $180,000.
Other estimates calculate the loss at "ham sandwich and a glass of milk".
Wearing pants should always be optional.
By every other tech site on the web days ago.
For me, it is far better to grasp the Universe as it really is than to persist in delusion
I still don't understand the worth of Bitcoins and probably never will.
The only catch is that the settlement will be paid out in Trepidicoins.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
I guess if you're going to claim damages for a virtual goods, the inflation phase of a bubble is as good a time as any.
Wouldn't do to wait too long either, or you'll get your damages in shoe strings and bubble gum.
I note too the hilarious claim in TFA that "BitCoins have generally hovered at a price of around $14 to $17".
Bitcoins have generally hovered around zilch, except for a brief investment bubble around last July, after which they have hovered around $5 until a recent and presumably temporary uptake.
I am thinking of purchasing some bitcoins to travel the turnpike called: Silk Road. I think I can keep that many bitcoins safe in my own AES encrypted storage.
The Bitcoin infrastructure might be secured, it's just that the weakest link is in the server
When the server is hacked, and all the info (Bitcoin is made up of encrypted information, please correct me if I am wrong) contained within it is stolen, it's as good as the Bitcoins were stolen and can be used elsewhere
Therefore, the one crucial thing for the Bitcoin infrastructure designers to do is to find ways to shore up the security of the Bitcoin servers, and make it as difficult as possible (it's impossible to make _any_ server 100% guarantee secured, I know) to be hacked
Muchas Gracias, Señor Edward Snowden !
He's talking about the Internet's definition of a Ponzi scheme, which is basically "a thing relating to money that I don't like".
Bullshit. $180,000? Dream on.
Here's the thing: Bitcoins are nothing and nothing is worth exactly that.
Bitcoin is a pyramid scheme, plane and simple.
Ok, you made your point. But these former customers have a right to line up and demand a solid answer to their complaints.
My userid is prime!
I never thought this would happen.
Who wants to bet that the SEC will stomp in and claim that bitcoins are an illegal security?
Back when this happened there was a sizable number of people claiming that this was merely a small fraction of Bitcoinica's volume and how it's not a big deal at all, etc. Care to explain why they are now closed and being sued?
Analogies don't equal equalities, they are merely somewhat analogous.
Second life currency cannot be stored outside Linden Labs system. It is just an entry in their database. With Bitcoin, you have your private keys and any money assigned to them is under your sole control. Of course, you may place your private keys in a foolish place but it is your duty to yourself to take precautions in relation to the value therein.
I'm not familiar with second-life banks but I doubt they were truly able to hold SLL so that they were under their sole control. Linden Labs could always claim TOS violation and remove the money from their account. Not so with Bitcoin which is why you keep hearing about the system. It's a genuinely different virtual currency.
Perfectly reasonable. After all, you can get USD12 for a bitcoin at a number of places today. Although not all funds lost were in bitcoins, however, some were in fiat balances in their accounts; and forcing any loosing defendants to buy bitcoins to pay plaintiffs who might prefer USD anyway seems silly to me.
Prediction for end of Universe #42: Fencepost error in Quantum_bogosort.cpp
Gold stored in a bank is the only money you can count on.
So, what, our entire economic system is a mistake? Because there's not enough gold to keep the world economy going.
BTW, it's simply not true that gold never loses value except through increased supplies. Look at the price of gold in the markets — it goes up and down all the time. Fluctuations with respect to fiat currency may not impress you, but these shifts represent real changes in gold's ability to be exchanged for stuff you really need.
Yeah, gold backed currency is more resistant to inflation than fiat currency. But when the economy expands and the money supply doesn't you end up with deflation. Where inflation erodes your savings, deflation erodes your ability to sell stuff, because everybody's waiting for it to get even cheaper. If I have to chose between the two, I'll choose inflation.
Note that on this so-called "exchange" you could never actually convert Bitcoins to any other currency. Sure you could "sell" your coins, but you had to buy new Bitcoins to ever get your money out. Mainly Bitconica was used by people trying to short Bitcoins or dollars. This kind of arrangement is known as a bucket shop and has been illegal for a very long time for very good reasons. Namely the people running the site can always manipulate the exchange rates to clean you out, and therefor pocket all your money.
Of course, the 17 year old kid running the whole thing always said that trades went out to real exchanges, but the volume on other exchanges never was anything near what was required for that to be plausible. Meanwhile the whole time people were "zoutong'd" whenever the alleged exchange rate went against their bets.
The whole thing is shady as fuck, although to the credit of Bitcoin people, a lot were asking questions about the thing right from day one, see here and here. (the latter is one of Bitcoins main developers)
I can't believe that much money was stolen. It further sets back BitCoin from ever becoming mainstream.
Exchanges are a weak point, I'll grant you. They are all new companies who have not built up much trust. But they are a necessary evil at present. At some time the bitcoin economy will grow to the point that anyone with bitcoins can use them to purchase products, and anyone who needs them can get paid for services with them, and the exchanges importance will shrink. And with bitcoin's deflationary tendency, those who have them will have an incentive to keep them in bitcoin, and not sell to a fiat.
Bitcoin itself: Its future is fixed by the whim of the internet, and its wish for a open e-cash. Even if bitcoin itself has a limited life, I don't see cryto-currencies ever disappearing, and I do see any replacement growing out of the bitcoin ecosystem, not from outside it.
Prediction for end of Universe #42: Fencepost error in Quantum_bogosort.cpp
And if the SEC did, I don't see the Internet taking much notice of them!
Prediction for end of Universe #42: Fencepost error in Quantum_bogosort.cpp
Ever heard of the term "bucket shop"? That's exactly how Bitconica functioned. Sure you could sell, or sell on margin, your Bitcoins for imaginary US dollars, but you couldn't never withdraw or deposit anything but Bitcoins. What went on was people would use the margin given to them by Bitconica to speculate on the price of Bitcoin, then they'd conveniently lose their whole positions whenever the market went against them, which is quite easy to do if you happen to have everyones Bitcoins to manipulate the market with. This happened so often that a new term was invented for it: zhou tonged, named in honor of the 17 year old kid running the site. (seriously, 17!) Hell, even in the Bitcoin community lots of people were calling them out on this right from the start, for instance here is a post by one of the main devs, obviously concerned about all the other scams that of course have cropped up using bitcoin. Speaking of, wait'll you see the press when the pyramid scheme known as "Bitcoin Savings and Trust" fails, as it of course will given it pays out %3400 a year.
Personally I'd suggest you use your Bitcoins for something reputable, like buying pot, getting cash out of Argentina or donating to wikileaks. All this investment non-sense, as opposed to just using the currency for moving value around digitally, is getting out of hand.
While I agree with you that the victims on this case should share a portion of the blame, we need to understand that not all the bitcoin users are super tech-savvy
Sure, compare with the Joe Sixpacks on the back alleys the average bitcoin users do comprehend more tech terms, but that does not make them super-tech-savvy - I bet that there _are_ users who do not know which database engine a particular site they visit is using
Muchas Gracias, Señor Edward Snowden !
If I had been one of the victims, I would have sued the site directly in Singapore court. A small tax haven and tax shelter like Singapore is much more likely to want to encourage this type of industry and therefore encourage straight dealings in those types of transactions.
Dear Sir,
I do not know where you get the notion that Singapore being a tax heaven
Before anybody else gets hurt, I need to say that Singapore is NO tax heaven.
Never was, never is, and the way it looks, not likely to be in the future, either
Muchas Gracias, Señor Edward Snowden !
and you are assuming other people care enough about the bitcoin ponzi scheme to have urgent news on the topic
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
their gold lust started a snowballing chain of inquiring efforts that eventually led through the centuries to the accumulation of enough knowledge to do this:
http://en.wikipedia.org/wiki/Synthesis_of_precious_metals#Gold
of course, it's not financially worth the effort. but we have realized the dreams of the alchemists
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
I'm having a really tough time following this logic?
You say a gold-backed currency would be a bad thing because the standard deflates (because the demand for money far outpaces the supply).
Ok, except when you look at the whole point of having some sort of standardized currency in the first place, isn't it really nothing more than a symbol of one's labor?
It seems to me the assigned value for a certain amount of it is rather irrelevant, as long as it's agreed upon by all parties. If the demand outstrips the supply so badly, then perhaps people will simply deal in smaller quantities? Who says a coin has to be pure gold, for example? What if it's made of other materials of very little value, with a small (but verifiable) amount of gold included with it? Surely, there's enough gold to go around if we reach the stage where people aren't typically storing whole bars of the stuff, but rather, measurable amount of gold dust (or as I said previously, that same small amount mixed in with another material to make a convenient to handle coin)?
Not only that, but silver has long acted as gold's lesser valued twin. So when dealing in smaller amounts of money, I don't see why silver couldn't work in tandem with gold as a currency?
By contrast, the current system of printing up paper money means we put all the control over its worth in the hands of Federal Reserve bankers and the Federal govt. It's obvious to me why the people in power advocate such a system. They get to pull the strings whenever they like, printing more or less currency to purposely create more demand or flood the supply. But IMO, something as basic as a universally recognized symbol of the work we do shouldn't have ANYONE manipulating it subjectively at that low a level. If the Fed wants to raise or lower interest rates on loans, fine. That's one thing. But I like knowing that only a free marketplace of buyers, sellers, and investors determined the worth of a given piece of currency.
Also Linden could make as much second life currency as they wanted. The same is not true for bitcoin, where the amount grows in a fixed manner.
IMO, currency has its value because people put trust in it. There's a collective agreement going on that it's assigned a value that's universally recognized.
There lies the problem with paper currency.... You can't just come up with billions or trillions of dollars worth of gold out of thin air. The world's supply is essentially fixed. When your symbol of wealth is simply paper printed by some central authority or body, you have to entrust its "caretaking" to that central authority.
Especially in more recent times, it's clear that authority is abusing its power, making huge loans to other nations when they likely don't even posses the amount of money required to extend the loan in the first place.... printing up more paper whenever they feel it would "help the economy" to do so (vs. letting things play out naturally), etc. People still have SOME trust in the currency right now, but much of that trust is probably only out of ignorance of the extent to which it's manipulated, and what that could mean for everyone. All in all, the trust is eroding.....
Bitcoins are worth what they trade for and they trade for a lot more then nothing. For all of 2012 they have been over $5, today they are about $12. If trades were infrequent or isolated you might have a point. Bitcoins trade all over the world at many exchanges, in person, for goods, to the tune of $20 million at one exchange in the past thirty days. Bitcoin is heading towards a billion dollar a year economy.
Just about every "Bitcoin exchange" has had some huge problem. Either they take the money and run, or they get broken into and lose the money.
Tradehill sounded like the most legitimate of the exchanges. Then, in February 2012, Tradehill shut down with no notice, after a big chargeback from Dwolla. They did refund the money, though.
Bitcoinica collapsed and lost customer funds. There was the Bruce Wagner fiasco. Below that level, there were about a dozen other "exchanges" and "online wallets" that lost customer funds.
Mt. Gox is almost the only exchange that hasn't yet lost customer funds or collapsed. Even there, one wonders. They're vague about who's really behind the organization. Mt. Gox started as "Magic, the Gathering Online Exchange."
Comment removed based on user account deletion
Most of the people here are confusing security of the bitcoin protocol with security of some server which provides bitcoin services. Bitcoin hasn't been hacked. Bitcoinica was. That's a big difference. If you store the wallet offline or encrypted on a virus free computer, there is no way you can get hacked. Where are all the people on slashdot that used to provide excelent feedback? I guess I have to move on as well.
I guess this proves bitcoin's libertarian credentials, you've got about as much chance of getting stolen bitcoins back as you do getting stolen gold that you hid under your bed back...
In 1991 the Philosopher's Stone became the target of the Dark Wizard Lord Voldemort in his quest for immortality. Voldemort used a human host, Quirinus Quirrell, to seek it out at Hogwarts School of Witchcraft and Wizardry, where it was being held. The stone was originally stored at Gringotts Wizarding Bank in Vault 713. However, possibly suspecting a threat, Albus Dumbledore had Rubeus Hagrid retreive the stone the very morning of an attempted robbery.
http://harrypotter.wikia.com/wiki/Philosopher's_Stone
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Learn history, gold and silver used to be the money of USA when USA was the productive country. Same with the Roman Republic, of-course when they started inflating the value of their coins (clipping and diluting with non-precious metals), they too began the destruction of their economy.
MY OTHER COMMENTS
Here's a nice graph.
That's the GDP adjusted for inflation (real GDP). Note that the scale is logarithmic. The USA is the most productive it's ever been, and since leaving the gold standard in 1971, the economy has been far more stable. There's your history. The gold standard currency was unstable and had no effect on America's productivity.
You do not have a moral or legal right to do absolutely anything you want.
That's not a 'nice' graph, that's a hugely misleading graph.
1. GDP.
There is almost no manufacturing left in USA and has been the trend since about the seventies until now, factories have left, manufacturing is not there. GDP before 1970s actually had production in it. Where is the 'Product' part of the GDP exactly today, when GDP is 70 consumption, and most of that is of foreign made goods? GDP is mostly consumption. It's also very heavily affected by the inflation, and it's not deflated property, because in USA the inflation is way under-reported.
Real inflation in USA is 11-15%, not what the gov't is reporting. The real GDP in USA has been going down for over 2 decades, USA is in a depression for 2 decades.
2. Productivity.
USA is losing productivity, not gaining it. Yes, there are still productive farmers and some people are still productive in industries that didn't lose the capital yet. But there is no productivity in production, the capital is lost, it's gone to other countries.
Productivity is not your ability to flail your hands around faster, it's the application of the capital to the labor force that increases productivity.
MY OTHER COMMENTS
what do you care, AC? It's called a ban, the account gets locked because a lot of like minded individuals moderate it into shit and it cannot be used to post.
MY OTHER COMMENTS
So to summarize, "all those other statistics and figures from actual trained economists are wrong! Real things are worse than everything being measured, because I say so!"
Sure, why not?
You do not have a moral or legal right to do absolutely anything you want.
And if they win, will get paid in bitcoins...
I follow that logic, except if you don't have any standard universally accepted currency EXCEPT specific precious metals (like gold), hoarding would prove difficult for most people. (If you have to decide between trying to stock up on gold or pay your rent, or buy groceries? It seems to me most people will give in and spend some of their saved up gold. The fact it would increase in value by hanging onto it isn't really any different than other forms of investment, IMO. If I bought Apple stock at pretty much any point in time in the last 10 years or so and just "hoarded" it, I'd have generated a lot of wealth too. But I don't own any stock because although I had pretty high confidence doing so would be profitable, I couldn't spare the money to purchase it after paying for all the necessities.)
The "elite" in positions to hoard significant quantities (perhaps oil barons, for example?) would still be taking chances, IMO. If they succeeded in making gold rare enough to run its price way up, people would lean more heavily on alternative precious metals like silver, platinum, or whatever else was in circulation. That could, in turn, make its price fall back down again -- correct?