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Author Topic: The problem of stolen coins  (Read 7980 times)
zby
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March 02, 2012, 08:58:29 AM
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It's back.  Now after bitcoinica publicized the thieves transactions the question is even more nagging.  Everyone can follow where the money goes.  MtGox support wrote in one thread that they don't expect those coins to come to them - but I think it is inevitable that at some point they will and MtGox needs to make some declarations.  Will they accept coins with a track going back to the stolen amounts and let the thieves laundry them?  What will do other exchanges?  I have been asking this question ever since the first MtGox hack and it will be coming back again and again - so it might be a good time now to settle it down.
Even in the event that an attacker gains more than 50% of the network's computational power, only transactions sent by the attacker could be reversed or double-spent. The network would not be destroyed.
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Matthew N. Wright
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March 02, 2012, 09:04:16 AM
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It's back.  Now after bitcoinica publicized the thieves transactions the question is even more nagging.  Everyone can follow where the money goes.  MtGox support wrote in one thread that they don't expect those coins to come to them - but I think it is inevitable that at some point they will and MtGox needs to make some declarations.  Will they accept coins with a track going back to the stolen amounts and let the thieves laundry them?  What will do other exchanges?  I have been asking this question ever since the first MtGox hack and it will be coming back again and again - so it might be a good time now to settle it down.

Bitcoin is information.

We do not police information. That is the quickest way to kill Bitcoin.

Let the hackers cash out and let security be the winner.

If you can catch the hackers with evidence, that is great. If you can't, don't try to stop people with money from spending that money just because where it came from.

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March 02, 2012, 09:18:31 AM
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It's back.  Now after bitcoinica publicized the thieves transactions the question is even more nagging.  Everyone can follow where the money goes.  MtGox support wrote in one thread that they don't expect those coins to come to them - but I think it is inevitable that at some point they will and MtGox needs to make some declarations.  Will they accept coins with a track going back to the stolen amounts and let the thieves laundry them?  What will do other exchanges?  I have been asking this question ever since the first MtGox hack and it will be coming back again and again - so it might be a good time now to settle it down.

Wanna bet some fiat money you used (Dollars, Euros, ...) was used for illegal activities or even stolen before?

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zby
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March 02, 2012, 09:18:41 AM
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If someone stole dollar bills that were marked - police will use that to track him down and also, I am not a lawyer but, I think that if you know that these particular bills were stolen - then accepting them would mean complicity wouldn't it?

I agree that we have to treat the bitcoins as cleared once they go through a few transations - this looks like the only logical conclusion - but I think at least the main exchanges need to make some declaration in this matter.  This of course means that the thieves now need to make some transfers from the original accounts to their other accounts.  Their current problem is that it is all public and people can register the IP addresses that are used to announce the new transactions, but I guess they'll use TOR for this.  Another thing is that the miners can refuse registering these transactions - but this would also work only on a very short term - eventually someone will register them.
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March 02, 2012, 09:37:09 AM
 #5

You can sue him,
but you can't freeze the BTC.

Jered Kenna (TradeHill)
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March 02, 2012, 11:04:00 AM
 #6

At the least it's a slippery slope. I can understand blocking them directly from the wallet etc but no one smart enough to get to them is dumb enough to send them right to an exchange.

You're going to run in to issues if they're spent in a legit way IE:

1) someone steals 43k BTC from Bitcoinica
2) They buy a new Tesla for 15k BTC (Elon taking Bitcoin yet?)
3) The guy who sold the car deposits the BTC in an exchange
4) The exchange returns the coins to Bitcoinica.

Or something far simpler: someone buys 500 BTC OTC and then finds out they're stolen and can't unload them / exchange returns them etc.
Blocking them is one thing, that doesn't really hurt, taking them and returning them to the original owner seems to be crossing the line but is going to be up to the exchange.

Another question is what would the authorities like to do. As much as I'd like to see the rightful owner get their BTC returned it doesn't seem right if the government stepped in and started taking it from people who hadn't committed a crime. I'm sure if you went through the cash in my wallet a portion was used for something illegal at one point before it reached me. With everyone talking about how anonymous Bitcoin is this is one point where it can't compete with cash.

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March 02, 2012, 11:36:03 AM
 #7

Even if you don't care about what is 'right' any exchange/wallet that appears to randomly take users deposits on claims that they came from a dirty source is going to go out of business.

If taking the coins was standard practice Bitcoin would be unusable. Even subscribing to a service that tells you if coins are known to be dirty doesn't help because thieves will turn them over before anyone gets a report in many cases.

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zby
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March 02, 2012, 11:42:43 AM
 #8

Even if you don't care about what is 'right' any exchange/wallet that appears to randomly take users deposits on claims that they came from a dirty source is going to go out of business.

If taking the coins was standard practice Bitcoin would be unusable. Even subscribing to a service that tells you if coins are known to be dirty doesn't help because thieves will turn them over before anyone gets a report in many cases.

Well - the question is if bitcoin is usable.  If the stolen bitcoins were treated as stolen property - then I think bitcoinica can request anyone to return them back if they locate that anyone.
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March 02, 2012, 11:51:34 AM
 #9

Even if you don't care about what is 'right' any exchange/wallet that appears to randomly take users deposits on claims that they came from a dirty source is going to go out of business.

If taking the coins was standard practice Bitcoin would be unusable. Even subscribing to a service that tells you if coins are known to be dirty doesn't help because thieves will turn them over before anyone gets a report in many cases.

Well - the question is if bitcoin is usable.  If the stolen bitcoins were treated as stolen property - then I think bitcoinica can request anyone to return them back if they locate that anyone.


Do you think the same on dollars?

Let's say I videotape a break in and make sure to shoot every serial number of every bill they steal. Then 6 months later you get these same papers direct from a bank in exchange for your paycheck and I present the video.

Forcing you to give the dollars once sucks, but if it is the general practice people won't risk working for a paycheck or using a bank.

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March 02, 2012, 11:59:11 AM
 #10

It is OK to try to trace the stolen BTC back to the thieves
.
But I don't think an embargo against the stolen coins is good. It would make using Bitcoins generally a lot more troublesome and it would affect the small-time users more because they wouldn't know how to check for stolen coins.

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Matthew N. Wright
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March 02, 2012, 12:03:33 PM
 #11

It is OK to try to trace the stolen BTC back to the thieves
.
But I don't think an embargo against the stolen coins is good. It would make using Bitcoins generally a lot more troublesome and it would affect the small-time users more because they wouldn't know how to check for stolen coins.

It would also successfully be controlling bitcoins, which we vow not to do (by creating it in the first place) even at the risk of supporting terrorism, rape, child abuse, murder, drug and weapon trade, genocide, etc.

Money is money. The people who think it's more than just money are on the other side.

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March 02, 2012, 05:24:51 PM
 #12

Send the stolen coins here 1Aiq9FYv12GQjM9LeBHoNq9c3FfFaA4GTA to get back the same amount without bad history.

1LEaxxAh1LKFUvDKYVhiMEVAHRM7K5o7cF
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March 02, 2012, 05:55:19 PM
 #13

Police people, not the money they use.
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March 02, 2012, 06:00:15 PM
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Police people, not the money they use.

+1

Money is money. The people who think money has an agenda or intention in itself are the ones against Bitcoin.

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March 02, 2012, 07:00:19 PM
 #15

If someone stole dollar bills that were marked - police will use that to track him down and also, I am not a lawyer but, I think that if you know that these particular bills were stolen - then accepting them would mean complicity wouldn't it?

I agree that we have to treat the bitcoins as cleared once they go through a few transations - this looks like the only logical conclusion - but I think at least the main exchanges need to make some declaration in this matter.  This of course means that the thieves now need to make some transfers from the original accounts to their other accounts.  Their current problem is that it is all public and people can register the IP addresses that are used to announce the new transactions, but I guess they'll use TOR for this.  Another thing is that the miners can refuse registering these transactions - but this would also work only on a very short term - eventually someone will register them.


There was a case where someone robbed a armored truck that picks up money from businesses.  They messed up somehow and lost some of the bricks of cash near a relatively poor neighborhood.  The police swarmed in that place to collect the stolen cash.  Usually if a person find something that does not belong to them, then they have to report it to the police and the rightful owner has some amount of time to claim it.  (here is a question, would you rather have an ounce of gold or an ounce of $100 bills?)

If I buy some items from someone that that person got by stealing it, then if those items were tracked backed to me the police would confiscate them.  They can do this 2 ways.  One it is not my property and another person is claiming it is theirs.  The courts will decide.  Second, it is evidence of a crime being committed.  This is part of the liability of being in the pawn shop business.  When a person pawns an item or sells it to the pawn shop, the pawn shop business has to record the item.  That record goes to the police, so that in case a stolen item is reported and matches the pawn record, that item can be given back to the victim.

The problem with money is that it can be stolen.  Luckily the next bitcoin will take ease of theft into account.  It is interesting in the bitcoin white paper that Satoshi was more interested in theft by chargebacks and not other forms of theft.

Introducing constraints to the economy only serves to limit what can be economical.
BadBear
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March 02, 2012, 09:52:46 PM
 #16

Well it's starting, MtGox froze someones account, and is questioning them over 7 BTC.

https://bitcointalk.org/index.php?topic=67091.msg780362#msg780362

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March 02, 2012, 09:56:05 PM
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I don't think they have a choice.

They can't resell stolen goods.

This is a very interesting new development in the young history of Bitcoin.
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March 02, 2012, 09:59:27 PM
 #18

Well it's starting, MtGox froze someones account, and is questioning them over 7 BTC.

https://bitcointalk.org/index.php?topic=67091.msg780362#msg780362

Not for the first time. But I talked to some of the people who have been victim to this previously, as I mentioned on the other thread. Their coins were not confiscated.

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March 03, 2012, 12:42:26 AM
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Seems fairly obvious to me you cant go around freezing or confiscating coins unless it is proven that the given person is the thief.  Unlike bitcoins, dollars are centrally controlled and managed as well as being indivisible, so I don't think bitcoins and dollars are a good parallel for comparison.  Sounds like a nightmare with random thefts all over and coins being split and sent to multiple people (1 stolen bitcoin over time could lead to multiple people with "dirty" coin fractions in their possession, or do I have that wrong?) to have some entities haphazardly choose which coins they'll let you keep and which will be frozen or sent back to previous owners.  Plus you don't even need to take the coins away from current owner to assist in tracking the transactions back through the blockchain to find the original thief I believe.

I don't see any reason to treat the stolen coins any different than others.  On the other hand I see seemingly random (from the coin owners perspective) coin confiscation as something that could drastically undermine users trust in bitcoins altogether and destroy any chance of growth (there are plenty of already present hurdles in place as it is).

If I started more actively engaging in commerce with bitcoins only to have a portion confiscated at some point due to no wrong doing on my part, I'd likely stop or do less commerce in bitcoins.  That's not a good model for the future of bitcoin in my opinion.

People know the security risks involved in storing bitcoins and have some control in mitigating those risks as well as the chance to learn from mistakes when thefts do occur.  Do the people that find themselves in possession of laundered stolen coins have the same opportunity to protect themselves?
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March 03, 2012, 06:56:17 AM
 #20

If someone stole dollar bills that were marked - police will use that to track him down and also, I am not a lawyer but, I think that if you know that these particular bills were stolen - then accepting them would mean complicity wouldn't it?

I agree that we have to treat the bitcoins as cleared once they go through a few transations - this looks like the only logical conclusion - but I think at least the main exchanges need to make some declaration in this matter.  This of course means that the thieves now need to make some transfers from the original accounts to their other accounts.  Their current problem is that it is all public and people can register the IP addresses that are used to announce the new transactions, but I guess they'll use TOR for this.  Another thing is that the miners can refuse registering these transactions - but this would also work only on a very short term - eventually someone will register them.


There was a case where someone robbed a armored truck that picks up money from businesses.  They messed up somehow and lost some of the bricks of cash near a relatively poor neighborhood.  The police swarmed in that place to collect the stolen cash.  Usually if a person find something that does not belong to them, then they have to report it to the police and the rightful owner has some amount of time to claim it.  (here is a question, would you rather have an ounce of gold or an ounce of $100 bills?)

If I buy some items from someone that that person got by stealing it, then if those items were tracked backed to me the police would confiscate them.  They can do this 2 ways.  One it is not my property and another person is claiming it is theirs.  The courts will decide.  Second, it is evidence of a crime being committed.  This is part of the liability of being in the pawn shop business.  When a person pawns an item or sells it to the pawn shop, the pawn shop business has to record the item.  That record goes to the police, so that in case a stolen item is reported and matches the pawn record, that item can be given back to the victim.

The problem with money is that it can be stolen.  Luckily the next bitcoin will take ease of theft into account.  It is interesting in the bitcoin white paper that Satoshi was more interested in theft by chargebacks and not other forms of theft.


I think the hard part is providing evidence that the coins were indeed stolen.  How bitcoinica could now prove that the transactions were done illegaly?
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