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Author Topic: The Bitcoin Crooks are not Who We Thought They Were  (Read 5631 times)
Razick
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February 28, 2014, 02:38:25 PM
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When I bought a small amount in Bitcoins a few years ago, I was very careful to read up on how to keep them safe and secure from hackers. I used long (very long) passwords, created my paper wallets on offline Linux machines, set up two-factor authentication for my exchange accounts, and kept all my backups encrypted. I did all this because I thought I knew who the crooks were. The crooks were hackers trying to take my Bitcoins for themselves.

The problem was that I was protecting myself against the wrong threat. The hackers weren't nearly as much of a threat as the people who thought they could get rich running fiscally irresponsible exchange businesses and insecure trading platforms. These people might not have intended to steal, but the end result is that they did.

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I do not wish to divulge how much money I lost, but I will say that I have lost 90% of it. The only money I have left in Bitcoins is what I had on Bitstamp from selling XRP.

I began to realize this when the Bitfloor exchange, which had around 50% of my Bitcoins shut down. Roman Stylman promised to return funds to customers, and although the incompetent manner in which refunds were handled was frustrating I was confident I would see my money. Finally, late last year when I had almost given up, I received an email asking me to send my identity details before the end of the month so that my withdrawal could be processed. I did as requested within a few days.

Would you be surprised to hear that I haven't seen a penny? My Bitfloor account still shows the same balance as before (which is supposed to show $0 when the refund is processed). It's been months. I've tried emailing Bitfloor, Twittering Bitfloor, and Twittering Stylman's private account. I haven't heard a peep out of him.

He's clearly not dead; he posts too often about vacations and how much he's enjoying his free time for that. Being dead is the only excuse for ignoring me an people like me.

He has funds that were entrusted to him in his possession and does nothing to see to their return. Roman Stylman should be working tirelessly to return the money that is not his to keep. Roman Stylman thinks he is above answering emails, that Bitfloor is over, and he has no duty to fix what he broke. Roman Styleman has better things to do. Roman Styleman is a crook.

Of course Mt.Gox was an established exchange, they were registered, had proven security, and were experienced in carefully managed accounting practices. Mt.Gox wasn't another Bitfloor, or so I thought.

When Mt.Gox said they were shutting down withdrawals to manage a bug in the Bitcoin software which by all accounts should have been easy to deal with securely, my first reaction after outrage was that something wasn't right.

If I ran an exchange, I wouldn't think of shutting down for a month or two while we rewrite our software and cut customer's off from their money while I do so. No! It's not my money. Just as I argued that Bitfloor should have manually sent out money in BTC form if requested, Mt.Gox should have allowed transfers to a working exchange like Bitstamp. What? That would hurt their business? That's their problem. As a businessman in the industry of handling other people's money, your first priority is to meet obligations to your customers.

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As another side note, did MtGox really think anyone would trust them after they shut down withdrawals? They were dead from the moment they did so.

MtGox wasn't just foolish and criminal in keeping coins from customers though. They were covering something up. Either it was as one Redditor suggested, that they closed down hoping to crash the price of Bitcoins and make a quick buck selling them after the price recovered, or they were completely insolvent. It turned out that the latter, or possibly both, were true.

MtGox and it's CEO grossly mismanaged funds in what should have been a very easy business in which to remain solvent. Look at the cash flow these people had! Apparently, however, they either mismanaged their funds or were negligent in security. It's one or the other. An exchange business doesn't lose almost ALL of its Bitcoins unless either its security or it's business practices are beyond horrible.

Mark Kerpeles is also, very likely a crook. I am lucky to have trusted relatively little to him and his company, but he has literally ruined lives with his incompetence. I genuinely think this might be another Enron. Kerpeles should be scared, because he might end up in jail. I hope for his sake that he wasn't as negligent as I think he was.

What this teaches us is, first, trust no one. Second of all, even as Bitcoin upholds the Libertarian ideals of minimal government and regulation, it disproves entirely the anarchist notion that there should be none. MtGox has probably violated numerous regulations, but at it's core this is a violation of contract law, plain and simple.

We, even those of us who lost nothing, should all be shaken, and we should expect to know more about the people and businesses to whom we entrust our money.


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February 28, 2014, 02:42:40 PM
 #2

Man I really need to become a prominent public figure in Bitcoin, because every time the news come out I can't help but think "I TOLD YOU SO, I TOLD YOU SO" but I wasn't shouting nearly loud enough when making the predictions.








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February 28, 2014, 02:43:37 PM
 #3

Long written an well said. Agreed on most parts.
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February 28, 2014, 02:43:59 PM
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Unfortunately a lot of people of lost BTCBTCBTC. You're lucky you didnt lose too much Smiley

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February 28, 2014, 03:54:01 PM
 #5

A system like Bitcoin that is trustless doesn't get rid of trust, it just pushes it out of the center towards the edges where it's effects are more unpredictable and amplified. It needs a social contract to function but its perceived lack of need of just such relationships is always foregrounded.
Razick
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February 28, 2014, 04:06:06 PM
 #6

Unfortunately a lot of people of lost BTCBTCBTC. You're lucky you didnt lose too much Smiley

I sure am, I'm more angry for other's sake than my own. What if I had my entire college fund in MtGox or Bitfloor? What these people have done is shameful.


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February 28, 2014, 04:12:45 PM
 #7

Unfortunately a lot of people of lost BTCBTCBTC. You're lucky you didnt lose too much Smiley

He lost 90% bitcoin he had. That is too much. I feel your anger and frustration.

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February 28, 2014, 04:29:06 PM
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Unfortunately a lot of people of lost BTCBTCBTC. You're lucky you didnt lose too much Smiley

I sure am, I'm more angry for other's sake than my own. What if I had my entire college fund in MtGox or Bitfloor? What these people have done is shameful.
It is very awful what happened. At the same time, you shouldn't leave all of your savings, college funds etc in a very volatile situation.
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February 28, 2014, 04:29:53 PM
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bitfunder took my neobeeshares down with them ...
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February 28, 2014, 04:37:35 PM
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Don't assume Mark has done anything other than secreted away the coins to keep them away from you and the Feds.  Plus, he has another 500k coins from his little password heist back in 2011.

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February 28, 2014, 04:38:09 PM
 #11

There is very easy solution - stop putting all of your money at one place !!

When people will finally understand it. When you keep money at bank and it will go bankrupt you will lose part or all of money that were in this bank. When you invested all of your money in some stocks, you might lose it all if it ends up bad investment. If you even keep all of your money in normal paper united states dollars, it will become just a paper when country collapse or also decide to go bankrupt, not to mention inflation.

You can always keep money in different form and in different places. It is not a new or surprising idea.

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February 28, 2014, 04:41:22 PM
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It's better to learn now while the price per coin is still reasonable.
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February 28, 2014, 05:19:05 PM
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There is very easy solution - stop putting all of your money at one place !!

When people will finally understand it. When you keep money at bank and it will go bankrupt you will lose part or all of money that were in this bank. When you invested all of your money in some stocks, you might lose it all if it ends up bad investment. If you even keep all of your money in normal paper united states dollars, it will become just a paper when country collapse or also decide to go bankrupt, not to mention inflation.

You can always keep money in different form and in different places. It is not a new or surprising idea.

Yes, but you even win if you don't diversify *your* holdings; just decentralize your holdings from everyone else's. Mt Gox may have been especially incompetent, but that's just the proximate cause of this disaster - the ultimate cause is far too many bitcoins under the control of far too few people.

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February 28, 2014, 06:35:32 PM
 #14

This is the logical fallacy that most Bitcoiners fall into, they will PGP 4016 encrypt all their messages, generate the wallet in an offline linux machine etc only to be hit with a 12 dollar wrench on the head until he gives up the password.








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February 28, 2014, 06:44:21 PM
 #15

This is the logical fallacy that most Bitcoiners fall into, they will PGP 4016 encrypt all their messages, generate the wallet in an offline linux machine etc only to be hit with a 12 dollar wrench on the head until he gives up the password.
So true. I worry more about IRL thieves these days. I used to protect my BTC with strong passwords and offline wallets. Now I use guns and safe deposit boxes.
Sorry for your loss Razick. That sucks man.

I like Danny Hamilton's approach. "If you do not have sole control of you private keys then you do not own any bitcoins."

The gospel according to Satoshi - https://bitcoin.org/bitcoin.pdf

Free bitcoin in ICELAND - https://bitcointalk.org/index.php?topic=1610684
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February 28, 2014, 07:00:28 PM
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razick, well written post.

i think the community is now into version 2 of bitcoins. where businesses like mybitcoin, bitfloor, mtgox, inputs.io and similar crooks will be shunned and noone will do business with them. a hard and very expensive lesson to learn but a lesson nonetheless.

now that bitcoins are worth more and their potential is shinning i doubt people will be willing to part with them as easily or trust others as easily as well.

i lost more than i will ever admit to anyone ever but it's been a lesson.
what little i have left i will be 100x more wiser with.

ok
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February 28, 2014, 07:07:21 PM
 #17

It amazes me that people don't realize that the crooks in any society or financial arrangement are the business owners not the individuals. Think about all the businesses that have fucked you over in your life. I can name three without giving it much thought (Best Buy, Albertsons and PayPal). Then think of all the individual people that have fucked you over as an adult. I can think of one and he was family (never loan money to family). Businesses by their very design are out to take as much money from you as they can. Bitcoin just gives them an easier way to do that by allowing them to hide behind legal obscurity. Gox is going to do what so many businesses have done in the past and hide behind bankruptcy laws. The reason mainstream financial institutions, like banks, have government protections, like the FDIC, is because their mistakes fuck over so many individuals that people cry for a solution. Libtards forget that those protections are there because people need them, want them and demand them. Pirate@40 fucked over a bunch of people and the first thing they did was run to the government to fix it. I'd like to feel sorry for your loss but that's impossible because you did it to yourself by trusting an unregulated business with your money. Regulations may not always work but at least they provide some incentive to business owners to at least contact you back and try to fix it before you tattle on them.

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February 28, 2014, 07:26:16 PM
 #18

Ironic thread title.  There is reason to believe that BitFloor is related to the MtGox shutdown, and that they both have a single cause.

You wonder how people who abscond with Bitcoins can post openly as though nothing happened?  Obviously this is not normal behaviour.  That means they are likely protected.  Who do you think the real crooks are?

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February 28, 2014, 08:18:17 PM
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It amazes me that people don't realize that the crooks in any society or financial arrangement are the business owners not the individuals. Think about all the businesses that have fucked you over in your life. I can name three without giving it much thought (Best Buy, Albertsons and PayPal). Then think of all the individual people that have fucked you over as an adult. I can think of one and he was family (never loan money to family). Businesses by their very design are out to take as much money from you as they can. Bitcoin just gives them an easier way to do that by allowing them to hide behind legal obscurity. Gox is going to do what so many businesses have done in the past and hide behind bankruptcy laws. The reason mainstream financial institutions, like banks, have government protections, like the FDIC, is because their mistakes fuck over so many individuals that people cry for a solution. Libtards forget that those protections are there because people need them, want them and demand them. Pirate@40 fucked over a bunch of people and the first thing they did was run to the government to fix it. I'd like to feel sorry for your loss but that's impossible because you did it to yourself by trusting an unregulated business with your money. Regulations may not always work but at least they provide some incentive to business owners to at least contact you back and try to fix it before you tattle on them.

Really well said.
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February 28, 2014, 08:23:29 PM
 #20

It amazes me that people don't realize that the crooks in any society or financial arrangement are the business owners not the individuals. Think about all the businesses that have fucked you over in your life. I can name three without giving it much thought (Best Buy, Albertsons and PayPal). Then think of all the individual people that have fucked you over as an adult. I can think of one and he was family (never loan money to family). Businesses by their very design are out to take as much money from you as they can. Bitcoin just gives them an easier way to do that by allowing them to hide behind legal obscurity. Gox is going to do what so many businesses have done in the past and hide behind bankruptcy laws. The reason mainstream financial institutions, like banks, have government protections, like the FDIC, is because their mistakes fuck over so many individuals that people cry for a solution. Libtards forget that those protections are there because people need them, want them and demand them. Pirate@40 fucked over a bunch of people and the first thing they did was run to the government to fix it. I'd like to feel sorry for your loss but that's impossible because you did it to yourself by trusting an unregulated business with your money. Regulations may not always work but at least they provide some incentive to business owners to at least contact you back and try to fix it before you tattle on them.

Really well said.

Thank you! It seems like common sense to me but common sense doesn't always prevail.

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