{ANNOUNCEMENT} WBX Exchange Frozen

[dooglus]

Using the numbers that Andre recently provided, on top of my most recent backup shows that WBX should currently be holding
1,769.0417 BTC and 25,779.49 AUD.  If we assume a price of $5 AUD/BTC then that's a total of 1,769.0417 + 5,155.898 = 6,924.9397 BTC.

Just coming back to this, managing to lose $25,779?! That must have been pretty damn obvious well before you pulled the plug of people's accounts.

(observation - my account now tells me I have a zero balance)

Please note that the numbers I posted are based on my most recent backup, and the statement entries that Andre pasted in this thread.  It may be that he honoured AUD withdrawals which I don't know about, in which case the outstanding dollar balance will be less than I posted.

I have requested the information I need several times now, but so far it hasn't been forthcoming.

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[repentance]

Andre, if you still have a house,car and some financial aid then you are still in a position to pay back every single cent/bitcent that you had in your posession for legit clients.

Simply stating you cant pay since you were scammed is bullshit, then sell your car or morgage your house or whatever as long as you pay back what you owe(currently stole) from the legit users.

Its as simple as that, you lose their money then you lose your property.

It's interesting that Andre hasn't chosen the route of bankruptcy or a personal insolvency agreement, both of which would limit his liability to pay back creditors.  I suspect it's less an "honour" thing (after all, he's not making any promises that he'll attempt to pay back the remaining balances in the future but pretty much saying "26% is all you're going to get) and more to do with having his financial affairs subjected to scrutiny and the restrictions which would be placed on his ability to operate another business and to travel overseas in the short-term future.  

The current insolvency income thresholds are quite generous - a person with no dependants can have after tax income of ~$917 per week before they are required to make payments to their creditors.  The thresholds are higher for those with dependants and non-taxable income is excluded from the calculations.  There are also thresholds for assets and some types of assets are protected.

Andre, please enlighten us how a bank can hold onto legit deposits ? Be honest, you started to live of the money and when people started to scam you there wasnt enough money left for the legit deposits? Correct?

I'm aware of at least one way that the bank account could be emptied of legitimate user funds due to fraudulent deposits (there are others, and many involve multiple deposits and transfers using different identities but the basic strategy is the same).  Let's say there's $10,000 in legitimate user funds sitting in the account.  Fraudster deposits $5,000 and WBX allows him to trade to the value of $5,000 before those funds are properly cleared (so it's the legitimate money in the account which is used for his trades).  Bank then detects the deposits as fraudulent and reverses them - which leaves no legitimate funds remaining in the account.  By the time the fraud is detected, the legitimate funds have already been laundered in a series of irreversible transactions.  The bank isn't "holding onto legitimate funds" because there are no longer any legitimate funds in the account.  Many Bitcoin businesses do allow their customers to trade using deposits which haven't been fully cleared - it's an inherently risky thing to do so if you're going to allow it you need sophisticated risk management processes.

Andre claims that this incident has been investigated by the Financial Ombudsman Service.  There should be no problem with him giving people the reference numbers which allow them to contact the FOS office and find out whether the bank transferred any legitimate funds in the account to one of the unclaimed monies funds (this is exactly what services like PayPal and Technocash do when an account is closed due to fraudulent activity).  Of course it's not unreasonable to assume that funds were being co-mingled and that user deposits were not being quarantined from the operational funds of the business or Andre's personal funds.  A fee-free model was clearly never going to be sustainable and it's likely that the business was operating at a loss prior to the claimed fraud.

[PatrickHarnett]

Using the numbers that Andre recently provided, on top of my most recent backup shows that WBX should currently be holding
1,769.0417 BTC and 25,779.49 AUD.  If we assume a price of $5 AUD/BTC then that's a total of 1,769.0417 + 5,155.898 = 6,924.9397 BTC.

Just coming back to this, managing to lose $25,779?! That must have been pretty damn obvious well before you pulled the plug of people's accounts.

(observation - my account now tells me I have a zero balance)

Please note that the numbers I posted are based on my most recent backup, and the statement entries that Andre pasted in this thread.  It may be that he honoured AUD withdrawals which I don't know about, in which case the outstanding dollar balance will be less than I posted.

I have requested the information I need several times now, but so far it hasn't been forthcoming.

Unlikely - I was having enormous trouble getting money out and if it had been $500/day like it should have been, I might now simply be an interested bystander.  From discussion in this thread, it only takes three or four people to get to half of that total.

Andre still has the option of making a payment arrangement to cover his debts, and I still have debt collection services at my disposal.  One way keeps people happy, the other will screw up his life more than mine.

[Clipse]

Andre, if you still have a house,car and some financial aid then you are still in a position to pay back every single cent/bitcent that you had in your posession for legit clients.

Simply stating you cant pay since you were scammed is bullshit, then sell your car or morgage your house or whatever as long as you pay back what you owe(currently stole) from the legit users.

Its as simple as that, you lose their money then you lose your property.

It's interesting that Andre hasn't chosen the route of bankruptcy or a personal insolvency agreement, both of which would limit his liability to pay back creditors.  I suspect it's less an "honour" thing (after all, he's not making any promises that he'll attempt to pay back the remaining balances in the future but pretty much saying "26% is all you're going to get) and more to do with having his financial affairs subjected to scrutiny and the restrictions which would be placed on his ability to operate another business and to travel overseas in the short-term future.  

The current insolvency income thresholds are quite generous - a person with no dependants can have after tax income of ~$917 per week before they are required to make payments to their creditors.  The thresholds are higher for those with dependants and non-taxable income is excluded from the calculations.  There are also thresholds for assets and some types of assets are protected.

Andre, please enlighten us how a bank can hold onto legit deposits ? Be honest, you started to live of the money and when people started to scam you there wasnt enough money left for the legit deposits? Correct?

I'm aware of at least one way that the bank account could be emptied of legitimate user funds due to fraudulent deposits (there are others, and many involve multiple deposits and transfers using different identities but the basic strategy is the same).  Let's say there's $10,000 in legitimate user funds sitting in the account.  Fraudster deposits $5,000 and WBX allows him to trade to the value of $5,000 before those funds are properly cleared (so it's the legitimate money in the account which is used for his trades).  Bank then detects the deposits as fraudulent and reverses them - which leaves no legitimate funds remaining in the account.  By the time the fraud is detected, the legitimate funds have already been laundered in a series of irreversible transactions.  The bank isn't "holding onto legitimate funds" because there are no longer any legitimate funds in the account.  Many Bitcoin businesses do allow their customers to trade using deposits which haven't been fully cleared - it's an inherently risky thing to do so if you're going to allow it you need sophisticated risk management processes.

Andre claims that this incident has been investigated by the Financial Ombudsman Service.  There should be no problem with him giving people the reference numbers which allow them to contact the FOS office and find out whether the bank transferred any legitimate funds in the account to one of the unclaimed monies funds (this is exactly what services like PayPal and Technocash do when an account is closed due to fraudulent activity).  Of course it's not unreasonable to assume that funds were being co-mingled and that user deposits were not being quarantined from the operational funds of the business or Andre's personal funds.  A fee-free model was clearly never going to be sustainable and it's likely that the business was operating at a loss prior to the claimed fraud.

So the theft with illegal money is again due to his own incompentence. If he allows to clear funds that isnt cleared in his bank account he chose to practice a risky business. Again the problem I see is that he seems to just try and pass the buck to his clients and his reasoning seems like he thinks its the proper way to do things.

[repentance]

So the theft with illegal money is again due to his own incompentence. If he allows to clear funds that isnt cleared in his bank account he chose to practice a risky business. Again the problem I see is that he seems to just try and pass the buck to his clients and his reasoning seems like he thinks its the proper way to do things.

I'm pretty sure that all of the major exchanges have admitted to being hit by similar frauds at some point (MtGox, TradeHill and CryptoXchange have all admitted being hit by similar frauds) - some of them have been able to cover the losses and some haven't.  But yes, it's a known risk and it's one which should absolutely be taken into account when deciding how soon after depositing you will allow your users to trade.  You also need a process for flagging high risk transactions and not letting high risk account trade until those transactions have been investigated and it's possible that WBX didn't really have that in any meaningful sense.

Given the relatively small amount of money owed to WBX customers, it's disappointing that Andre is not making an offer to repay the shortfall over time.  Of course it's possible that he owes money elsewhere as well and that paying back WBX customers wouldn't make a substantial dent in what he owes (he could also be avoiding making such an offer because he's expecting legal action in respect of other matters which would make giving WBX customers priority for payment inadvisable).

It's probably worth reminding people what Andre posted only a couple of weeks before WBX announced freezing the exchange.

In order to protect your money we have had to increase the security around our accounts and systems, the following is the new process.

1. We now have series of accounts with minimal funds
2. We now hold a small amount of funds outside our banking institution.(in the event our account is frozen again)
3. A large portion of our transaction are manually processed.

https://bitcointalk.org/index.php?topic=37079.msg713074#msg713074

[dooglus]

It's probably worth reminding people what Andre posted only a couple of weeks before WBX announced freezing the exchange.

The whole post is probably worth quoting:

Hi all,

We have an announcement, we apologise to our members that are experiencing delays in the services we provide, over the past weeks we have had a series of charge backs to our account which has forced our banking institution to hold our funds on several occasions this year. we wanted to carry out an investigation on these criminals before we release it to the public, the good news is that we are making progress in catching these criminals.

In order to protect your money we have had to increase the security around our accounts and systems, the following is the new process.

1. We now have series of accounts with minimal funds
2. We now hold a small amount of funds outside our banking institution.(in the event our account is frozen again)
3. A large portion of our transaction are manually processed.

What these new security measures mean? The processing of deposits stays the same with no change how ever withdraw requests will be slightly affected, next day processing will now be delayed.

We do want your feed back on this matter.

Happy Australia Day
Andre

Were details of the investigation ever made public?

[repentance]

Were details of the investigation ever made public?

I'm not sure whether they were separate incidents relating to different banks, but Andre stated in this thread that he was unable to give details while the investigation was in progress due to legal reasons.  It sounds like the investigation is now complete.  While the banks may still refuse to divulge any details to WBX customers, if the Financial Ombudsman truly did review the case then their office should be able to confirm the basic details and it would certainly be in Andre's interests to facilitate communication between his customers and the Ombudsman.  Andre could also provide the contact details of any law enforcement officers who worked on the investigation.

[Clipse]

Were details of the investigation ever made public?

I'm not sure whether they were separate incidents relating to different banks, but Andre stated in this thread that he was unable to give details while the investigation was in progress due to legal reasons.  It sounds like the investigation is now complete.  While the banks may still refuse to divulge any details to WBX customers, if the Financial Ombudsman truly did review the case then their office should be able to confirm the basic details and it would certainly be in Andre's interests to facilitate communication between his customers and the Ombudsman.  Andre could also provide the contact details of any law enforcement officers who worked on the investigation.

Someone in Australia must follow up on this, if it didnt happen then I can assure you that everything Andre said was all simply to stall users from making more noise early on and no one should trust even one word coming out of Andre's mouth.

[repentance]

Someone in Australia must follow up on this, if it didnt happen then I can assure you that everything Andre said was all simply to stall users from making more noise early on and no one should trust even one word coming out of Andre's mouth.

It probably needs to be someone who actually has funds tied up with WBX.

I would strongly suggest that people don't accept Andre's word for anything at this point.  He's been extremely reticent to disclose useful information and his reluctance to say who now controls the WBX website is very suspicious.  I certainly wouldn't take his word that it's not someone who was previously associated with WBX and/or High Net Worth Property Pty Ltd and I wouldn't take his word that he has no income or assets which could be used to repay WBX customers.  I wouldn't trust any such claims unless they are verified by either a court or an insolvency trustee.

It may well be worth someone who is owed a significant amount paying for a skip trace given Andre's refusal to provide an address for the service of legal claims.  Some local companies provide this service on a "no locate, no fee" basis.

[dooglus]

I received a private message:

Actually, it is around 1500 AUD more that he owes his customers. (Have to look up the number when I'm back home). I have made a withdrawal last year which was never actually paid out. I can forward the mail correspondence (or post them here in the forum) where Andre confirms the problems and that he still owes me the money - whatever you prefer. Just wanted to mention it in time.

I don't know if that 1500 AUD is just the extra that's owed to one customer, or whether that's the total, but if true, then that will reduce the 25.5% even further.  Also, it may be that the 1500 AUD withdrawal was left in a 'pending' state, in which case it will have been included in the amount I wrote here earlier, since I cancelled all pending withdrawals in my backup copy of the database, causing the pending withdrawals to be added back to the account balances.

Andre: do you have a complete list of the exchange's liabilities?  I was assuming that the outstanding customer account balances was everything, but apparently that's not true.

And please address my other recent questions to you in this thread.

[PatrickHarnett]

I suspect he has gone again.  I have not heard anything via my lawyers despite his asking for contact details (and my providing them), and I don't think he is interested in providing any answers to some quite reasonable questions, let alone meeting any of his obligations. 

[dooglus]

I suspect he has gone again.  I have not heard anything via my lawyers despite his asking for contact details (and my providing them), and I don't think he is interested in providing any answers to some quite reasonable questions, let alone meeting any of his obligations. 

That leaves me in an awkward position.

I have the remaining Bitcoin assets of the exchange, but neither the authority nor the necessary information to distribute them to their rightful owners.

[payb.tc]

I suspect he has gone again.  I have not heard anything via my lawyers despite his asking for contact details (and my providing them), and I don't think he is interested in providing any answers to some quite reasonable questions, let alone meeting any of his obligations. 

That leaves me in an awkward position.

I have the remaining Bitcoin assets of the exchange, but neither the authority nor the necessary information to distribute them to their rightful owners.

i wouldn't rush it. you don't want to be in a situation where you've distributed funds and then find out 3 months later that it was done incorrectly.

[PatrickHarnett]

I suspect he has gone again.  I have not heard anything via my lawyers despite his asking for contact details (and my providing them), and I don't think he is interested in providing any answers to some quite reasonable questions, let alone meeting any of his obligations. 

That leaves me in an awkward position.

I have the remaining Bitcoin assets of the exchange, but neither the authority nor the necessary information to distribute them to their rightful owners.

i wouldn't rush it. you don't want to be in a situation where you've distributed funds and then find out 3 months later that it was done incorrectly.

Thank you payb.tc, that is a very sensible comment.

In other liquidations, there can be a liquidator appointed, and that can be from the business or from the creditors.  A file of creditor claims would be made, and paid on.
For now, I'm comfortable with Chris just holding onto things.  If he is agreeable, we could provide evidence of claims over the next three months (say to 1 August) and if nothing else happens before then, he would distribute on that basis. 

I would even be comfortable contributing some coins to him for his efforts/troubles.
(does the database scrape you have include client contact details?)

[dooglus]

For now, I'm comfortable with Chris just holding onto things.  If he is agreeable, we could provide evidence of claims over the next three months (say to 1 August) and if nothing else happens before then, he would distribute on that basis. 

I would even be comfortable contributing some coins to him for his efforts/troubles.
(does the database scrape you have include client contact details?)

I'm OK to keep holding the coins for now.  I've published the address they're at, a couple of times now, so you can see they're still there.  I can provide a signature proving that I have control of the private key if anyone would find that useful.

The exchange never asked for contact details other than an OpenID string and scans of ID documents, and so I have no way of contacting all the exchange users.  Andre probably has emails from lots of users, but I was only forwarded the ones that he needed my technical assistance with.  A few users have contacted me privately after seeing my email address in the 'news' section of the site, but there are many users I have no contact details for at all.

[payb.tc]

an OpenID string

i'm not familiar with OpenID... what does an "OpenID string" look like? is it just random characters, like a hash?

[dooglus]

an OpenID string

i'm not familiar with OpenID... what does an "OpenID string" look like? is it just random characters, like a hash?

It depends which OpenID provider you use, but it always looks like a URL.

If you use https://www.myopenid.com/ as WBX recommends you to, your OpenID string is:
  http://xxx.myopenid.com/
where xxx is the username you picked when you signed up for your myopenid account.

If instead you click the 'google' or 'yahoo' links, you get an ugly OpenID string containing a hash.  I've found no way of getting from the hash to the real google account name; there probably is no way to do it.  Examples:
  https://www.google.com/accounts/o8/id?id=AItOawnltTjfGlqy1qsZr-pG-EdT46q4r0rfS0g
  https://me.yahoo.com/a/C9b5H60e24bhpJpUve31fJIsCQpQkcqR#232f1

Edit: I believe WBX shows you your own OpenID string towards the top of your profile page.

[repentance]

an OpenID string

i'm not familiar with OpenID... what does an "OpenID string" look like? is it just random characters, like a hash?

It depends which OpenID provider you use, but it always looks like a URL.

If you use https://www.myopenid.com/ as WBX recommends you to, your OpenID string is:
  http://xxx.myopenid.com/
where xxx is the username you picked when you signed up for your myopenid account.

If instead you click the 'google' or 'yahoo' links, you get an ugly OpenID string containing a hash.  I've found no way of getting from the hash to the real google account name; there probably is no way to do it.  Examples:
  https://www.google.com/accounts/o8/id?id=AItOawnltTjfGlqy1qsZr-pG-EdT46q4r0rfS0g
  https://me.yahoo.com/a/C9b5H60e24bhpJpUve31fJIsCQpQkcqR#232f1

Edit: I believe WBX shows you your own OpenID string towards the top of your profile page.

From memory, when you sign in with OpenID (even if you do it through Google or another service) it asks you whether you want to share your email and your username for that service with the site you're signing into.  It's possible that at least some users elected to do this and so they might be contactable in a roundabout way if that information can be retrieved.

[dooglus]

From memory, when you sign in with OpenID (even if you do it through Google or another service) it asks you whether you want to share your email and your username for that service with the site you're signing into.  It's possible that at least some users elected to do this and so they might be contactable in a roundabout way if that information can be retrieved.

I looked into that at the time.  It turned out that I had the option in the code of either:

* only accepting users who check the "let them see my email address" box, or
* never getting email information from any user

I couldn't find a way of allowing users to decide whether to send their email or not, and still having them be able to register even if they decided not to share their email address.  So it ended up just not asking for the email address.

I think you'll find that if a site that uses OpenID ever has the "share email?" option and you don't check it, then your sign-up attempt will fail.

There's no field in the WBX database for email addresses either.

[sonba]

I received a private message:

Actually, it is around 1500 AUD more that he owes his customers. (Have to look up the number when I'm back home). I have made a withdrawal last year which was never actually paid out. I can forward the mail correspondence (or post them here in the forum) where Andre confirms the problems and that he still owes me the money - whatever you prefer. Just wanted to mention it in time.

That was mine, yes. Actually it is additional ~1900 AUD that Andre still owes me. Please find below the original mail from him. I can also forward the e-mail to dooglus (for the header or whatsoever) please give me a shout and I will do so, potentially also witht he complete discussion with Andre.
Attached his mail:

Hi XXX,

Sorry for the late reply, My accounts Department has confirmed the following is held withdraws by our Bank.

date/time       Amount   trans Ref
02:02am 25NOV    $499.98     8212
04:06am 26NOV   $499.97     8231
07:44pm 27NOV   $400.96     8246
07:51pm 30NOV   $499.96     8257

We will process these withdraw amounts as soon as the investigation has completed, unfortunately we have no indication when this will happen though we will advise you as soon this information becomes available, thank you for being patient XXX as you will be aware we have loss a lot of volume and business due to this issue, we hope to sort this issue in a timely manner.
 

Andre Jensen
andre@worldbitcoinexchange.com