Skycoin Founder Synth Kidnapping

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Skycoin

While Skycoin was not a cryptocurrency exchange, it helps highlight an important consideration in the security of crypto-assets. Assets were stored in the single individual wallets of the Skycoin founder, and easily accessible in the case of physical intimidation. The members of the marketing team, after a dispute in which they were accused of stealing funds, broke into the founder's house to physically force handing over the coins.

This exchange or platform is based in China, or the incident targeted people primarily in China.

About Skycoin

"Taking the idea of net neutrality to the max, Skycoin made its debut at ChainXChange conference in Las Vegas back in August, opening the floors up to Apple co-founder, Steve Wozniak, social media’s Gary Vaynerchuk, and Nobel Prize Winner, Paul Krugman."

"Holding itself out as the “third generation cryptocurrency,” Skycoin aims to provide a “new internet” that is global, decentralized, and not controlled by any country, corporation, or government entity."

"Its technological hardware innovation, "the skyminer," will allow the company to provide computing power, network capability, and storage capacity necessary for the Skywire network to function. Members of the company, or ‘skyminers’, act as specialized VPN’s and nodes on the network, allowing users to become their own ISP’s (internet service providers), granting complete user freedom within an encrypted network. Adding to the excitement, the Skywire network is private enough that IP addresses cannot be traced, and users are rewarded in Skycoin for providing bandwidth to other users."

"EVOLAB the Skycoin marketing team based in China embezzled more than 100,000 skycoins. These unfortunate events took place last year. The team did not account or return the embezzled coins resulting in termination of the connection they had with Skycoin."

A "robbery took place on June 13, 2018 and is said to have been led by the marketing team members, Sam Sing Fong, Mary Li, Xiangdong Yan, and Jesse Sun Fei." "[N]ine members of the company’s Asian marketing team broke into the home of Synth, the founder of the Skycoin currency. Then, in an effort to seize his stake in Skycoin’s holdings, the group tied up and beat both Synth and his wife."

"Sam Sing Fong led the team in holding Synth's family hostage for close to 6 hours. During this period, they caused the couple harm by beating them up and robbing them." "The nine individuals only managed to seize 18.88 Bitcoin and 6466 Skycoins during the robbery and were quickly identified after the event." "The contractors began dumping their stolen coins onto the market, adversely affecting Skycoin’s price at the time." "Fortunately, the gang's attempt to steal the design framework for the ecosystem belonging to Skycoin failed." "The team specified that the thieves, “attempted and failed to steal the design framework for the skycoin ecosystem.”"

"As news about this alleged home invasion began to circulate, many in the crypto community were skeptical that any of the described events actually took place. Many mistook the episode for an exit scam or a smokescreen for internal theft of coins, or some other nefarious conspiracy. This may be where most people lost track of the story, and of Skycoin."

"The perpetrators of the crime were each sent to prison to serve sentences from several months to over a year, depending on the role they played in the attack. They were convicted of “illegal detention”, for holding Synth and his wife hostage while they compelled them to surrender cryptocurrency, but in spite of the conviction, Skycoin’s funds were not ever recovered. The perpetrators emerged from their prison sentences facing a civil lawsuit in an effort from Synth to recover Skycoin’s stolen funds."

"This most recent case was technically an appeal, brought by the four criminal defendants who had been ordered to return the stolen money in the original proceedings which resulted in their prison sentences. A second lawsuit was launched to recover the funds, and was appealed by the defendants to the First Intermediate People’s Court on the tenuous assertion that digital currency cannot be considered property in China and therefore cannot be returned to an “owner”."

"Now, nearly two years later, the saga has come to its conclusion in a court ruling at the Shanghai First Intermediate People’s Court, where Skycoin’s founder, Synth, emerged victorious."

"At the centre of the lawsuit was the thieves’ dubious assertion that Chinese law that did not recognize Bitcoin (or other digital currency) as property, and therefore not subject to the rights of fiat currency, or any other tangible form of value. They argued, therefore, that they should not be compelled to return the stolen Skycoin or Bitcoin because those could not be legally considered ‘property’."

"Needless to say, this argument was soundly refuted in court, with the judge ruling that digital currency like Skycoin or Bitcoin, despite being virtual property, nevertheless possess the characteristics of ‘property’ as legally understood, including value, scarcity, and fungibility."

This exchange or platform is based in China, or the incident targeted people primarily in China.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Skycoin Founder Synth Kidnapping

Date	Event	Description
June 13th, 2018	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $205,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

While it is not possible to reasonable prevent all possibility of physical violence, security of crypto-assets can be better maintained through the establishment of a multi-signature setup. Under such a setup, multiple individuals are required to sign off on a transaction. The security is further improved through keeping the identities of some signers secret, using a variety of storage means, and securing some keys inside of physically protected areas such as banks.

Another strategy which can be used by an individual is the creation of a throw-away wallet which has less funds. This wallet can be given up to the attacker in place of all assets. This works as long as the adversary is unaware of the full asset balance.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.