Man Behind Week-Long Bitcoin Attacks Reveals Himself 71

An anonymous reader writes: A Russian man that calls himself "Alister Maclin" has been disrupting the Bitcoin network for over a week, creating duplicate transactions, and annoying users. According to Bitcoin experts, the attack was not dangerous and is the equivalent of "spam" on the Bitcoin blockchain servers, known in the industry as a "malleability attack," creating duplicate transactions, but not affecting Bitcoin funds. Maclin recently gave an interview to Vice.

Chinese Researchers Propose Tor-Inspired Overhaul of Bitcoin 46

Patrick O'Neill writes: Although Bitcoin was never designed to be anonymous, many of its users have used it as if it were. Now, two prominent Chinese researchers are proposing a system that encrypts all new Bitcoin transactions layer by layer to beat network analysis that can unmask Bitcoin users. The new research is inspired by the Tor anonymity network. The researchers' paper is at arXiv. (Also covered by The Stack.)

Bitcoin Ponzi Scheme Operator Pleads Guilty To $150M Fraud 114

JustAnotherOldGuy writes: Bitcoin Savings & Trust founder Trendon Shavers pleaded guilty to fraud over his company's Ponzi scheme, whose victims believed they would earn one percent interest every three days — an annual rate of 3,641 percent. Shavers used new depositors' money to pay the existing depositors, and skimmed enough cream to pay for a car, a $1000 Vegas steak dinner, and plenty of casino gambling. He cost his depositors about $150M and was holding onto $40.7M in Bitcoin when he was arrested. At his peak, he controlled about 7 percent of all Bitcoins in circulation. He netted $164,758 from the scheme. Under a plea deal, Shavers has agreed not to appeal any sentence at or below 41 months in prison. Sentencing before U.S. District Judge Lewis Kaplan is scheduled for Feb. 3. Shavers, who went by "pirateat40" online, was arrested in November, two months after a federal judge in Texas ordered him to pay $40.7 million in a related U.S. Securities and Exchange Commission civil lawsuit.
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The Economics of Drug Sales On the Dark Web 53 writes: Allison Schrager has an interesting article about how marketplaces for contraband drugs have only existed for about four years on the dark web, but they've made inroads fast. About 10%-15% of drug users in the U.K., U.S., and Australia [are believed to have] bought drugs off the net. According to Schrager, these marketplaces look remarkably similar to normal online marketplaces. Users leave detailed reviews on the quality of a vendor's product, speed of delivery, and how secure the shipping method was. There's information on where vendors are located and where they'll ship to. Some even post their refund and exchange policies. Purchasing meth from a dealer in the Netherlands feels as familiar and mundane as buying sheets from Macy's. The dark web makes transactions safer.

All the same, there are risks that Macy's customers don't run. Because there's no legal protection for illegal purchases, the bitcoin payments sit in escrow until the goods have been delivered and both parties are satisfied. That exposes the seller to exchange-rate risk, because bitcoin is an extremely volatile currency. And there is one other big source of risk: the point where the virtual world of the dark web and the world of physical reality intersect. In other words, getting drugs delivered. Certain drugs like MDMA and LSD may move mostly online. And the web may become the preferred source for affluent users and small-time pot dealers.

Bitcoin Is Officially a Commodity 59

Taco Cowboy writes: According to the Commodity Futures Trading Commission (CFTC), Bitcoin and other all virtual currencies have been officially categorized as commodities, just like crude oil or wheat. The CFTC on Thursday announced it had filed and settled charges against a Bitcoin exchange for facilitating the trading of option contracts on its platform.

By this action, the CFTC asserts its authority to provide oversight of the trading of cryptocurrency futures and options, which will now be subject to the agency's regulations. In the event of wrongdoing, such as futures manipulation, the CFTC will be able to bring charges against bad actors. If a company wants to operate a trading platform for Bitcoin derivatives or futures, it will need to register as a swap execution facility or designated contract market, just like the CME Group. And Coinflip—the target of the CFTC action—is hardly the only company that provides a platform to trade Bitcoin derivatives or futures
In other Bitcoin news, reader McGruber notes that the CFO of BitPay, a Bitcoin payment service, was successfully phished, costing the company $1.8 million worth of Bitcoins. The company is attempting to recover the money from its insurer.

Bitcoin Trader Agrees To Work For Police In Plea Agreement 111

An anonymous reader writes: Florida Bitcoin trader Pascal Reid, who was arrested in a February 2014 sting operation as part of his plea agreement, promised to carry out 20 sessions of law enforcement training in Bitcoin as well as serve as a consultant in criminal cases involving Bitcoin. This is in addition to 90 days in jail with credit for time served and a $500 reimbursement to the State of Florida for the expense of prosecuting him. Qntra has a write up on the case and the full text of the draft plea agreement.

Video Bitcoin and Beyond

Circle is building a new consumer finance company with radically different unit economics, they're also leveraging mobile and social trends to drive global adoption. Here's a look at the how's and why's.

Nine of World's Biggest Banks Create Blockchain Partnership 93

An anonymous reader writes: Nine major banks, including Barclays, Goldman Sachs, Credit Suisse, and JP Morgan have teamed up to bring Bitcoin's blockchain technology to financial markets. "Over the past year, interest in blockchain technology has grown rapidly. It has already attracted significant investment from many major banks, which reckon it could save them money by making their operations faster, more efficient and more transparent." Leaving aside the question of whether banks actually want to become more transparent, they're funding a firm dedicated to running tests on how data can be shared and collected through the blockchain. "The blockchain works as a huge, decentralized ledger of every bitcoin transaction ever made that is verified and shared by a global network of computers and therefore is virtually tamper-proof. ... The data that can be secured using the technology is not restricted to bitcoin transactions. Two parties could use it to exchange any other information, within minutes and with no need for a third party to verify it."

Mt. Gox CEO Charged With Stealing $2.7 Million 99

An anonymous reader writes: After being arrested six weeks ago in Japan, Mt. Gox CEO Mark Karpeles has now been formally charged with the theft of $2.66 million worth of clients' money. "Tokyo-based MtGox shuttered last year after admitting 850,000 coins — worth around $480 million at the time, or $387 million at current exchange rates — had disappeared from its digital vaults. The exchange, which once said it handled around 80 percent of global Bitcoin transactions, filed for bankruptcy protection soon after the cyber-money went missing, leaving a trail of angry investors calling for answers." Karpeles still denies doing anything illegal. The case is proving difficult for Japanese authorities to unravel, and they're taking it as slowly as they legally can.

Bitcoin Extortion Group DD4BC Now Targeting Financial Services 70

An anonymous reader writes: Akamai is detailing the activities of DD4BC, a cyber-extortionist group that has launched distributed denial-of-service (DDoS) attacks against numerous organizations and demanded Bitcoin payments to stop the attacks. The group is sending ransom emails requiring payments of 25 to 100 Bitcoin, which is about $6,000 — $24,000 (€5,350 — €21,400). Social media shaming is also part of the deal, threatening to expose the DDOS on Twitter if payment is not made.

Secret Service Agent Pleads Guilty In Bitcoin Theft 82

An anonymous reader writes: A former Secret Service agent has pleaded guilty to charges related to the theft of $800,000 worth of bitcoins during a high-profile investigation into the online drug marketplace Silk Road. Reuters reports: "Shaun Bridges, 33, appeared in federal court in San Francisco and admitted to money laundering and obstruction of justice....In court on Monday, Bridges admitted his theft made Ulbricht believe that another individual was stealing from Silk Road and helped lead Ulbricht to try to hire someone to kill that person."

Six UK Teens Arrested For Being "Customers" of Lizard Squad's DDoS Service 95

An anonymous reader writes: UK officials have arrested six teenagers suspected of utilizing Lizard Squad's website attack tool called "Lizzard Stresser". Lizard Squad claimed responsibility for the infamous Christmas Day Xbox Live and PlayStation Network attacks. The teenagers "are suspected of maliciously deploying Lizard Stresser, having bought the tool using alternative payment services such as Bitcoin in a bid to remain anonymous," an NCA spokesperson wrote in an official statement on the case. "Organizations believed to have been targeted by the suspects include a leading national newspaper, a school, gaming companies, and a number of online retailers."

Beyond Bitcoin: How Business Can Capitalize On Blockchains 68

snydeq writes: Bitcoin's widely trusted ledger offers intriguing possibilities for business use beyond cryptocurrency, writes InfoWorld's Peter Wayner. "From the beginning, bitcoin has assumed a shadowy, almost outlaw mystique," Wayner writes. "Even the mathematics of the technology are inscrutable enough to believe the worst. The irony is that the mathematical foundations of bitcoin create a solid record of legitimate ownership that may be more ironclad against fraud than many of the systems employed by businesses today. Plus, the open, collaborative way in which bitcoin processes transactions ensures the kind of network of trust that is essential to any business agreement."

Extortionists Begin Targeting AshleyMadison Users, Demand Bitcoin 286

tsu doh nimh writes: It was bound to happen: Brian Krebs reports that extortionists have begun emailing people whose information is included in the leaked user database, threatening to find and contact the target's spouse and alert them if the recipient fails to cough up 1 Bitcoin. Krebs interviews one guy who got such a demand, a user who admits to having had an affair after meeting a woman on the site and who is now worried about the fallout, which he said could endanger his happily married life with his wife and kids. Perhaps inevitable: two Canadian law firms have filed a class action lawsuit against the company, seeking more than half a billion dollars in damages.

Bitcoin Fork Divides Community 185 writes: The Bitcoin community is facing one of the most momentous decisions in its six-year history. The Bitcoin network is running out of spare capacity, and two increasingly divided camps disagree about what, if anything, to do about the problem. The technical issue is that a block, containing a record of recent transactions, currently has a 1MB limit. Increasing the block size would allow more transactions on the network at once, helping it to scale up to meet growing demand. But it would also make it more difficult for ordinary users to host full network "nodes" that validate new transactions on the network, potentially making the digital currency more centralized as a result. Now Rob Price writes that two high-profile developers have released a competing version of the codebase that risks splitting the digital currency in two.

Gavin Andresen and Mike Hearn have released Bitcoin XT, an alternative version of the core software that supports increasing the block size when required. Bitcoin users will now be forced to decide between "Bitcoin Core" and Bitcoin XT, raising the prospect of a "fork," where the digital currency divides into two competing versions. According to Price, Core and XT are compatible right now. However, if XT is adopted by 75% of users by January 2016, it will upgrade to a larger block size that will be incompatible with Core — meaning that if the other 25% don't then choose to convert, it will effectively split the currency into two. So far, 7.7% of the network has adopted XT, according to website "Ultimately, how the dispute is resolved may matter more than the specific decision that's reached," says Timothy B. Lee. "If the community is ultimately able to reach a consensus, the process could become a template for resolving future disagreements. On the other hand, if disagreements fester for months — or, worse, if a controversial software change splits the Bitcoin network into two warring camps — it could do real damage to Bitcoin's reputation."
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Cuba Uses Big Data To Help Tourism, But Their Networks Lack Capacity 60

dkatana writes: The Cuban government is very active in reshaping the country's industry, not only focusing on leisure and cultural tourism. The biggest challenge, however, is the quality of Internet connections. Cuba's global ranking for Internet speed is 196 out of 200, averaging 1.6 Mbps, just ahead of Guinea, Gambia, Equatorial Guinea, and Niger. Another thing that Cuba lacks: free movement of currency, as reader lpress points out: Cuba has two paper currencies — the Peso and the Convertible Peso or CUC. CUCs are worth about $1 and Pesos, which are used for government salaries, are worth about $.04. But, what about Bitcoin? The first Cuban Bitcoin transaction is history. Will Bitcoin be used by Cubans and Americans to sell goods and services without the knowledge of their governments? Cuban offshore developers might be the first to use Bitcoin.

Spyware Demo Shows How Spooks Hack Mobile Phones 35

An anonymous reader writes: Joe Greenwood, of cybersecurity firm 4Armed, recently gave a live demonstration of some of Hacking Team's leaked spyware to the BBC. Tracking Bitcoin payments, recording audio from the microphone of a locked device, and secretly gaining control of an infected phone's camera are just a few of the software's capabilities. The BBC reports: "Both Mr Greenwood and 4Armed's technical director, Marc Wickenden, said they were surprised by the sleekness of the interface. Both point out, though, that customers could be paying upwards of £1m for the software and would expect it to be user-friendly, especially if it was intended for use by law enforcers on the beat. For the tracked user, though, there are very few ways of finding out that they are being watched. One red flag, according to Mr Greenwood, is a sudden spike in network data usage, indicating that information is being sent somewhere in the background. Experienced spies, however, would be careful to minimize this in order to remain incognito."

Japanese Police Arrest Mount Gox CEO Mark Karpeles 104

McGruber writes with the news as carried (paywalled) by the Wall Street Journal that Mark Karpeles, who headed bitcoin exchange Mt. Gox, has been arrested by Japanese police: In February 2014, Mount Gox filed for bankruptcy, saying it had lost 750,000 of its customers' bitcoins as well as 100,000 of its own, worth some $500 million at the time. A police spokesman said Mr. Karpelès is suspected of manipulating his own account at the company by making it appear that $1 million was added to it. The BBC reports the arrest as well, and notes that the coins missing from Mt. Gox represent 7% of all Bitcoins in circulation.

Your Stolen Identity Goes For $20 On the Internet Black Market 57 writes: Keith Collins writes at Quartz that the going rate for a stolen identity is about twenty bucks on the internet black market. Collins analyzed hundreds of listings for a full set of someone's personal information—identification number, address, birthdate, etc., known as "fullz" that were put up for sale over the past year, using data collected by Grams, a search engine for the dark web. The listings ranged in price from less than $1 to about $450, converted from bitcoin. The median price for someone's identity was $21.35. The most expensive fullz came from a vendor called "OsamaBinFraudin," and listed a premium identity with a high credit score for $454.05. Listings on the lower end were typically less glamorous and included only the basics, like the victim's name, address, social security number, perhaps a mother's maiden name. Marketplaces on the dark web, not unlike eBay, have feedback systems for vendors ("cheap and good A+"), refund policies (usually stating that refunds are not allowed), and even well-labeled sections. "There is no shortage of hackers willing to do about anything, computer related, for money," writes Elizabeth Clarke. "and they are continually finding ways to monetize personal and business data."