In the early hours of February 1, $3.55 billion worth of Bitcoin from the 2016 Bitfinex hack suddenly moved after years. A week later, the United States Department of Justice officially announced the seizure of around $3.6 billion in Bitcoin related to the same crypto exchange hack.
That on-chain movement of
Bitcoin Bitcoin Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities. Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities. Read this Term was reportedly conducted by federal agents as a part of its seizure.
The identity of the hackers still remains unknown, but the authorities arrested a New York married couple, Ilya ‘Dutch’ Lichtenstein and Heather Morgan, for laundering these Bitcoins from that hack. They were charged with conspiring to launder money and defraud the federal government, but many believe that they could also be hackers.
But why is it so hard to launder cryptocurrencies, specifically Bitcoin?
Well, several industry experts told Finance Magnates that it was Bitcoin’s open ledger that make it hard for criminals to get away with these ill-gotten proceeds.
“It is difficult to launder crypto because of the immutable nature of ledger transactions,” the Chief Technology Officer at CEX.IO, Dmytro Volkov explained. He pointed out analytics teams with sophisticated monitoring tools are a headache for hackers and launderers.
“Although digital footprints are difficult to trace, consistent proactive efforts to stay a step ahead of cybercrime are absolutely critical to the ongoing success and growth of crypto ecosystems. Especially, as it relates to areas of known vulnerabilities like hot wallet storage, proactive due diligence and
risk management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent. One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent. Read this Term can prevent attacks from occurring in the first place. But, there are also opportunities here. Robust security teams energized by the expanding capabilities of blockchain technology are well-positioned to thwart attacks,” Volkov said. But, hackers and launderers are modifying their tactics in washing Bitcoins tainted with the marks of illicit activities. Bitcoin mixers are widely used to break cryptocurrencies into pieces and clean their transaction records.
Despite the technological advancements on both sides, human behavior remains one of the major vulnerabilities for hackers and launderers.
“I don’t think it is hard to launder crypto, but people by nature make mistakes. Often you’ll find scammers interacting with centralized exchanges or showing off their lavish lifestyles on social media, which all points to something suspicious,” said Mark Basa, the Global Brand and Business Manager at HOKK Finance.
How the Seizure will Impact the Industry?
The US authorities seized about 94,000 Bitcoins from the Bitfinex hack. In total, some 120,000 BTC were stolen in the 2016 attack. Though not fully recovered, it is still the US Justice Department’s largest financial seizure ever.
The hacks reveal vulnerabilities of the exchanges, but these seizures prove that the decentralized ecosystem is not beyond anyone’s reach.
“I think it is a great boon for the industry,” said Eric Chen, the CEO and Co-Founder of Injective Labs. “Thousands of individuals were impacted by this hack, and they can finally begin to recoup some of their funds. I expect most of these parties to again join the ecosystem when previously they may have shunned it to an extent after suffering from such a large capital loss.”
Though these seizures are good in one way, it puts a massive amount of Bitcoin in the hands of the governments. The United States and Chinese governments have become two of the largest holders of cryptocurrencies.
The drama around the seizure might not be over yet as Bitfinex said that it has compensated the victims and will “follow appropriate legal processes to establish our rights to a return of the stolen Bitcoin.”
Violations of Bitcoin’s Fundamental Property
So, are these seizures and government control violating the fundamental property of Bitcoin?
“Although many believe major hacks like these are evidence that Bitcoin has deviated from its fundamental privacy properties, we understand and believe in the incredible potential this technology has to overcome on-chain privacy issues,” Volkov added.
But, these attacks might prompt the governments to accelerate their efforts to recognize Bitcoin.
“As the Security and Exchange Commission (SEC) has made clear relative to crypto from Day One, its purpose is to protect investors. Unfortunately, the Bitfinex attack is far from novel. Cybercrime is becoming ubiquitous across industries,” Volkov said. “We expect the government to look more closely than ever at the digital asset space as it continues to mature and evolve. Indeed, SEC Chair Gary Gensler recently said crypto exchanges will be a chief focus on his agency’s crackdown on digital assets this year.”
In the early hours of February 1, $3.55 billion worth of Bitcoin from the 2016 Bitfinex hack suddenly moved after years. A week later, the United States Department of Justice officially announced the seizure of around $3.6 billion in Bitcoin related to the same crypto exchange hack.
That on-chain movement of
Bitcoin Bitcoin Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities. Bitcoin is the world’s first digital currency that was created in 2009 by a mysterious entity named Satoshi Nakamoto. As a digital currency or cryptocurrency, Bitcoin operates without a central bank or single administrator. Instead, Bitcoin can be sent via a Peer-to-Peer (P2P) networking, devoid of intermediaries.Bitcoins are not issued or backed by any governments or banks, and Bitcoin is not considered to be legal tender, although they do have status as an acknowledged transfer of value in some jurisdictions. Rather than composing a physical currency, Bitcoins are pieces of code that can be sent and received across a kind of distributed ledger network called a blockchain. Transactions on the Bitcoin network are confirmed by a network of computers (or nodes) that solve a series of complex equations. This process is called mining. In exchange for mining, the computers receive rewards in the form of new Bitcoins. Mining grows increasingly difficult over time, and the rewards get smaller and smaller. There is a total of 21 million Bitcoins. As of May 2020, there are 18.3 million Bitcoins in circulation. This number changes approximately every 10 minutes when new blocks are mined. Presently, each new block adds 12.5 bitcoins into circulation.Since its inception, Bitcoin has remained the most popular and largest cryptocurrency in terms of market cap in the world. Bitcoin’s popularity has contributed significantly to the release of thousands of other cryptocurrencies, called “altcoins.” While the crypto market was originally hegemonic, today’s landscape features countless altcoins.Bitcoin ControversyBitcoin has been extremely controversial since its original launch. Given its mercurial nature, Bitcoin has been criticized for its use in illegal transactions and money laundering.As its impossible to trace, these attributes make Bitcoin the ideal vehicle for illicit behavior. Moreover, critics point to its high electricity consumption for mining, rampant price volatility, and thefts from exchanges. Bitcoin has been seen as a speculative bubble given its lack of oversight. The crypto has weathered multiple collapses and survived over a decade so far. Unlike its launch back in 2009, Bitcoin today is viewed far differently and is much more accepted by merchants and other entities. Read this Term was reportedly conducted by federal agents as a part of its seizure.
The identity of the hackers still remains unknown, but the authorities arrested a New York married couple, Ilya ‘Dutch’ Lichtenstein and Heather Morgan, for laundering these Bitcoins from that hack. They were charged with conspiring to launder money and defraud the federal government, but many believe that they could also be hackers.
But why is it so hard to launder cryptocurrencies, specifically Bitcoin?
Well, several industry experts told Finance Magnates that it was Bitcoin’s open ledger that make it hard for criminals to get away with these ill-gotten proceeds.
“It is difficult to launder crypto because of the immutable nature of ledger transactions,” the Chief Technology Officer at CEX.IO, Dmytro Volkov explained. He pointed out analytics teams with sophisticated monitoring tools are a headache for hackers and launderers.
“Although digital footprints are difficult to trace, consistent proactive efforts to stay a step ahead of cybercrime are absolutely critical to the ongoing success and growth of crypto ecosystems. Especially, as it relates to areas of known vulnerabilities like hot wallet storage, proactive due diligence and
risk management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent. One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, most brokers employ a risk management department tasked with analyzing the data and flow of the broker to mitigate the firm’s exposure to financial markets moves. Why Risk Management is a Fixture Among BrokersTraditionally the company is employing a risk management team that is monitoring the exposure of the brokerage and the performance of select clients which it deems risky for the business. Common financial risks also come in the form of high inflation, volatility across capital markets, recession, bankruptcy, and others.As a countermeasure to these issues, brokers have looked to minimize and control the exposure of investment to such risks.In the modern hybrid mode of operation, brokers are sending out the flows from the most profitable clients to liquidity providers and internalize the flows from customers.This is deemed less risky and are likely to incur losses on their positions.This in turn allowing the broker to increase its revenue capture. Several software solutions exist to assist brokers to manage risk more efficiently and as of 2018, most connectivity/bridge providers are integrating a risk-management module into their offerings. This aspect of running a brokerage is also one of the most crucial ones when it comes to employing the right kind of talent. Read this Term can prevent attacks from occurring in the first place. But, there are also opportunities here. Robust security teams energized by the expanding capabilities of blockchain technology are well-positioned to thwart attacks,” Volkov said. But, hackers and launderers are modifying their tactics in washing Bitcoins tainted with the marks of illicit activities. Bitcoin mixers are widely used to break cryptocurrencies into pieces and clean their transaction records.
Despite the technological advancements on both sides, human behavior remains one of the major vulnerabilities for hackers and launderers.
“I don’t think it is hard to launder crypto, but people by nature make mistakes. Often you’ll find scammers interacting with centralized exchanges or showing off their lavish lifestyles on social media, which all points to something suspicious,” said Mark Basa, the Global Brand and Business Manager at HOKK Finance.
How the Seizure will Impact the Industry?
The US authorities seized about 94,000 Bitcoins from the Bitfinex hack. In total, some 120,000 BTC were stolen in the 2016 attack. Though not fully recovered, it is still the US Justice Department’s largest financial seizure ever.
The hacks reveal vulnerabilities of the exchanges, but these seizures prove that the decentralized ecosystem is not beyond anyone’s reach.
“I think it is a great boon for the industry,” said Eric Chen, the CEO and Co-Founder of Injective Labs. “Thousands of individuals were impacted by this hack, and they can finally begin to recoup some of their funds. I expect most of these parties to again join the ecosystem when previously they may have shunned it to an extent after suffering from such a large capital loss.”
Though these seizures are good in one way, it puts a massive amount of Bitcoin in the hands of the governments. The United States and Chinese governments have become two of the largest holders of cryptocurrencies.
The drama around the seizure might not be over yet as Bitfinex said that it has compensated the victims and will “follow appropriate legal processes to establish our rights to a return of the stolen Bitcoin.”
Violations of Bitcoin’s Fundamental Property
So, are these seizures and government control violating the fundamental property of Bitcoin?
“Although many believe major hacks like these are evidence that Bitcoin has deviated from its fundamental privacy properties, we understand and believe in the incredible potential this technology has to overcome on-chain privacy issues,” Volkov added.
But, these attacks might prompt the governments to accelerate their efforts to recognize Bitcoin.
“As the Security and Exchange Commission (SEC) has made clear relative to crypto from Day One, its purpose is to protect investors. Unfortunately, the Bitfinex attack is far from novel. Cybercrime is becoming ubiquitous across industries,” Volkov said. “We expect the government to look more closely than ever at the digital asset space as it continues to mature and evolve. Indeed, SEC Chair Gary Gensler recently said crypto exchanges will be a chief focus on his agency’s crackdown on digital assets this year.”