A Thief Is Attempting To Hide $100 Million In Stolen Bitcoins — And You Can Watch It Live Right Now

[phantom power]

I actually disagree with the last claim. Extending our body of law to cover bitcoins would work pretty much as it does already. If I steal your $100 bill, I can be forced to give it back via our legal justice system. If I get away and you can't find me, you lost your money. Currently, bitcoins aren't protected by any law, but that's a matter of public policy. If we made the decision to make bitcoin theft illegal, the thief could be caught and legally forced to give the money back via a new transaction. Nothing about that would "fundamentally break" a bitcoin currency.

A person who allegedly robbed the web site Sheep Marketplace of 96,000 Bitcoins — about $100 million at current prices — is attempting to hide the heist by breaking up the massive online currency cache and repeatedly trading it through various "tumblers," which mix up and (supposedly) launder old Bitcoins for new.

You can watch his progress here, on a Bitcoin address tracker where the money has been tagged with the marker "Sheep Market Scam."

It's not clear exactly how big this Bitcoin theft is, but it is shaping up to be one of the biggest. Sheep Marketplace was an anonymous site for drug dealers that became prominent when Silk Road was closed down. In the last couple of days, Sheep Marketplace was hacked in such a way that users' accounts were drained even though their balances continued to show the money was still there. The robbery was discovered in late November and Sheep Marketplace promptly shut down.

The thief's problem is that the angry Bitcoin account holders whose money has gone are following the thief through the tumbler, by sending him small amounts of cash that are appended to the larger amount as it is split up and moved on. Each Bitcoin transaction generates a "blockchain" record showing its history, and the appended loose change thus identifies where the bulk of the money is going. The theft victims are hoping that eventually the thief will be prevented from cashing out his accounts because doing so would lead to him being identified in real life.


Unfortunately for those who have been ripped off, the chances of them getting any money back are slim: Once a Bitcoin transaction has been made, it cannot be reversed without the consent of the recipient. The thief therefore must find a way to cash out his Bitcoins without revealing his true identity, according to The New Statesman:

Selling those bitcoins and turning them into cash is going to be extremely difficult, as the major Bitcoin exchanges all demand proof of identity (specifically to avoid charges that they're involved in money laundering), and if they're broken down into smaller quantities to sell via a site like localbitcoins.com a paper trail will still be generated. As soon as it's possible to link one real-life bank account or identity to any bitcoins from that stash, it will be possible to work out their real-life identity.

Those observing the chase on Reddit seem to believe that the thief will either eventually get away with it, or the money will be "lost" by becoming irretrievable:

You aren't going to get anything back. None of you are going to get anything back, and it's by design. This is EXACTLY how Bitcoin is supposed to work. Bitcoin would be fundamentally broken if you somehow got your money back.

http://www.sfgate.com/technology/businessinsider/article/A-Thief-Is-Attempting-To-Hide-100-Million-In-5031329.php

[tridim]

1. So many suckers. SMH...

Ponzi schemes should NOT have legal protections. Ever.
They already tried that on Wall Street and look where it got us.

[customerserviceguy]

2. If we're going to extend legal protections to bitcoins

Then I want my Monopoly money protected, too.

It's amazing what people will accept as money these days...

[TampaAnimusVortex]

3. Bitcoin is here to stay...

These comments remind me about those people saying the internet was just a bunch of geeks in college basements talking to each other back in the late 1980s, with no vision of what was to come.

http://online.barrons.com/article/SB50001424053111903302604579234163250372446.html

[geek tragedy]

4. Hah, feel free to invest your retirement savings in Bitcoins then nt

[TampaAnimusVortex]

9. Actually I'm already ahead of the game...

Invested, watched it grow, pulled out my initial investment, and now just watching the profits grow with absolutely no risk at all.

So now we see your going to be the genius who knew better then to buy Apple or Google at $10 eh? Good luck with that.

[MattBaggins]

7. No it's not

It's a fad that will pass soon.

When the drug dealers and criminal elements keeping it alive realize this shit is going to happen, or worse if it turns out that the FBI could pull stunts like this, they will stop using bitcoin and it will fold.

[TampaAnimusVortex]

8. Too bad the senate loves it too then...

http://www.forbes.com/sites/kenrapoza/2013/12/04/the-bitcoin-bubble/

"Last month, the Senate Committee on Homeland Security and Governmental Affairs held the first congressional hearing on the future of Bitcoin. The panel featured senior members of the Obama administration, all of whom had nothing but praise for Bitcoin. They expressed concern about it being used for cyber crime. But also stressed that it had legitimate uses and that regulators needed to be careful not to stifle virtual currencies. No one was asking for new regulatory powers to crack down on illicit uses of Bitcoin, Timothy Lee of WaPo reported on Nov. 18.

Government loves it. Investors love it. Criminals love it. The Chinese love it! This beast is going to 10k!"

[phantom power]

14. one point I like to make: although the tech was designed to support decentralized currency...

I see no deep reason why governments couldn't "issue" their own currencies based on bitcoin tech.

Exactly how one defines "currency identity" in such a system is a bit up in the air for me. It seems like it would boil down to who owns the digital signature at the root of the block chain. Although somehow one would have to account for the block chain compression where they drop older info.

Assuming a multi-rooted system can work, it suggests a world where there could be national currencies, and state-less distributed currencies, and state/local/regional currencies. There might be economic benefits.

[Orrex]

11. They're great for buying a snack when Red Warrior Needs Food Badly

Other than that? Meh.

I have a big tin box full of bit coins buried in my back yard. Honest!

[Blue_Tires]

5. So what's supposedly so great about bitcoins again?

Yeah, I know it's the currency to have if I'm trying to buy some black-market plutonium, biological weapons or kiddie porn, but I've never seen any real useful applications other than that....

And what sets the "value" of bitcoins anyway? Doesn't a scandal like this rattle confidence and make the coins worth much, much less?

[tridim]

6. They have bitcoin banks that set the "value"

Several people who run the banks have admitted that they regularly manipulate the bitcoin price to make money for themselves. Hackers can also manipulate the price, anonymously.

There is nothing great about bitcoin. It's a Ponzi scheme used to drain money from idiots.

[TampaAnimusVortex]

10. The value in bitcoin is it's usefulness as a payment network...

Much like golds value is in its ability to be made into jewelry or other things.

Anyone that tells you it doesn’t have intrinsic value just has no idea what they are talking about.

See this article

"Last month, the Senate Committee on Homeland Security and Governmental Affairs held the first congressional hearing on the future of Bitcoin. The panel featured senior members of the Obama administration, all of whom had nothing but praise for Bitcoin. They expressed concern about it being used for cyber crime. But also stressed that it had legitimate uses and that regulators needed to be careful not to stifle virtual currencies. No one was asking for new regulatory powers to crack down on illicit uses of Bitcoin, Timothy Lee of WaPo reported on Nov. 18.

Government loves it. Investors love it. Criminals love it. The Chinese love it! This beast is going to 10k!"

http://www.forbes.com/sites/kenrapoza/2013/12/04/the-bitcoin-bubble/

[phantom power]

12. One of the social-experiment aspects of bitcoins that interests me...

is that the majority of FUD surrounding bitcoins has nothing much to do with bitcoins-as-a-technology. For example, this entire story is now being seen as "more proof" that bitcoins aren't for real. When in fact the one aspect of this story that is actually bitcoin-technology related -- the tagging -- is an example of a useful thing that bitcoins can do that other kinds of currency can't.

I also keep hearing bitcoins described as a "ponzi scheme," which makes no sense to me. Bitcoins aren't a "ponzi scheme" any more than U.S. dollars, yen, gold, clam-shells or bartering chickens are a "ponzi scheme."

A lot of the FUD appears to come in two categories:
(a) guilt-by-association (a lot of the early adopters are criminals, or libertarians, which specifically makes it unpopular with many democrats)
(b) lack of government and/or legal endorsement.

But (a) and (b) are, in the end, purely a question of emergent behavior or public policy. The more people who use bitcoins for transactions, the less it is dominated by fringe elements. If governments decide to extend legal coverage to bitcoins, then -- voila -- they are "legitimate."

[oldhippie]

13. Many people use "Ponzi Scheme" to describe ......

.... any "financial shenanigans" they don't understand. They abound here.

[Blue_Tires]

15. So what recourse is there when people get robbed like this?

[TampaAnimusVortex]

16. What recourse is there when someone takes your cash?

Do you suggest doing away with cash?

[Blue_Tires]

17. I haven't suggested doing away with *anything*

I'm just trying to properly understand this...

I guess I was thinking about these as similar to bank accounts -- Maybe I'm off the mark?