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Two Arrested Bitcoin Fraud

German police say they have arrested two people and seized illegally generated bitcoins worth more than 700,000 euros ($950,000) in an investigation of computer fraud.

The Federal Criminal Police Office said Wednesday it staged searches earlier this week in an investigation of three people suspected of manipulating existing malware and spreading it over the Internet, creating a remotely controlled network of compromised computer systems.

rest of the story here:

http://abcnews.go.com/Technology/wireStory/arrested-bitcoins...



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I predicted this over a year ago

As the con-man Steve Gibson once said in the year 2000.

When those insecure and maliciously potent machines are mated to high-bandwidth Internet connections, we are going to experience an escalation of Internet terrorism...

Of course he was talking about zombie bots merely ddossing websites (spyware). But after being laughed at, he and the Lavasoft/zonelabs outfit figured they would pack up, invent bitcoins under a fictitious Japanese name, and use their own zombie-bot spyware to mine bitcoins for themselves.

The fact that that these two people were caught just means that they must have upset the insiders by taking too much out of the cookie jar, and beating them at their own game.

What you won't find in this story is why law enforcement even cared enough to bother with these people, much less launch an investigation leading to an arrest with trumped up imaginary charges of "fraud."

Think about it. "Illegally generated bitcoins." Think about what that even means.

So law enforcement became upset that somebody pooled resources of a bunch of computers to solve algorithms? Sure, the owners of the computers probably have no clue, but when did anyone give a damn about computers being used to solve algorithms?

huh isnt that weird, i

huh isnt that weird, i thought everybody here said you couldnt "create" bitcoins out of nothing. Well so much for that

What happened was that the

What happened was that the hackers stole computing power from users using malware and used that power to mine real authentic bitcoins. They didn't counterfeit bitcoin but rather just stole resources from people for their personal profit.

To give a rough analogy, it was as if like they sneaked into a gold mine owned by someone else and stole real authentic gold.

theft of electricity?

Yeah, I'd like to see that hold up in court.

Electricity

has a cost. That's a big part of a Bitcoin miner's profit calculation.

who would press charges?

they would have to ask the NSA to give up the identities, form a class-action lawsuit, and then divvy the electricity bill back up.

No, as anarchocapitalists,

No, as anarchocapitalists, each defrauded user must separately bring his claims to stolen electricity before a private arbitration board. That's the efficient, free market way. If the thief is unwilling, private defense forces should be sent to track down the electricity thieves for flogging in the private square.

no claims will be made if they are unaware of the alleged abuse

by the way "fraud" is a nonsensical word here. there is no fraud.

you can't "create" bitcoins without mining them

they were using malware (hacked computers) to mine bitcoins. malware is old news and has been used to steal bandwidth and computer resources for over a decade. nothing new here they are just using malware to target/take over computers for btc mining. nothing to see here.

this is good news and i hope they catch the criminals from the sheepmarket that fleeced people like they just caught the Asian btc exchange scammers.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

isnt mining them "creating"

isnt mining them "creating" them. They are illegally hacking other peoples property specifically to mass mine (create) bitcoins. isnt that inflation?

true true

with all the talk about counterfeiting bitcoins i just wanted to make clear that they can not be counterfeited or created out of thin air. but i see your point.

as far as mining btc being inflationary, yes, technically it is. only difference with btc and our current system is that only 21 million btc will ever be created. so the inflation is set and has a controlled release until 2140 when all btc will be finished mining. it's not like qe to infinity which we have with frn's. so no you can't inflate away btc like every other gov currency. if there are to many and the price drops miners will stop mining until the price goes back up and they can make a profit. it's really ingenious.

Here's something i found somewhere that explains it a bit differently...

"it is energy correlated since the profitability of mining is strongly affected by energy costs. And how much of a 'waste' the computation is, is in part how clean the typical energy source is. Thus an efficient market must incorporate the cost of electricity when pricing bitcoin. Actively traded bitcoin cannot fall below the cost of electricity it takes to produce it. Which is its own deflationary pressure due to difficulty increases."

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

those 'controlled release'

those 'controlled release' restrictions, aren't they just self imposed? couldn't they be changed if that's what was desired by whatever body makes the decision? suppose bitcoin was the dominant currency by 2140. wouldn't the same pressures of expanding bitcoin supply exist, i.e., standard macroeconomic arguments about the proper rate and role of inflation and all the political pressures that currently apply to banking, law, academia, and government?

you could respond that btc is controlled by all btc users or open source, etc., but that wouldn't actually answer the question... if btc were the dominant currency, and there was 15% unemployment, the same pressures and arguments for inflation would exist to compel the collective body of users, or the law could simply force it the same way gold holders were forced to accept paper in 1933.

isn't it true that at present bitcoin has very few 'end uses'? long term holding might be an example of an 'end use,' if we apply the term liberally. but if the holder of the btc changes his long term prognosis, his demand becomes very unreliable. ultimately a bitcoin saver is not an end user.

another possible end user would be someone looking to use bitcoin for a purchase he either could not or would not make with a financial transaction or cash (illicit end use, silk road, etc.)

finally, there are some purchases which the user simply prefers to make with btc rather than cash or financial transaction, due to some perceived convenience or the trait of irreversibility.

aside from these sources of demand, the rest of bitcoin users seem to use it only to change it into dollars, not as an actual store of value or unit of account. it has the property of being a medium of exchange, but not the other properties of a currency, unit of account or store of value.

also, bitcoin is subject to the exact same legal enforcement of taxes and regulation as gold or paper money, if it ever became widely used enough to really interest governments or threaten them.

and finally, for bitcoin to serve as a full blown currency, it would need to be subject to lending, market making, trading, and banking. that would bring it under the way of regulation. in a free market of any sort, btc promissory notes and fractional reserves could be maintained.

p.s. and since the tech behind bitcoin will likely never be understood by more than 1-4% of people, isn't it the ultimate easy sell for the state to raise 'concerns' and fears about it. the government was able to confiscate gold at a time when a large portion of the public owned gold, traded in gold and understood gold, and at a time when there were greater constitutional restraints on government and individual liberty was more prized.

you might object that since bitcoin isn't physical its harder to confiscate, but i would reply that it wasn't the confiscation per se that made trading in gold a problem post 1933, but simply the legal status and stigma. most people aren't going to do something illegal, hide their business, hide their taxes, etc. how would btc be viable if the government chose to ban, tax or confiscate it?

Jefferson's picture

Hey

MMJM. What's up? Hope all is well.

I have a friend thinking about accepting btcees for his gold for a premium. He has a brick and mortar coin shop..Think there's a market there for that?
My concerns would be the volatility and any withdrawal restrictions at the exchanges. His are security and "someone being able to see how much you have in your wallet" (which idk is even possible or valid) I'd be interested to hear your thoughts.

great questions

i don't have all the answers but i'll give it a shot.

there is definitely a market for that. i say that as someone who has spent thousands of dollars in btc on gold and silver from different company's. it always took over a week to get it sent to me and i had to give them an address to send it to which could potentially identify me if i cared. having a local b&m that did not ask question and gave me metals on the spot would be great.

he could go through bitpay which charges 1% and immediately converts btc to dollars and deposits them in his bank account. you can also use coinbase and blockchain.info which may be even cheaper but you have do it yourself. it looks pretty easy though. i think you just add a button on your website or use a smart phone app in his case.
some of the overseas exchanges like mtgox are having trouble/delays getting money sent to the usa because of gov regulations.

most places automatically create new address for each transaction but store them in the same wallet. that way people can only see how much you have at the address you gave them and not your whole wallet balance.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Gold and silver will always be king.

story's like this make you wonder of how easily technologies can be corrupted.

only

when people don't understand technology.
bitcoins can not be counterfeited unlike gold and silver etc.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Im good w/ my gold and silver

Just my 2 cents... lol

I maintain that Gold and Silver will ultimately be the more sought after choice over bitcoins once all the hype dies down. The Bitcoin network is great and awesome idea no doubt.

It's just when it comes down to it, at least if the power goes out, I still have my gold and silver readily accessible if needed.

I would vote BitCoin network as awesome for transferring funds, but i would personally NOT want to hold any significant wealth in the digital currency.

And I'm a techie too. But I prefer physical over digital as a storage of wealth. On transferring funds, the actual bitcoin network seems awesome to utilize!

Love Liberty, be Vigilant

"Now the Lord is that Spirit: and where the Spirit of the Lord is, there is liberty" (2 Corinthians 3:17)

Faith in God will prevail all things!

Hmm..

"Police say the perpetrators used the processing power of the hacked computers to generate bitcoins, a cryptography-based digital currency."

Let's pretend they broke in your house and stole your gold. Would this mean nobody should invest in gold, too? Never thought I'd see such stupid propaganda at the DailyPaul.

So what? Some people did not protect their computers and these hackers took advantage. That happens and will always happen. Big whoop.

There are guns and insurance for that

Difference between physical and virtual make believe world

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if you're not smart enough

to protect your computer you should not use bitcoins or credit cards etc. i'm sure at some point there will be insurance of some kind. they have insurance for medical marijuana now so bitcoins can't be far away!

bitcoins are a libertarian form of currency that requires responsibility. with bitcoins there is no statist big brother gov agency to hold your hand and provide a safety net if you act irresponsibly.

Freedom requires responsibility. That is why most men dread it.
– George Bernard Shaw

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

and Chinese Bitcoin case reported also today

Do they coordinate these things?
http://mobile.bloomberg.com/news/2013-12-04/china-police-det...

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plaese don't spread anymore disinfo

you have no idea of what you're talking about.

bitcoin counterfeiting, give me a break bro.
bitcoins are not like frn's or gold and silver etc. they can not be counterfeited, period.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016

Hope more people

get to view this as it seems important for those who own or considering owning bitcoins.

"We can see with our eyes, hear with our ears and feel with our touch, but we understand with our hearts."

not really

this is important for people who don't protect their computer from malware.
it has nothing to do with buying bitcoins which still can't be counterfeited.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms
Rand Paul 2016