[Payout Updates] Bitcoinica site is taken offline for security investigation

[ninjarobot]

If you trust me personally, I can confirm that at the time of this post, at least 75% of total claimed value (even including the identified fake ones) is present in Bitcoinica's accounts.

Zhou, although I trust you personally (and appreciate the support you continue to provide to the best of your abilities) it is beside the point since it is unclear if you are even an official Bitcoinica representative or employee at this point. What I am afraid of is that Bitcoinica will use customer deposits to cover legal expenses.

There have been too many mistakes made by too many people and too many questions left unanswered. My goodwill towards Bitcoinica has pretty much reached rock bottom. So unless they will guarantee not to use customer deposits for anything other than customer refunds, I'd rather deal with a trusted 3rd party escrow agent.

[proudhon]

You're not going to be able to please everybody, let alone everybody all at once, that much is absolutely clear.  So, why not start with what you're most certain of now and then work your way down to the ones that seem fishy.  The way things are going, everybody is going to lose because eventually somebody will start legal action, and then a bunch more will join in, all the money will get spent on legal fees, and nobody will get any money back.  That will be an absolute blight to the reputation of everyone involved in bitcoinica's management.

Give those who made verifiable claims and are willing to take what they can get as much money as you can so that, at the very least, we don't get taken down with the sinking ship bitcoinica.  That's as close to a win as any of you are going to get in this situation as you'll have at least saved a bit of your reputation (when I say "you" I don't mean "Zhoutong", I mean everyone managing bitcoinica).

[isis]

To my fellow Bitcoinica users.

Thus far repeated attempts to contact Bitcoinica regarding a refund from them have met with nothing more than structured silence.
I promised in a previous comment on this thread that I would explain the process to begin legal proceedings against Bitcoinica and this post is my attempt to fulfill my promise.

Be aware that this is not intended as legal advice.

What I am about to explain is primarily applicable to United States citizens, however the legal logic, reasoning and process is somewhat universal, because what they are doing now is theft, breach of trust and malfeasance, which most countries in the world do have laws against.

First you must by now be aware that due to the way Bitcoinica was structured, civil proceedings are going to be difficult.
However this does not mean that all is lost.  The behavior shown thus far by Bitcoinica, and Bitcoin Consultancy does in fact appear to rise to the level of a criminal enterprise.  Therefore an active criminal investigation is warranted.  Once there has been action on a criminal complaint most of the evidence uncovered becomes a matter of public record and then can be used in civil litigation as well.

In the United States the primary charge to seek is one of Wire Fraud, 18 USC : 1343

"Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both."  

Which leads us to a question of jurisdiction.  You should go down to your local police station and file an official complaint.  The local police are unlikely to be able to do much more than take your complaint.  However that complaint is your key to the rest of this.  Before you file your complaint though make sure to have all of your ducks in a row.  First gather any supporting evidence you have.  This includes checking your bank if you deposited funds via wire, mtgox for mtgox codes etc.  Deposits made by Bitcoin are easy enough to verify via BlockChain explorer.

A criminal complaint should answer the questions of who, what, where, when and how.
For the "who" you would be best served by naming the individuals involved thus far, especially those with a more public profile such as

Christopher HEASLIP (Owner of record according to http://www.business.govt.nz)
Flat 3, 10 Dorchester Street, Meadowbank, Auckland, 1072 , New Zealand

Also make sure to put in the complaint "D.B.A. Bitcoinica LP, DBA Bitcoinica Consultancy, DBA Core Credit Limited, DBA PushPay".

The rest is your specific allegation.  This is a snippet from mine, but you should really make your own.  "Prior to May 11th 2012, I placed x funds on deposit at Bitcoinica via y means.  On May 11th 2012, Zhou Tong, the founder and to the best of my knowledge owner of the company, alleged in a public forum that his institution "Bitcoinica" had suffered a break in by an unknown attacker who stole deposits of BTC 18,547 and that he would be taking the website offline temporarily to address the situation.  This break-in and theft while widely reported in the media was never reported to police or any other authority to the best of my knowledge and therefore appears to be nothing more than a ruse.  This is supported by the fact that since that time no communication from any official channel has occurred.  However through unofficial channels, i.e. the forum where the original posting occurred, they announced a refund process and subsequent claims page.  Filling out the claims page resulted in an email (see attached) that was completely devoid of relevant information.  They have also posted 2 updates on their home page at www.bitcoinica.com, which go into greater detail about the alleged break in (see attached).  Nevertheless, they currently state in unofficial channels that my funds valued at $x are no longer available to me, because they have purportedly lost all records.  This is theft as I can easily document all deposits and withdrawals to them (see attached) and have done so via the methods that they themselves have proscribed."

The important thing to remember is to not make any allegation you cannot support with documentation.  The more prepared you are ahead of time, the more likely the complaint is to be taken seriously.  Also avoid using emotion and emotionally charged words, these carry no weight in investigative work and if you come off as too emotional, you probably won't get the results you expected.

When you file your complaint, make sure that the detective who takes it, understands that the fraud and theft span multiple agencies & jurisdictions and that you would like a copy sent to the Auckland police department since they have direct jurisdiction over the owner.  Also be sure to get a copy to your State Attorney Generals office, division of consumer protection or it's equivalent in your area and the local FBI office.  Since it is a financial crime, the allegation can prevent them from obtaining work in the financial services sector and defrauding others in the future.

Once you have filed your complaint you will get a case number.  Make a copy of your full complaint and your case number and submit them to http://www.ic3.gov/default.aspx
This will get the FBI & FTC involved on a broader perspective than just your local office.  If ic3 receives enough complaints they can take broader criminal action and co-operate internationally to make life very uncomfortable for them.  While it may seem strange to involve the FBI, there is a reason for it.  Just having your name attached to an open "Federal" case in the USA can make travel very difficult anywhere in the world.  Furthermore mutual co-operation treaties mean that all bank accounts owned by these criminals can be frozen while the matter is under investigation, pretty much no matter where they are in the world, but again that's federal action.

At this point, you need to make sure you gathered business cards from everyone you spoke to as you were filing these.  Call them at least once a week to check on the status of the case.  Let them know any new information that comes to light and generally speaking let them know you aren't going to go away but you'll be glad to testify against these guys.

Thank you for taking the time to read this.  I sincerely hope you will take the time and effort to file a criminal complaint against them.  The more of us that do this, the faster we will see action on it.

[Serge]

the way Bitcoinica Consultancy has been handling this debacle from start it shouldn't come as a surprise if they're being served as well by the investors, hence their silence and the delay with claims/refunds process. of course it's just a wild speculation.

[proudhon]

Thank you for taking the time to read this.  I sincerely hope you will take the time and effort to file a criminal complaint against them.  The more of us that do this, the faster we will see action on it.

I hate to say it, but I don't care whether they're convicted of a crime.  I care about getting bitcoins back.

[isis]

You're not going to be able to please everybody, let alone everybody all at once, that much is absolutely clear.  So, why not start with what you're most certain of now and then work your way down to the ones that seem fishy.  The way things are going, everybody is going to lose because eventually somebody will start legal action, and then a bunch more will join in, all the money will get spent on legal fees, and nobody will get any money back.  That will be an absolute blight to the reputation of everyone involved in bitcoinica's management.

Give those who made verifiable claims and are willing to take what they can get as much money as you can so that, at the very least, we don't get taken down with the sinking ship bitcoinica.  That's as close to a win as any of you are going to get in this situation as you'll have at least saved a bit of your reputation (when I say "you" I don't mean "Zhoutong", I mean everyone managing bitcoinica).

I wouldn't worry too much about them spending money that we placed on deposit and using it for legal fees.  First off, the moment an official charges them with a crime of this nature the normal course of action for the prosecutor is to have all of their assets frozen.  Secondly any money they managed to hide from the the legal process would be taken the minute it surfaced.  Finally I'm recommending that we take actions which by their very nature pierce the corporate veil.  This is not good faith on their part and so the veil would not protect them.  It never has been a defense anywhere in the world that "Yeah I committed a crime, but I was acting as an agent of my business and therefore I'm free and clear".  Sorry the law doesn't work that way.

[disclaimer201]

Would they even be legally allowed to use customers' deposits for their own legal defence? Or would they break a law? If this was the case there'd be no reason to withold refunds at this point. They shouldn't be allowed to spend our money on lawyers since this would be theft. Obviously, it isn't their money.

There have been no refunds and no more communication. Therefore, it can be concluded they must have declared insolvency and let an insolvency administrator handle the refunds. In this case, I'm afraid proudhon is right. It may be months before anything gets resolved and esp. those with minor claims must fear to be at the end of a long list and end up getting nothing.

I personally trusted my money to Zhoutong, and now I have to deal with consultancies, bureaucracy, and the police? Why isn't Zhou taking responsibility?

Least one could do is to demand the scammer tag for all of them asap, in order to warn and protect future customers from being screwed over.
Nothing left to do than letting the big dogs out.

[dancingnancy]

I personally don't like the idea of getting lawyers involved.  Not only that, but do police even know or give a fuck about bitcoin?  This seems like it will be very hard to do unless you have a bankroll for lawyers and such.  Shit, I had like 2000 dollars to my name, 1500 or so of that in the form of coins was sitting in bitcoinica.  

I hope ZT really doesn't have any interest in bitcoinica right now because I would hate to see him get in trouble at a young age for this shit.  Especially because I believe he has been the most helpful in this situation.  I also believe if he was still in "control" this would be settled and done already.

In the end this may have been a relatively cheap lesson for me to learn about risk.  275 BTC and $25 cash.  At least I didn't have money in MF Global.  Btw, why isn't that fuck in prison?  Do you think if they won't touch Corzine for losing 2 billion they are going to go after bitcoin people for less than 1% of that sum all the way on the other side of the world?

This shit isn't looking good for me at least.

[Krakonos]

Hey,

I just went to  http://www.bitcoinica.com/ and found some marketing stuff, the one you usually find on expired domains that someone registered for advertising purposes and quick gain on people, that came for the old site.

Does that mean that the domain expired?

[Raoul Duke]

Hey,

I just went to  http://www.bitcoinica.com/ and found some marketing stuff, the one you usually find on expired domains that someone registered for advertising purposes and quick gain on people, that came for the old site.

Does that mean that the domain expired?

They parked it with Sedo. It's not expired.

[tbcoin]

Hey,

I just went to  http://www.bitcoinica.com/ and found some marketing stuff, the one you usually find on expired domains that someone registered for advertising purposes and quick gain on people, that came for the old site.

Does that mean that the domain expired?

They may be preparing something on another platform, as it points www to a ip from http://www.softlayer.com, but the domain remains of them
While bitcoinica.com and claims.bitcoinica.com still pointed to Rackspace

EDIT:
This very ugly they do this, is an unnecessary shock for a user already burned and lost the perception brand ....

[Bitcoin Oz]

What a clusterfuck.

[isis]

Ok so how does the scammer tag get applied?  Is there a process for it?  I've been looking but I don't see any place in particular that explains how to start that process.

[kokjo]

may i suggest a scammer tag, if they have not begun the payouts by Friday?

[bulanula]

Chillax guys. Here, only the REAL scammers ( hint: me ) get the tags while the big boys get away with anything !

I am sure you will get your money back. After all, they were a damn FSP ( Financial Services Provider ) ! Thought of them running with our money is impossible in my mind.

Claims may be slow but the money will be given back after they collect enough interest from our USD to pay back our BTC

Zhou is not taking responsibility cuz he sold it and did not tell anyone (until after people who trusted him, asked him to act).

I do not think they can use fiat for legal defense, but honestly I think there is little we can do about them using the bitcoin.

Really what can we do, go to our local cops and say yeah, this company in New Zealand or where ever stole our imaginary crypto currency?

People who are missing dollars can file criminal claims, people who only had BTC are shit out of luck unless I really do not know what I am talking about.

+1 Anybody storing BTC with Interscamgo is a fool wanting to have his money taken from him.

[realnowhereman]

If you trust me personally, I can confirm that at the time of this post, at least 75% of total claimed value (even including the identified fake ones) is present in Bitcoinica's accounts.

You have previously said that only 20% of total holdings were stolen.  That was 20% of BTC.  That leaves 80%, which is bigger than 75%.

The USD holdings should have been untouched.  Let's assume a 50:50 split between USD and BTC deposits.  That means that 80% of the 50% BTC should be available and 100% of the 50% USD.  In other words: 50% + 40% = 90% of total deposits should be available.

Please someone explain how 90% has turned into 75%.

Further: claimed value should be less than deposited value, since not everyone will have claimed.  That makes it easier to have enough funds to match the claims and yet you've only 75% of that lower number?

Distinctly worrying.

[imsaguy]

If you trust me personally, I can confirm that at the time of this post, at least 75% of total claimed value (even including the identified fake ones) is present in Bitcoinica's accounts.

You have previously said that only 20% of total holdings were stolen.  That was 20% of BTC.  That leaves 80%, which is bigger than 75%.

The USD holdings should have been untouched.  Let's assume a 50:50 split between USD and BTC deposits.  That means that 80% of the 50% BTC should be available and 100% of the 50% USD.  In other words: 50% + 40% = 90% of total deposits should be available.

Please someone explain how 90% has turned into 75%.

Further: claimed value should be less than deposited value, since not everyone will have claimed.  That makes it easier to have enough funds to match the claims and yet you've only 75% of that lower number?

Distinctly worrying.

BTC value has gone up.  That increases the price they pay to buy btc to pay to people.

[bulanula]

If you trust me personally, I can confirm that at the time of this post, at least 75% of total claimed value (even including the identified fake ones) is present in Bitcoinica's accounts.

You have previously said that only 20% of total holdings were stolen.  That was 20% of BTC.  That leaves 80%, which is bigger than 75%.

The USD holdings should have been untouched.  Let's assume a 50:50 split between USD and BTC deposits.  That means that 80% of the 50% BTC should be available and 100% of the 50% USD.  In other words: 50% + 40% = 90% of total deposits should be available.

Please someone explain how 90% has turned into 75%.

Further: claimed value should be less than deposited value, since not everyone will have claimed.  That makes it easier to have enough funds to match the claims and yet you've only 75% of that lower number?

Distinctly worrying.

BTC value has gone up.  That increases the price they pay to buy btc to pay to people.

And here I was sat thinking BTC value went up because they were buying BTC to give back to people ...

[realnowhereman]

Please someone explain how 90% has turned into 75%.

Further: claimed value should be less than deposited value, since not everyone will have claimed.  That makes it easier to have enough funds to match the claims and yet you've only 75% of that lower number?

BTC value has gone up.  That increases the price they pay to buy btc to pay to people.

My analysis applied without them buying a single bitcoin; and if your suggestion were right it would mean they were using customer deposited USD to buy BTC.  What would be the point of that?  The USD customers would still need paying back.

[imsaguy]

Please someone explain how 90% has turned into 75%.

Further: claimed value should be less than deposited value, since not everyone will have claimed.  That makes it easier to have enough funds to match the claims and yet you've only 75% of that lower number?

BTC value has gone up.  That increases the price they pay to buy btc to pay to people.

My analysis applied without them buying a single bitcoin; and if your suggestion were right it would mean they were using customer deposited USD to buy BTC.  What would be the point of that?  The USD customers would still need paying back.

I'm sure they have USD that isn't customer USD.