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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?
+/- $180,000.
Other estimates calculate the loss at "ham sandwich and a glass of milk".
Wearing pants should always be optional.
The only catch is that the settlement will be paid out in Trepidicoins.
10 PRINT CHR$(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.
US dollars have no intrinsic value. They're worth something because everyone thinks they're worth something. More specifically, they're worth something because someone who has something I want is prepared to swap ("sell") that for US dollars.
Bitcoins are the same. Except there are millions of people who use US dollars, and legal/political institutions dedicated to making sure they work. There are only a relatively tiny number of people trading Bitcoins, and there's no legal/political backing.
The US $ is "Too Big To Fail". Bitcoins aren't.
or dollar bills.
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 !
Who wants to bet that the SEC will stomp in and claim that bitcoins are an illegal security?
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.
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)
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.
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 !
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
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.
I'm not a hardcore economics geek or anything, but the argument that I've found the most persuasive is that gold and other fixed-supply currencies are a bad idea because the economy itself is growing and increasing it's value. If your currency supply is fixed and your overall economic value is growing, then you get deflation, which discourages people from spending or investing their money because letting it just sit there will increase its value just as fast as investing it would. Apparanly, you get a nasty boom-bust cycle when large economic activity creates lots of extra wealth, but the money supply is fixed so it all deflates, then nobody wants to spend anymore, and the economy crashes again until total wealth drops back down to where it makes sense to invest again. I'm not completely sure if it's true, but I've heard that the whole European colonial period really came about because the societies at the time were creating lots of extra wealth and they had to find more gold to represent that wealth in order to avoid deflation, and it seems to make a kind of sense.
Essentially, to have a economy that it stable in the long term, you must inflate your currency at a controlled pace to create low but positive inflation. Thus, you must have a Fiat currency, and it basically has to be controlled by the Government.
Also persuasive is that we have hundreds of countries with all sorts of governments and economic policies. If the gold standard was such a great idea, then wouldn't some country somewhere try it and out-compete everyone else, or at least their neighbors/local rivals?
Now whether recent government have done a lousy job of running the economy and the currency, that's a whole different argument...
I don't reply to ACs
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."
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.