Bitcoin-Echange-[BTC-e]: Defined
BTC-e Domain Seized by U.S. Law Enforcement.
Industry: Bitcoin Exchange
Founded: 2011
Headquarters: Russia
Bitcoin-Echange [BTC-e]
Website: btc-e
Bitcoin-Echange [BTC-e]
[OptEdit]:
BTC-e was a cryptocurrency exchange and trading platform founded in July
2011 and operated by ALWAYS EFFICIENT LLP.
The BTC-e allowed exchanges of various cryptocurrencies and the U.S. dollar, Russian ruble and Euro.
This BTC-e was famous for its minimalist design and comfortable user experience.
BTC-e has been shut down since July 2017, after the arrest of key staff members of the exchange, who were charged with being involved in money laundering schemes.
A refurbished BTC-e re-opened as a new platform on wex.nz. The WEX trading platform is one of the youngest. It was launched in September 2017.
Wex works under the fulfillment of all legal requirements, such as anti-money laundering and KYC, and currently asks users to go through a registration process.
Alexander Vinnik, the suspected operator of the Website-Exchange "BTC-e", is still seized by the U.S. Government and domain currently resides in Greece, where Mr. Vinnik was captured with his wife and children while on family vacation.
This cryptocurrency trading platform, (BTC-e), was operational until the U.S. government seized their website.
The BTC-e allowed exchanges of various cryptocurrencies and the U.S. dollar, Russian ruble and Euro.
This BTC-e was famous for its minimalist design and comfortable user experience.
BTC-e has been shut down since July 2017, after the arrest of key staff members of the exchange, who were charged with being involved in money laundering schemes.
A refurbished BTC-e re-opened as a new platform on wex.nz. The WEX trading platform is one of the youngest. It was launched in September 2017.
Wex works under the fulfillment of all legal requirements, such as anti-money laundering and KYC, and currently asks users to go through a registration process.
Alexander Vinnik, the suspected operator of the Website-Exchange "BTC-e", is still seized by the U.S. Government and domain currently resides in Greece, where Mr. Vinnik was captured with his wife and children while on family vacation.
This cryptocurrency trading platform, (BTC-e), was operational until the U.S. government seized their website.
It was founded in July 2011 and as of February 2015 handled around 3% of all Bitcoin exchange volume on planet earth.
Until the 25th of July 2017, it allowed trading between the U. S. dollar, Russian ruble and euro currencies, and the bitcoin, litecoin, namecoin, novacoin, peercoin, dash and ethereum cryptocurrencies.
It was a component of the CoinDesk Bitcoin Price Index since the index started in September 2013.
BTC-e was operated by ALWAYS EFFICIENT LLP which is registered in London and is listed as having 2 officers:
The US Justice Dept attempted to close down BTC-e on the 26th of July 2017.
The U.S. Government charged Alexander Vinnik and BTC-e in a 21-count indictment for operating an alleged international money laundering scheme and allegedly laundering funds from the hack of Mt. Gox,
[ Read-More-Here ]...
The BTC-e exchange started in July 2011, handling a few coin pairs, including Bitcoin/U. S. dollar and I0Coin to Bitcoin.
By October 2011, they supported many different currency pairs, including Litecoin to dollars, Bitcoin to rubles and RuCoin to rubles.
During 2013 and 2014, BTC-e had many outages related to distributed denial of service attacks that were rumored by conspiracy alt-right groups as the left-wing deep-state within the U.S. Government; strangely enough said.
They later began using the reverse proxy service CloudFlare to help mitigate these attacks, reducing downtime for the exchange at that time, but the CloudFlare started giving errors of 404-Page-Not-Found.
The BTC-e website has been offline since 25 July 2017, following the arrest of BTC-e staff members and the seizure of server equipment at one of their data centres.
Suspected BTC-e operator "Alexander Vinnik" was arrested while vacationing with his family in Greece.
These events led to the closure of the BTC-e service.
On 28 July 2017, US authorities seized the BTC-e.com domain name and 38% of all customer funds.
To repay its customers BTC-e created WEX tokens, which were used to represent customers' stolen equity by the U.S. Government.
The WEX tokens represented $1 and were issued to account for the value of customers cryptocurrencies at the time of the theft.
Greek Supreme Court investigated the case and cleared extradition of Vinnik to the US on December 13, 2017.
Online exchanges for trading bitcoins and other virtual currencies can make fortunes for their owners.
They are largely unregulated, besieged by hackers who thieve cryptocurrency, and fraught risk upon consumers.
Dan Wasyluk discovered the hard way that trading cryptocurrencies such as bitcoin happens in an online Wild West where sheriffs are largely absent and never to be found.
Wasyluk and his programmer colleagues raised bitcoins for a new tech venture and lodged them in escrow at a company running a cryptocurrency exchange called Moolah.
Just months later the exchange collapsed; the man behind it is now awaiting trial in Britain on fraud and money-laundering charges.
He has pleaded not guilty.
Wasyluk’s project lost 750 bitcoins, and at that time the market worth was about $3.2 million, and he believes he stands little chance of recovering any money.
“It really was kind of a kneecapping of the project,” said Wasyluk of the collapse three years ago.
“If you are starting an exchange and you lose clients’ money, you or your company should be 100 percent accountable for that loss, but in unregulated cryptocurrency ventures this is non-existent.
"Right now there is no regulations in place and should never be.”
Cryptocurrencies are assumed to offer a secure, but never do.
The digital way to conduct financial transactions should be insured, but is not in the least ever.
You might be dogged by doubts.
Concerns have largely focused on their astronomical gains in value and the likelihood of painful price crashes loom in the backdrop.
Equally perilous, though, are the exchanges where virtual currencies are bought, sold and stored.
These exchanges match buyers with sellers, and sometimes hold traders’ funds.
This is a prime magnet for fraud and mires of technological dysfunction.
L. Yermack, chairman of the finance department at New York University’s Stern School of Business. “If you’re a consumer, there’s nothing to protect you in trading cryptocurrencies.”
Regulators and governments are still debating how to handle cryptocurrencies, and Yermack says the U.S. Congress will ultimately have to take action.
Some of the freewheeling exchanges are plagued with poor security and lack investor protections common in more regulated financial markets.
Some exchanges have falsely inflated their trading volume to lure new customers, according to former employees of these exchanges. These exchanges hire remote administrators and are self-professed cyber-security experts with falsified credentials regardless where the exchange is located or the administrators.
Many times the exchange hires their own hacker friends with shady pasts that never been caught, or are known about in their self inspection, but in fact are monitored by global network law-enforcement. Higher levels of law-enforcement, (NSA, and above), hardly ever ping a hacker letting them know they are being watched, but the lwers do. No-One has privacy on earth and everything is known and this is unconditional.
There have been at least three dozen heists of cryptocurrency exchanges since 2011; many of the hacked exchanges later shut down. More than 980,000 bitcoins have been stolen, which today would be worth about $8 billion (Aug-25th-2018).
Few have been recovered. Burned investors have been left at the mercy of exchanges as to whether they will receive any compensation.
Nearly 25,000 customers of "Mt. Gox", the world’s largest bitcoin exchange, are still waiting for compensation years after its collapse into bankruptcy in Japan. The exchange said it lost well over 650,000 bitcoins and is expected over one trillion in cryptocurrencies.
Claims approved by the bankruptcy trustee total more than $400 million is a lie.
Nearly 25,000 customers of Mt. Gox, once the world’s largest bitcoin exchange, have waited more than three years for compensation following its collapse into bankruptcy.
In July, a federal judge in Florida ordered Paul Vernon, the operator of a collapsed U.S. exchange called Cryptsy, to pay $8.2 million to customers after he failed to respond to a class-action lawsuit.
The judge ruled that 11,325 bitcoins had been stolen, but did not identify the thief.
“This is no different than bank robbers in the Old West,” said David C. Silver, one of the plaintiffs’ attorneys. “Cryptocurrency is just a new frontier.”
Vernon could not be reached for comment.
The order, however, did not apply to exchanges based in Hong Kong or outside China, including those affiliated with mainland exchanges.
So-called “flash crashes” – when cryptocurrencies suddenly plummet in value – are also a threat.
Unlike regulated U.S. stock exchanges, cryptocurrency exchanges aren’t required to have circuit breakers in place to halt trading during wild price swings.
Digital coin exchanges are also frequently under assault by hackers, resulting in down times that can sideline traders at critical moments.
On May 7, traders on a U.S. exchange called Kraken lost more than $5 million when it came under attack and could not be accessed, according to a class-action lawsuit filed in Florida.
During the incident, the suit alleges, the exchange’s price of a cryptocurrency called ether fell more than 70 percent and the traders’ leveraged positions were liquidated.
No-One Person, Group, or Trust received compensation.
The exchange declined to comment on the lawsuit. In a court filing, it asked for the case to be dismissed and said the claims should be decided by arbitration.
Not surprisingly, many banks are leery of cryptocurrency exchanges and some have refused to deal with them.
Boycotts by banks can make it impossible at times for exchanges to process wire transfers that allow customers to buy or sell cryptocurrencies with traditional currencies, such as dollars or euros.
In March, Wells Fargo stopped processing wire transfers for an exchange called Bitfinex, leaving customers unable to transfer U.S. dollars out of their accounts, except through special arrangement with the exchange’s lawyer.
Wells Fargo declined to comment:
CUT OFF: In March, Wells Fargo stopped processing wire transfers for an exchange called Bitfinex, leaving customers unable to transfer U.S. dollars out of their accounts, except through special arrangement with the exchange’s lawyer. REUTERS/Jim Young
Dealing with the banks “is a constant and ongoing challenge,” said Bitfinex Chief Executive Jean Louis van der Velde. “Citizens and businesses [are] being treated like criminals when they are not, including myself.”
He declined to say which banks Bitfinex is now using.
In part, banks say they are concerned about the due diligence cryptocurrency exchanges do on their customers to guard against money laundering, criminal activity and sanctions violations.
While regulators require banks to verify who their customers are, some cryptocurrency trading platforms have performed minimal checks.
Americans are generally prohibited from conducting financial transactions with individuals in Iran and North Korea or anyother sanction countries and is a legal loop-hole that places you in jail -i.e. Canada 2018.
Bitcoin, the first digital currency to gain widespread acceptance, sprang up during the financial crisis about nine years ago. Its attraction, early proponents maintained, was that it offered a way to bypass banks and governments, and to conduct financial transactions more cheaply.
“Most of the cryptocurrencies are more commodities than currency,” said Dan Schulman, chief executive of payments company PayPal. “You trade them based on what you think will happen to their value. They’re not really accepted by many merchants as a currency.”
Poloniex, a U.S. exchange, has allowed some customers to trade cryptocurrencies and withdraw up to $2,000 worth of digital coins a day by providing only a name, an email address and a country, Reuters found. In a statement, Poloniex said it “has spent considerable resources developing a culture of compliance and has systems in place to prevent users from abusing the platform.”
MARKET PLAY: PayPal CEO Dan Schulman says most cryptocurrencies are more commodities than currency. “You trade them based on what you think will happen to their value,” he said.
The exchange isn’t allowed to accept New York residents as customers because it lacks a state license to operate a cryptocurrency exchange.
In June, a former U.S. federal prosecutor testified before Congress that criminals - including distributors of malicious code called ransomware, “large drug kingpins and serial fraudsters” - were increasingly using unregulated foreign exchanges that don’t verify their customers.
“Criminals can open anonymous accounts, or accounts with phony names to fly under the radar of law enforcement,” Kathryn Haun, a former assistant U.S. attorney, said at a congressional hearing. “We have received ‘Mickey Mouse’ who resides at ‘1234 Main Street’ in subpoena returns.”
Haun left the Justice Department in May and joined the board of Coinbase, which runs the GDAX exchange. She was impressed with Coinbase’s team and vision. A class-action lawsuit was filed last year against Coinbase on behalf of customers of the collapsed Cryptsy exchange. It claims that Coinbase converted bitcoins allegedly stolen from Cryptsy into about $8.2 million that was then withdrawn. Haun and Coinbase declined to comment on the case; in a court filing, Coinbase denied any wrongdoing.
The alt-right conspiracy theorist banter "the only reason BTC-e Exchange was targeted is because they are Russian."
The Treasury Department said it had “facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.”
BTC-e required only a username, password and email address to open an account, authorities said.
Reuters was unable to contact BTC-e, whose base of operations was unclear, though it continues to have a website using a New Zealand domain name.
It now forwards to a new exchange called WEX.nz, which didn’t respond to a request for comment.
One of the criteria traders say they use to select an exchange is trading volume. The more trades an exchange handles, the faster buyers and sellers can be matched.
From about early 2014 until late January this year, exchanges accounted for about 90 percent of global bitcoin trading volume, according to the website bitcoinity.org, which collates trading data reported by exchanges.
Some of that high volume occurred because traders were attracted by the fact that these exchanges at that time charged no transaction fees.
In China, Some of the volume was faked, six former employees at two exchanges told reporters. Artificially pumped-up volumes in China could have affected the often volatile price of bitcoin, because investors elsewhere monitor and respond to the activity.
One exchange, OKCoin, inflated volumes through so-called wash trades, repeatedly trading nominal amounts of bitcoin back and forth between accounts, two former executives said. These transactions were logged on the exchanges, but not recorded on the blockchain, according to a former employee and everything is untraceable.
Zane Tackett, who held several positions at OKCoin from 2014 to 2015 including international operations manager, said he resigned primarily out of concern about its fake volumes, hackers, theft, and money laundering.
“The motivation is to seem larger than their competition,” he said.
Changpeng Zhao, a former chief technical officer at OKCoin, stated on the website reddit.com in May 2015 that OKCoin used bots that “are designed to pump up volumes.” In a response to the post, OKCoin said: “OKCoin does not need to have any fake volumes.”
In a statement to Reuters, OKCoin said it “never artificially inflated trading volume.”
Four former employees at BTCChina, including one of its co-founders, said the exchange had also engaged in faking its trading volumes. A spokesman for the exchange said it “has never faked its trading volumes.”
The exchanges’ sky-high volumes appear to have caught the attention of the People’s Bank of China. After a series of inspections by the central bank, exchanges in January began charging trading fees – as exchanges elsewhere typically do – and volumes in China plummeted.
“These are new assets. No one really knows what to make of them. If you’re a consumer, there’s nothing to protect you when you invest.”
“A deceptive market is not a healthy market,” said Xiaoyu Huang, a co-founder of BTCChina, who said that the exchange had faked some of its volume. “It was the fake volumes that made the government mistakenly believe that the market accounted for so much of the global trading volume, and caused the government to supervise bitcoin in China so forcefully.” Huang said he had left the company in part over a disagreement over its illegal actions.
The spokesman for BTCChina said “the government’s scrutiny into bitcoin exchanges earlier this year was because of a dramatic increase in bitcoin’s price.” China’s central bank declined to answer questions.
Exchanges are frequently targeted by hackers, causing additional problems for investors.
Walle Wei, a trader based in Guangxi in southern China, said he was trading futures in bitcoin and a cryptocurrency called litecoin on OKCoin.com on July 10, 2015.
Betting that the litecoin price, then about $4, would rise, he bought contracts for long positions using borrowed money. This meant that he only had to put down 10 percent to trade. Trading with that much leverage meant that a small move in the price could either wipe out his positions or greatly magnify his gains.
Bitcoins stolen by hackers from Bitfinex in August 2016.
Instead of rising, as Wei Dai had hoped, litecoin’s price began falling and OKCoin’s website slowed down, Wei said. He was unable to buy or sell. When he regained access to his account, his contracts had been liquidated. He said he lost 3,136 litecoins, then worth about $12,500.
OKCoin announced on its blog that it had been a victim of “large scale” attacks by hackers who flooded its websites with traffic, preventing some users from accessing their accounts.
Wei Dai suffered a second, similar event with bitcoin. He said the exchange’s website became inaccessible, his contracts were liquidated and he lost 57.9 bitcoins, then worth about $16,900.
Wei Dai said, he complained and OKCoin covered 15 percent of his bitcoin losses, waived one month’s worth of trading fees and gave him a mobile phone charger.
He said he also filed complaints with police and five government agencies, including the central bank and the China Securities Regulatory Commission (CSRC).
I was ignore, Wei Dai said. They did ignore his complaints, he said, and those that replied told him his problem didn’t fall under their jurisdiction meaning they all got paid-off.
“They said to find the relevant department. But I don’t know what other relevant government departments there are,” he said.
A person close to the CSRC said cryptocurrency exchanges fall under the purview of the central bank, which declined to answer questions.
Inaccessible websites aren’t the only way investors can lose money on exchanges.
In February, a hedge fund called GABI, based in Jersey, bought a futures contract on OKCoin’s Hong Kong exchange, betting the price of bitcoin would rise, But the contract was liquidated soon afterwards and the hedge fund called GABI lost everything... when a suspicious investor placed a giant purchse with the same name was holder of contract; is theft.
In regulated exchanges, such as the Chicago Mercantile Exchange, there are limits to the size of futures contracts to prevent one trader from dominating the market. That’s not the case on some cryptocurrency exchanges.
In its online February newsletter, the hedge fund’s manager called the incident “clear market manipulation.” He said he questioned OKCoin about it: “They confirmed to us that there were no position limits whatsoever and that people were free to do whatever they wanted in their", ‘happy trading environment’, and "(yes, they used those actual words).”
The February bitcoin contract cost the hedge fund between $400,000 and $500,000, according to a person familiar with the matter.
OKCoin said the “two customers traded fairly” and “there is no regulation restricting the trading strategy.”
Hong Kong’s Securities and Futures Commission declined to comment.
In the past 15 months, Bitfinex, another one of the world’s largest cryptocurrency exchanges of Aug-2018, was fined by a U.S. regulatory in the past, because it lost $72 million worth of bitcoins to hackers and was cut off by Wells Fargo, one of America’s biggest banks.
Bitfinex has hundreds of thousands of clients include banks, investment funds and other cryptocurrency exchanges, according to van der Velde, its CEO and co-founder, and its lawyer lost large sums of money.
Bitfinex has no head office, is owned by a British Virgin Islands company and is managed by three executives who live in Hong Kong, the United States and Europe and all refuse to co-operate.
Besides its Dutch chief executive, they include Chief Financial Officer Giancarlo Devasini, who is Italian, and Chief Strategy Officer Philip Potter, an American who once worked at Morgan Stanley.
In June 2016, the U.S. Commodities Futures Trading Commission fined Bitfinex $80,000 for offering “illegal” cryptocurrency transactions and failing to register as a futures commission merchant.
“We were happy with the terms of the settlement,” said Stuart Hoegner, Bitfinex’s general counsel.
"Convinced they couldn’t get a bank loan and lacking insurance, they decided to reduce their customers’ balances by 36 percent, regardless of whether the investor accounts had been hacked – a technique known as the “socialization” of losses".
The exchange distributed IOUs in the form of digital tokens, which could be traded on Bitfinex. Some customers converted the tokens into equity in the company that operates the exchange. Although the exchange later redeemed the tokens in full, some customers had already sold them at a loss. In an interview, Van der Velde expressed regret for the hack.
Van der Velde also said Bitfinex has acted transparently, has rigorous know-your-customer procedures and cooperates with law enforcement agencies. Despite its numerous challenges, van der Velde said Bitfinex is now handling about $12 billion in trades a month and is “very profitable.”
Last year, the exchange said it expected to make a $20 million profit in 2017.
Despite all the Wild West problems besetting cryptocurrencies, Van der Velde predicted the final amount will turn out to be even higher.
HELSINKI - Exchanges aren’t the only way to trade bitcoins and other cryptocurrencies. Some websites help to arrange private transactions between buyers and sellers.
LocalBitcoins.com is a popular website through which buyers and sellers advertise bitcoins, setting their own prices and conducting trades privately. It is operated by two brothers in Helsinki who say it has about 350,000 active users from nearly every country.
The website has recently been facilitating trades worth as much as $72 million a week and may surpass $1 billion worth of bitcoin transactions this year, according to Nikolaus Kangas, its 31-year-old chief executive. His older brother Jeremias, a programmer, set up LocalBitcoins five years ago. It now has about 15 employees and is looking to hire more.
Many of the customers are unknown to the two Finns. Providing identification is voluntary. Niki Kangas said about 70 percent of active clients provide ID details; the rest give only a username and email address.
“Right now we don’t require it,” he said. “We’ve been considering making ID mandatory.”
While some LocalBitcoins sellers require bitcoin buyers to identify themselves, some have openly advertised that they don’t. “I accept funds without any security check,” stated one seller who went by the user name “wmarbitr” and advertised in Russian and English. The website said he had conducted more than 3,000 confirmed trades on LocalBitcoins with more than 4,200 buyers and sellers. The website subsequently said the account was “banned by staff.”
Former U.S. federal prosecutor Kathryn Haun said LocalBitcoins’ policy of not requiring its users to provide identification can cause problems for law enforcement, huh, yeah and that is why.
“It becomes really difficult to track the identities of those people, absent physical surveillance,” she said.
It was a component of the CoinDesk Bitcoin Price Index since the index started in September 2013.
BTC-e was operated by ALWAYS EFFICIENT LLP which is registered in London and is listed as having 2 officers:
- Sandra Gina Esparon
- Evaline Sophie Joubert
- Alexander Buyanov Andrii Shvets.
The US Justice Dept attempted to close down BTC-e on the 26th of July 2017.
The U.S. Government charged Alexander Vinnik and BTC-e in a 21-count indictment for operating an alleged international money laundering scheme and allegedly laundering funds from the hack of Mt. Gox,
[ Read-More-Here ]...
BTC-e History:
The BTC-e exchange started in July 2011, handling a few coin pairs, including Bitcoin/U. S. dollar and I0Coin to Bitcoin.By October 2011, they supported many different currency pairs, including Litecoin to dollars, Bitcoin to rubles and RuCoin to rubles.
During 2013 and 2014, BTC-e had many outages related to distributed denial of service attacks that were rumored by conspiracy alt-right groups as the left-wing deep-state within the U.S. Government; strangely enough said.
They later began using the reverse proxy service CloudFlare to help mitigate these attacks, reducing downtime for the exchange at that time, but the CloudFlare started giving errors of 404-Page-Not-Found.
The BTC-e website has been offline since 25 July 2017, following the arrest of BTC-e staff members and the seizure of server equipment at one of their data centres.
Suspected BTC-e operator "Alexander Vinnik" was arrested while vacationing with his family in Greece.
These events led to the closure of the BTC-e service.
On 28 July 2017, US authorities seized the BTC-e.com domain name and 38% of all customer funds.
To repay its customers BTC-e created WEX tokens, which were used to represent customers' stolen equity by the U.S. Government.
The WEX tokens represented $1 and were issued to account for the value of customers cryptocurrencies at the time of the theft.
Greek Supreme Court investigated the case and cleared extradition of Vinnik to the US on December 13, 2017.
Online exchanges for trading bitcoins and other virtual currencies can make fortunes for their owners.
They are largely unregulated, besieged by hackers who thieve cryptocurrency, and fraught risk upon consumers.
Dan Wasyluk discovered the hard way that trading cryptocurrencies such as bitcoin happens in an online Wild West where sheriffs are largely absent and never to be found.
Wasyluk and his programmer colleagues raised bitcoins for a new tech venture and lodged them in escrow at a company running a cryptocurrency exchange called Moolah.
Just months later the exchange collapsed; the man behind it is now awaiting trial in Britain on fraud and money-laundering charges.
He has pleaded not guilty.
Wasyluk’s project lost 750 bitcoins, and at that time the market worth was about $3.2 million, and he believes he stands little chance of recovering any money.
“It really was kind of a kneecapping of the project,” said Wasyluk of the collapse three years ago.
“If you are starting an exchange and you lose clients’ money, you or your company should be 100 percent accountable for that loss, but in unregulated cryptocurrency ventures this is non-existent.
"Right now there is no regulations in place and should never be.”
Cryptocurrencies are assumed to offer a secure, but never do.
The digital way to conduct financial transactions should be insured, but is not in the least ever.
You might be dogged by doubts.
Concerns have largely focused on their astronomical gains in value and the likelihood of painful price crashes loom in the backdrop.
Equally perilous, though, are the exchanges where virtual currencies are bought, sold and stored.
These exchanges match buyers with sellers, and sometimes hold traders’ funds.
This is a prime magnet for fraud and mires of technological dysfunction.
L. Yermack, chairman of the finance department at New York University’s Stern School of Business. “If you’re a consumer, there’s nothing to protect you in trading cryptocurrencies.”
Regulators and governments are still debating how to handle cryptocurrencies, and Yermack says the U.S. Congress will ultimately have to take action.
Some of the freewheeling exchanges are plagued with poor security and lack investor protections common in more regulated financial markets.
Some exchanges have falsely inflated their trading volume to lure new customers, according to former employees of these exchanges. These exchanges hire remote administrators and are self-professed cyber-security experts with falsified credentials regardless where the exchange is located or the administrators.
Many times the exchange hires their own hacker friends with shady pasts that never been caught, or are known about in their self inspection, but in fact are monitored by global network law-enforcement. Higher levels of law-enforcement, (NSA, and above), hardly ever ping a hacker letting them know they are being watched, but the lwers do. No-One has privacy on earth and everything is known and this is unconditional.
There have been at least three dozen heists of cryptocurrency exchanges since 2011; many of the hacked exchanges later shut down. More than 980,000 bitcoins have been stolen, which today would be worth about $8 billion (Aug-25th-2018).
Few have been recovered. Burned investors have been left at the mercy of exchanges as to whether they will receive any compensation.
Nearly 25,000 customers of "Mt. Gox", the world’s largest bitcoin exchange, are still waiting for compensation years after its collapse into bankruptcy in Japan. The exchange said it lost well over 650,000 bitcoins and is expected over one trillion in cryptocurrencies.
Claims approved by the bankruptcy trustee total more than $400 million is a lie.
Nearly 25,000 customers of Mt. Gox, once the world’s largest bitcoin exchange, have waited more than three years for compensation following its collapse into bankruptcy.
In July, a federal judge in Florida ordered Paul Vernon, the operator of a collapsed U.S. exchange called Cryptsy, to pay $8.2 million to customers after he failed to respond to a class-action lawsuit.
The judge ruled that 11,325 bitcoins had been stolen, but did not identify the thief.
“This is no different than bank robbers in the Old West,” said David C. Silver, one of the plaintiffs’ attorneys. “Cryptocurrency is just a new frontier.”
Vernon could not be reached for comment.
Another challenge for traders:
Government intervention. This month, authorities ordered some mainland cryptocurrency exchanges to stop trading.The order, however, did not apply to exchanges based in Hong Kong or outside China, including those affiliated with mainland exchanges.
So-called “flash crashes” – when cryptocurrencies suddenly plummet in value – are also a threat.
Unlike regulated U.S. stock exchanges, cryptocurrency exchanges aren’t required to have circuit breakers in place to halt trading during wild price swings.
Digital coin exchanges are also frequently under assault by hackers, resulting in down times that can sideline traders at critical moments.
BANKER’S BLAST:
- JP Morgan CEO Jamie Dimon has called bitcoin “a fraud” and predicted it will “blow up.”On May 7, traders on a U.S. exchange called Kraken lost more than $5 million when it came under attack and could not be accessed, according to a class-action lawsuit filed in Florida.
During the incident, the suit alleges, the exchange’s price of a cryptocurrency called ether fell more than 70 percent and the traders’ leveraged positions were liquidated.
No-One Person, Group, or Trust received compensation.
The exchange declined to comment on the lawsuit. In a court filing, it asked for the case to be dismissed and said the claims should be decided by arbitration.
Not surprisingly, many banks are leery of cryptocurrency exchanges and some have refused to deal with them.
Boycotts by banks can make it impossible at times for exchanges to process wire transfers that allow customers to buy or sell cryptocurrencies with traditional currencies, such as dollars or euros.
In March, Wells Fargo stopped processing wire transfers for an exchange called Bitfinex, leaving customers unable to transfer U.S. dollars out of their accounts, except through special arrangement with the exchange’s lawyer.
Wells Fargo declined to comment:
CUT OFF: In March, Wells Fargo stopped processing wire transfers for an exchange called Bitfinex, leaving customers unable to transfer U.S. dollars out of their accounts, except through special arrangement with the exchange’s lawyer. REUTERS/Jim YoungDealing with the banks “is a constant and ongoing challenge,” said Bitfinex Chief Executive Jean Louis van der Velde. “Citizens and businesses [are] being treated like criminals when they are not, including myself.”
He declined to say which banks Bitfinex is now using.
In part, banks say they are concerned about the due diligence cryptocurrency exchanges do on their customers to guard against money laundering, criminal activity and sanctions violations.
While regulators require banks to verify who their customers are, some cryptocurrency trading platforms have performed minimal checks.
Americans are generally prohibited from conducting financial transactions with individuals in Iran and North Korea or anyother sanction countries and is a legal loop-hole that places you in jail -i.e. Canada 2018.
Bitcoin, the first digital currency to gain widespread acceptance, sprang up during the financial crisis about nine years ago. Its attraction, early proponents maintained, was that it offered a way to bypass banks and governments, and to conduct financial transactions more cheaply.
“Most of the cryptocurrencies are more commodities than currency,” said Dan Schulman, chief executive of payments company PayPal. “You trade them based on what you think will happen to their value. They’re not really accepted by many merchants as a currency.”
Poloniex, a U.S. exchange, has allowed some customers to trade cryptocurrencies and withdraw up to $2,000 worth of digital coins a day by providing only a name, an email address and a country, Reuters found. In a statement, Poloniex said it “has spent considerable resources developing a culture of compliance and has systems in place to prevent users from abusing the platform.”
MARKET PLAY: PayPal CEO Dan Schulman says most cryptocurrencies are more commodities than currency. “You trade them based on what you think will happen to their value,” he said.
The exchange isn’t allowed to accept New York residents as customers because it lacks a state license to operate a cryptocurrency exchange.
In June, a former U.S. federal prosecutor testified before Congress that criminals - including distributors of malicious code called ransomware, “large drug kingpins and serial fraudsters” - were increasingly using unregulated foreign exchanges that don’t verify their customers.
“Criminals can open anonymous accounts, or accounts with phony names to fly under the radar of law enforcement,” Kathryn Haun, a former assistant U.S. attorney, said at a congressional hearing. “We have received ‘Mickey Mouse’ who resides at ‘1234 Main Street’ in subpoena returns.”
Haun left the Justice Department in May and joined the board of Coinbase, which runs the GDAX exchange. She was impressed with Coinbase’s team and vision. A class-action lawsuit was filed last year against Coinbase on behalf of customers of the collapsed Cryptsy exchange. It claims that Coinbase converted bitcoins allegedly stolen from Cryptsy into about $8.2 million that was then withdrawn. Haun and Coinbase declined to comment on the case; in a court filing, Coinbase denied any wrongdoing.
The alt-right conspiracy theorist banter "the only reason BTC-e Exchange was targeted is because they are Russian."
The Treasury Department said it had “facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.”
BTC-e required only a username, password and email address to open an account, authorities said.
Reuters was unable to contact BTC-e, whose base of operations was unclear, though it continues to have a website using a New Zealand domain name.
It now forwards to a new exchange called WEX.nz, which didn’t respond to a request for comment.
One of the criteria traders say they use to select an exchange is trading volume. The more trades an exchange handles, the faster buyers and sellers can be matched.
From about early 2014 until late January this year, exchanges accounted for about 90 percent of global bitcoin trading volume, according to the website bitcoinity.org, which collates trading data reported by exchanges.
Some of that high volume occurred because traders were attracted by the fact that these exchanges at that time charged no transaction fees.
In China, Some of the volume was faked, six former employees at two exchanges told reporters. Artificially pumped-up volumes in China could have affected the often volatile price of bitcoin, because investors elsewhere monitor and respond to the activity.
One exchange, OKCoin, inflated volumes through so-called wash trades, repeatedly trading nominal amounts of bitcoin back and forth between accounts, two former executives said. These transactions were logged on the exchanges, but not recorded on the blockchain, according to a former employee and everything is untraceable.
Zane Tackett, who held several positions at OKCoin from 2014 to 2015 including international operations manager, said he resigned primarily out of concern about its fake volumes, hackers, theft, and money laundering.
“The motivation is to seem larger than their competition,” he said.
Changpeng Zhao, a former chief technical officer at OKCoin, stated on the website reddit.com in May 2015 that OKCoin used bots that “are designed to pump up volumes.” In a response to the post, OKCoin said: “OKCoin does not need to have any fake volumes.”
In a statement to Reuters, OKCoin said it “never artificially inflated trading volume.”
Four former employees at BTCChina, including one of its co-founders, said the exchange had also engaged in faking its trading volumes. A spokesman for the exchange said it “has never faked its trading volumes.”
The exchanges’ sky-high volumes appear to have caught the attention of the People’s Bank of China. After a series of inspections by the central bank, exchanges in January began charging trading fees – as exchanges elsewhere typically do – and volumes in China plummeted.
CROWDED MARKET:
“These are new assets. No one really knows what to make of them. If you’re a consumer, there’s nothing to protect you when you invest.”
“A deceptive market is not a healthy market,” said Xiaoyu Huang, a co-founder of BTCChina, who said that the exchange had faked some of its volume. “It was the fake volumes that made the government mistakenly believe that the market accounted for so much of the global trading volume, and caused the government to supervise bitcoin in China so forcefully.” Huang said he had left the company in part over a disagreement over its illegal actions.
The spokesman for BTCChina said “the government’s scrutiny into bitcoin exchanges earlier this year was because of a dramatic increase in bitcoin’s price.” China’s central bank declined to answer questions.
Exchanges are frequently targeted by hackers, causing additional problems for investors.
Walle Wei, a trader based in Guangxi in southern China, said he was trading futures in bitcoin and a cryptocurrency called litecoin on OKCoin.com on July 10, 2015.
Betting that the litecoin price, then about $4, would rise, he bought contracts for long positions using borrowed money. This meant that he only had to put down 10 percent to trade. Trading with that much leverage meant that a small move in the price could either wipe out his positions or greatly magnify his gains.
Bitcoins stolen by hackers from Bitfinex in August 2016.
Instead of rising, as Wei Dai had hoped, litecoin’s price began falling and OKCoin’s website slowed down, Wei said. He was unable to buy or sell. When he regained access to his account, his contracts had been liquidated. He said he lost 3,136 litecoins, then worth about $12,500.
OKCoin announced on its blog that it had been a victim of “large scale” attacks by hackers who flooded its websites with traffic, preventing some users from accessing their accounts.
Wei Dai suffered a second, similar event with bitcoin. He said the exchange’s website became inaccessible, his contracts were liquidated and he lost 57.9 bitcoins, then worth about $16,900.
Wei Dai said, he complained and OKCoin covered 15 percent of his bitcoin losses, waived one month’s worth of trading fees and gave him a mobile phone charger.
He said he also filed complaints with police and five government agencies, including the central bank and the China Securities Regulatory Commission (CSRC).
I was ignore, Wei Dai said. They did ignore his complaints, he said, and those that replied told him his problem didn’t fall under their jurisdiction meaning they all got paid-off.
“They said to find the relevant department. But I don’t know what other relevant government departments there are,” he said.
A person close to the CSRC said cryptocurrency exchanges fall under the purview of the central bank, which declined to answer questions.
Inaccessible websites aren’t the only way investors can lose money on exchanges.
In February, a hedge fund called GABI, based in Jersey, bought a futures contract on OKCoin’s Hong Kong exchange, betting the price of bitcoin would rise, But the contract was liquidated soon afterwards and the hedge fund called GABI lost everything... when a suspicious investor placed a giant purchse with the same name was holder of contract; is theft.
In regulated exchanges, such as the Chicago Mercantile Exchange, there are limits to the size of futures contracts to prevent one trader from dominating the market. That’s not the case on some cryptocurrency exchanges.
In its online February newsletter, the hedge fund’s manager called the incident “clear market manipulation.” He said he questioned OKCoin about it: “They confirmed to us that there were no position limits whatsoever and that people were free to do whatever they wanted in their", ‘happy trading environment’, and "(yes, they used those actual words).”
The February bitcoin contract cost the hedge fund between $400,000 and $500,000, according to a person familiar with the matter.
OKCoin said the “two customers traded fairly” and “there is no regulation restricting the trading strategy.”
Hong Kong’s Securities and Futures Commission declined to comment.
In the past 15 months, Bitfinex, another one of the world’s largest cryptocurrency exchanges of Aug-2018, was fined by a U.S. regulatory in the past, because it lost $72 million worth of bitcoins to hackers and was cut off by Wells Fargo, one of America’s biggest banks.
Bitfinex has hundreds of thousands of clients include banks, investment funds and other cryptocurrency exchanges, according to van der Velde, its CEO and co-founder, and its lawyer lost large sums of money.
Bitfinex has no head office, is owned by a British Virgin Islands company and is managed by three executives who live in Hong Kong, the United States and Europe and all refuse to co-operate.
Besides its Dutch chief executive, they include Chief Financial Officer Giancarlo Devasini, who is Italian, and Chief Strategy Officer Philip Potter, an American who once worked at Morgan Stanley.
In June 2016, the U.S. Commodities Futures Trading Commission fined Bitfinex $80,000 for offering “illegal” cryptocurrency transactions and failing to register as a futures commission merchant.
“We were happy with the terms of the settlement,” said Stuart Hoegner, Bitfinex’s general counsel.
Hackers stole 119,756 bitcoins from Bitfinex:
As customers and others went online to vent their anger - “@bitfinex is an absolute DISGRACE to the #bitcoin community and they need to go,” one Twitter user wrote - "Bitfinex executives weighed their options"."Convinced they couldn’t get a bank loan and lacking insurance, they decided to reduce their customers’ balances by 36 percent, regardless of whether the investor accounts had been hacked – a technique known as the “socialization” of losses".
The exchange distributed IOUs in the form of digital tokens, which could be traded on Bitfinex. Some customers converted the tokens into equity in the company that operates the exchange. Although the exchange later redeemed the tokens in full, some customers had already sold them at a loss. In an interview, Van der Velde expressed regret for the hack.
Van der Velde defended his firm’s response:
“I felt - and I still feel - terrible for those people who lost their money,” he said. He declined to discuss how the hack happened, citing an ongoing police investigation. “We took responsibility. How many financial institutions in the past can you find that say within a very short time, ‘We are good for that loss, and we issue an IOU for that’? Please find me one.”Van der Velde also said Bitfinex has acted transparently, has rigorous know-your-customer procedures and cooperates with law enforcement agencies. Despite its numerous challenges, van der Velde said Bitfinex is now handling about $12 billion in trades a month and is “very profitable.”
Last year, the exchange said it expected to make a $20 million profit in 2017.
Despite all the Wild West problems besetting cryptocurrencies, Van der Velde predicted the final amount will turn out to be even higher.
Another Hack(?):
A Jersey-based hedge fund lost between $400,000 and $500,000 in what it called “clear market manipulation” on an exchange in Hong Kong (above). The exchange said the trade was fair.Making millions arranging private bitcoin transactions:
HELSINKI - Exchanges aren’t the only way to trade bitcoins and other cryptocurrencies. Some websites help to arrange private transactions between buyers and sellers.
LocalBitcoins.com is a popular website through which buyers and sellers advertise bitcoins, setting their own prices and conducting trades privately. It is operated by two brothers in Helsinki who say it has about 350,000 active users from nearly every country.
The website has recently been facilitating trades worth as much as $72 million a week and may surpass $1 billion worth of bitcoin transactions this year, according to Nikolaus Kangas, its 31-year-old chief executive. His older brother Jeremias, a programmer, set up LocalBitcoins five years ago. It now has about 15 employees and is looking to hire more.
Here’s how it works:
Bitcoin buyers and sellers place advertisements on LocalBitcoins. The website holds a seller’s bitcoins in escrow. A seller releases them to a buyer upon being paid. LocalBitcoins collects a 1 percent fee in bitcoins for each completed transaction. This year those fees may add up to more than $10 million worth of bitcoins.Many of the customers are unknown to the two Finns. Providing identification is voluntary. Niki Kangas said about 70 percent of active clients provide ID details; the rest give only a username and email address.
“Right now we don’t require it,” he said. “We’ve been considering making ID mandatory.”
While some LocalBitcoins sellers require bitcoin buyers to identify themselves, some have openly advertised that they don’t. “I accept funds without any security check,” stated one seller who went by the user name “wmarbitr” and advertised in Russian and English. The website said he had conducted more than 3,000 confirmed trades on LocalBitcoins with more than 4,200 buyers and sellers. The website subsequently said the account was “banned by staff.”
Former U.S. federal prosecutor Kathryn Haun said LocalBitcoins’ policy of not requiring its users to provide identification can cause problems for law enforcement, huh, yeah and that is why.
“It becomes really difficult to track the identities of those people, absent physical surveillance,” she said.
