Bitcoinica Another Hot Wallet Hack: Difference between revisions

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(Created page with "{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/anotherbitcoinicahotwallethack.php}} A generous thief returned the funds. More than 30% of the assets on the exchange had been stored in hot wallets. This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand. == About Bitcoinica == “On July 13, 2012, a thief compromised the Bitcoinica Mt. Gox account. The thief made off with around 30% of Bitco...")
 
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{{Imported Case Study|source=https://www.quadrigainitiative.com/casestudy/anotherbitcoinicahotwallethack.php}}
{{Case Study Under Construction}}{{Unattributed Sources}}[[File:Bitcoinica.jpg|thumb|Bitcoinica Logo/Homepage]]


A generous thief returned the funds. More than 30% of the assets on the exchange had been stored in hot wallets.
This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand.<ref name="finextra-13" /><ref name="bitcointalklistold-20" /><ref name="bitcoinmagazine-23" /><ref name="bitcoinwiki-24" /><ref name="bitcointalklist-87" /><ref name="slowmisthacked-1160" /><ref name=":0">https://bitcointalk.org/index.php?topic=95738.0;topicseen</ref><ref>http://www.theverge.com/2012/8/10/3233711/second-bitcoin-lawsuit-is-filed-in-california</ref><ref name=":1">[http://www.scribd.com/doc/102576821 Brian Cartmell Et Al vs. Bitcoinica LP - Scribd] (Accessed Aug 7, 2024)</ref>
 
This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand.


== About Bitcoinica ==
== About Bitcoinica ==
“On July 13, 2012, a thief compromised the Bitcoinica Mt. Gox account. The thief made off with around 30% of Bitcoinica's bitcoin assets, which are likely to cost claimants of Bitcoinica debt. Additionally, 40000 USD was also reported to be stolen. The thief is still unknown at this point, but the theft has supposedly been entirely returned. This theft further complicated the May 2012 Bitcoinica Hack.”
Bitcoinica was a New-Zealand based exchange originally launched by teenager Zhou Tong<ref name="finextra-13" />, and was considered one of the most successful bitcoin exchanges as of July, 2012<ref name="finextra-13" />.


This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand.
The exchange was sold to UK-based rival Intersango in June of 2012<ref name="finextra-13" />.


The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.
In a lawsuit filed in California court, it is alleged that Donald Normal, Patrick Strateman, and Amir Taaki are operators of the Bitcoinica platform<ref name=":1" />.


Include:
== The Reality ==
When using an exchange, you are entrusting the safety of your assets to another individual. Pooling together funds creates a stronger incentive for a hacker to breach the wallet. Bitcoin theft transactions are generally irreversible.


* Known history of when and how the service was started.
Bitcoinica had already suffered a series of attacks by July of 2012, including:
* 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:
* An attack which claimed 18,547 bitcoin (estimated value $90k) within a few days after the platform was sold to Intersango in June 2012<ref name="finextra-13" />.
 
* 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 ==
== 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.
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.
“On July 13, 2012, a thief compromised the Bitcoinica Mt. Gox account."
{| class="wikitable"
{| class="wikitable"
|+Key Event Timeline - Bitcoinica Another Hot Wallet Hack
|+Key Event Timeline - Bitcoinica Another Hot Wallet Hack
Line 44: Line 27:
!Description
!Description
|-
|-
|July 1st, 2012 12:00:10 AM
|July 13th, 2012
|First Event
|Reported Event Incident
|This is an expanded description of what happened and the impact. If multiple lines are necessary, add them here.
|This is the reported date of the incident<ref name="bitcointalklistold-20" />.
|-
|-
|
|July 25th, 2012 10:41:02 PM MDT
|
|Aurum X Change Thread
|
|A BitcoinTalk thread delves into details which link Tong Zhou to the funds<ref name=":0" />.
|-
|-
|
|August 6th, 2012 4:30:00 PM MDT
|
|California Lawsuit Filed
|
|A California lawsuit is filed by Brian Cartmell, Jed McCaleb, Jesse Powell, and Roger Ver<ref name=":1" />. The complaint is brought against the known operators of the Intersango exchange<ref name=":1" />.
|-
|August 13th, 2012 11:18:00 AM MDT
|Finextra Lawsuit Article
|Finextra reports that several former users of the Bitcoinica exchange are preparing to launch a lawsuit against the exchange platform<ref name="finextra-13" />. The total losses from the hack are mentioned as 43,554 coins, which are estimated to be worth $87,000 USD<ref name="finextra-13" />.
|-
|February 3rd, 2017 10:00:04 AM MST
|Bitcoin.com News Mention
|Bitcoin.com includes the Bitcoinica hack along with others in an article on "Bitcoin Exchange Thefts You May Have Forgotten About"<ref name="newsdotbitcoin-7" />. This reports that 40,000 BTC were taken from Mt. Gox<ref name="newsdotbitcoin-7" />.
|}
|}
== Technical Analysis ==
The theft was possible due to a compromise of Bitcoinica's account at the Mt. Gox exchange<ref name="newsdotbitcoin-7" />.


== Total Amount Lost ==
== Total Amount Lost ==
$305 000 USD
Different sources have provided various estimates and figured for the amount lost.
How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?
{| class="wikitable"
|+
!Source
!Date
!Loss (BTC)
!Loss (USD)
!Notes
|-
|Finextra<ref name="finextra-13" />
|August 13th, 2012
|43,554
|$87,000
|Taken from the lawsuit.
|-
|BitcoinTalk<ref name="bitcointalklistold-20" />
|July 26th, 2013
|40,000
|$305,200
|Taken from Mt. Gox daily withdrawal limit<ref name="bitcointalklistold-20" />.
|-
|Bitcoin.com<ref name="newsdotbitcoin-7" />
|February 3rd, 2017
|40,000
|N/A
|Mentions the stash held in Mt. Gox specific to July of 2012, and there is no indication that this article believes the number to be an estimate. No USD equivalent is provided.
|}
 
 
 
"The thief made off with around 30% of Bitcoinica's bitcoin assets, which are likely to cost claimants of Bitcoinica debt. Additionally, 40000 USD was also reported to be stolen."
 
The total amount lost has been estimated at $305,000 USD.


== Immediate Reactions ==
== 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?
Bitcoinica reportedly told users that the bitcoin was stolen from the exchange and not customers, and promised that all withdrawal requests would be honoured<ref name="finextra-13" />.


== Ultimate Outcome ==
== Ultimate Outcome ==
What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?
Once a claims system was set up, the Bitcoinica platform then claimed that only half of user's funds would be returned<ref name="finextra-13" />.
 
 
Speculation of Tong's involvement was started on the BitcoinTalk forums<ref name="finextra-13" />. This ultimately resulted in a lawsuit being filed in August of 2012 against Bitcoinica, Intersango, and some associated individuals<ref name="finextra-13" />. The lawsuit alleges that these individuals "knowingly and wilfully conspired and agreed upon themselves to hinder, delay and deprive Plaintiffs of their rights with respect to the monies at issue"<ref name="finextra-13" />.
 
"The thief is still unknown at this point, but the theft has supposedly been entirely returned. This theft further complicated the May 2012 Bitcoinica Hack.”
 
=== California Lawsuit ===
A lawsuit was filed in August against the Bitcoinica team by Brian Cartmell, Jed McCaleb, Jesse Powell, and Roger Ver against the known operators of the Intersango platform<ref name=":1" />. It is alleged that Donald Normal, Patrick Strateman, and Amir Taaki are operators of the Bitcoinica platform<ref name=":1" />.<blockquote>Plaintiffs are informed and believe, and thereon allege, that: upon receiving Plaintiffs' instructions to return the monies, Defendants and DOES 1 through 60  converted, and took unlawful possession of, said monies for their own use and benefit by refusing to return all of the monies belonging to Plaintiffs, and instead retaining portions of said monies for the alleged pro rata distribution despite Plaintiff's refusal to permit the same, or for some other unpermitted purpose. Plaintiffs are further informed and believe, and thereon allege, that Defendants and said DOES did so intentionally, willfully and in flagrant disregard for Plaintiffs' rights.</blockquote>
 
=== Inclusion In Lists ===
The theft was included in a list published on BitcoinTalk<ref name="bitcointalklistold-20" /> and a list later published by Bitcoin.com News<ref name="newsdotbitcoin-7" />.
 
This theft is reportedly considered to be one of the most controversial as many well-known cryptocurrency community members were reported to be involved<ref name="newsdotbitcoin-7" />.


== Total Amount Recovered ==
== Total Amount Recovered ==
$0 USD
A generous thief returned the funds. More than 30% of the assets on the exchange had been stored in hot wallets.
What funds were recovered? What funds were reimbursed for those affected users?
 
There do not appear to have been any funds recovered in this case.


== Ongoing Developments ==
== Ongoing Developments ==
What parts of this case are still remaining to be concluded?
What parts of this case are still remaining to be concluded?
== Individual Prevention Policies ==
{{Prevention:Individuals:Placeholder}}
{{Prevention:Individuals:End}}


== Prevention Policies ==
== Platform Prevention Policies ==
This is a case where simply knowing who's holding the funds and storing them properly offline with multiple signatures would have avoided the issues.
This is a case where simply knowing who's holding the funds and storing them properly offline with multiple signatures would have avoided the issues.


== References ==
{{Prevention:Platforms:Placeholder}}
[https://news.bitcoin.com/bitcoin-exchange-thefts-forgotten/ The Bitcoin Exchange Thefts You May Have Forgotten | Featured Bitcoin News] (Jan 28)


[https://www.finextra.com/newsarticle/23973/users-sue-bitcoin-exchange-over-460k-in-missing-funds Users sue Bitcoin exchange over $460k in missing funds] (Feb 2)
{{Prevention:Platforms:End}}


[https://bitcointalk.org/index.php?topic=83794.msg923918#post_toc_27 <nowiki>List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses [Old]</nowiki>] (Jan 27)
== Regulatory Prevention Policies ==
{{Prevention:Regulators:Placeholder}}


[https://bitcoinmagazine.com/articles/bitcoinica_an_obituary-1336979566 Bitcoinica: An Obituary] (Feb 3)
{{Prevention:Regulators:End}}


[https://en.bitcoin.it/wiki/Bitcoinica Bitcoinica - Bitcoin Wiki] (Feb 3)
== References ==
 
<references>
[https://bitcointalk.org/index.php?topic=576337 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses] (Feb 14)
<ref name="newsdotbitcoin-7">[https://news.bitcoin.com/bitcoin-exchange-thefts-forgotten/ The Bitcoin Exchange Thefts You May Have Forgotten - Bitcoin.com News] (Accessed Jan 29, 2020)</ref>
 
<ref name="finextra-13">[https://www.finextra.com/newsarticle/23973/users-sue-bitcoin-exchange-over-460k-in-missing-funds Users sue Bitcoin exchange over $460k in missing funds - Finextra] (Accessed Feb 3, 2020)</ref>
[https://hacked.slowmist.io/en/?c=Exchange SlowMist Hacked - SlowMist Zone] (Jun 25)
<ref name="bitcointalklistold-20">[https://bitcointalk.org/index.php?topic=83794.msg923918#post_toc_27 <nowiki>List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses [Old] - BitcoinTalk</nowiki>] (Accessed Jan 28, 2020)</ref>
<ref name="bitcoinmagazine-23">[https://bitcoinmagazine.com/articles/bitcoinica_an_obituary-1336979566 Bitcoinica: An Obituary] (Feb 4, 2020)</ref>
<ref name="bitcoinwiki-24">[https://en.bitcoin.it/wiki/Bitcoinica Bitcoinica - Bitcoin Wiki] (Feb 4, 2020)</ref>
<ref name="bitcointalklist-87">[https://bitcointalk.org/index.php?topic=576337 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses] (Feb 15, 2020)</ref>
<ref name="slowmisthacked-1160">[https://hacked.slowmist.io/en/?c=Exchange SlowMist Hacked - SlowMist Zone] (Jun 26, 2021)</ref>
</references>

Latest revision as of 15:32, 13 September 2024

Notice: This page is a new case study and some aspects have not been fully researched. Some sections may be incomplete or reflect inaccuracies present in initial sources. Please check the References at the bottom for further information and perform your own additional assessment. Please feel free to contribute by adding any missing information or sources you come across. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

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Bitcoinica Logo/Homepage

This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand.[1][2][3][4][5][6][7][8][9]

About Bitcoinica

Bitcoinica was a New-Zealand based exchange originally launched by teenager Zhou Tong[1], and was considered one of the most successful bitcoin exchanges as of July, 2012[1].

The exchange was sold to UK-based rival Intersango in June of 2012[1].

In a lawsuit filed in California court, it is alleged that Donald Normal, Patrick Strateman, and Amir Taaki are operators of the Bitcoinica platform[9].

The Reality

When using an exchange, you are entrusting the safety of your assets to another individual. Pooling together funds creates a stronger incentive for a hacker to breach the wallet. Bitcoin theft transactions are generally irreversible.

Bitcoinica had already suffered a series of attacks by July of 2012, including:

  • An attack which claimed 18,547 bitcoin (estimated value $90k) within a few days after the platform was sold to Intersango in June 2012[1].

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.

“On July 13, 2012, a thief compromised the Bitcoinica Mt. Gox account."

Key Event Timeline - Bitcoinica Another Hot Wallet Hack
Date Event Description
July 13th, 2012 Reported Event Incident This is the reported date of the incident[2].
July 25th, 2012 10:41:02 PM MDT Aurum X Change Thread A BitcoinTalk thread delves into details which link Tong Zhou to the funds[7].
August 6th, 2012 4:30:00 PM MDT California Lawsuit Filed A California lawsuit is filed by Brian Cartmell, Jed McCaleb, Jesse Powell, and Roger Ver[9]. The complaint is brought against the known operators of the Intersango exchange[9].
August 13th, 2012 11:18:00 AM MDT Finextra Lawsuit Article Finextra reports that several former users of the Bitcoinica exchange are preparing to launch a lawsuit against the exchange platform[1]. The total losses from the hack are mentioned as 43,554 coins, which are estimated to be worth $87,000 USD[1].
February 3rd, 2017 10:00:04 AM MST Bitcoin.com News Mention Bitcoin.com includes the Bitcoinica hack along with others in an article on "Bitcoin Exchange Thefts You May Have Forgotten About"[10]. This reports that 40,000 BTC were taken from Mt. Gox[10].

Technical Analysis

The theft was possible due to a compromise of Bitcoinica's account at the Mt. Gox exchange[10].

Total Amount Lost

Different sources have provided various estimates and figured for the amount lost.

Source Date Loss (BTC) Loss (USD) Notes
Finextra[1] August 13th, 2012 43,554 $87,000 Taken from the lawsuit.
BitcoinTalk[2] July 26th, 2013 40,000 $305,200 Taken from Mt. Gox daily withdrawal limit[2].
Bitcoin.com[10] February 3rd, 2017 40,000 N/A Mentions the stash held in Mt. Gox specific to July of 2012, and there is no indication that this article believes the number to be an estimate. No USD equivalent is provided.


"The thief made off with around 30% of Bitcoinica's bitcoin assets, which are likely to cost claimants of Bitcoinica debt. Additionally, 40000 USD was also reported to be stolen."

The total amount lost has been estimated at $305,000 USD.

Immediate Reactions

Bitcoinica reportedly told users that the bitcoin was stolen from the exchange and not customers, and promised that all withdrawal requests would be honoured[1].

Ultimate Outcome

Once a claims system was set up, the Bitcoinica platform then claimed that only half of user's funds would be returned[1].


Speculation of Tong's involvement was started on the BitcoinTalk forums[1]. This ultimately resulted in a lawsuit being filed in August of 2012 against Bitcoinica, Intersango, and some associated individuals[1]. The lawsuit alleges that these individuals "knowingly and wilfully conspired and agreed upon themselves to hinder, delay and deprive Plaintiffs of their rights with respect to the monies at issue"[1].

"The thief is still unknown at this point, but the theft has supposedly been entirely returned. This theft further complicated the May 2012 Bitcoinica Hack.”

California Lawsuit

A lawsuit was filed in August against the Bitcoinica team by Brian Cartmell, Jed McCaleb, Jesse Powell, and Roger Ver against the known operators of the Intersango platform[9]. It is alleged that Donald Normal, Patrick Strateman, and Amir Taaki are operators of the Bitcoinica platform[9].

Plaintiffs are informed and believe, and thereon allege, that: upon receiving Plaintiffs' instructions to return the monies, Defendants and DOES 1 through 60  converted, and took unlawful possession of, said monies for their own use and benefit by refusing to return all of the monies belonging to Plaintiffs, and instead retaining portions of said monies for the alleged pro rata distribution despite Plaintiff's refusal to permit the same, or for some other unpermitted purpose. Plaintiffs are further informed and believe, and thereon allege, that Defendants and said DOES did so intentionally, willfully and in flagrant disregard for Plaintiffs' rights.

Inclusion In Lists

The theft was included in a list published on BitcoinTalk[2] and a list later published by Bitcoin.com News[10].

This theft is reportedly considered to be one of the most controversial as many well-known cryptocurrency community members were reported to be involved[10].

Total Amount Recovered

A generous thief returned the funds. More than 30% of the assets on the exchange had been stored in hot wallets.

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

Ongoing Developments

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

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

This is a case where simply knowing who's holding the funds and storing them properly offline with multiple signatures would have avoided the issues.

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.

References

  1. ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 Users sue Bitcoin exchange over $460k in missing funds - Finextra (Accessed Feb 3, 2020)
  2. ↑ 2.0 2.1 2.2 2.3 2.4 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses [Old] - BitcoinTalk (Accessed Jan 28, 2020)
  3. ↑ Bitcoinica: An Obituary (Feb 4, 2020)
  4. ↑ Bitcoinica - Bitcoin Wiki (Feb 4, 2020)
  5. ↑ List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses (Feb 15, 2020)
  6. ↑ SlowMist Hacked - SlowMist Zone (Jun 26, 2021)
  7. ↑ 7.0 7.1 https://bitcointalk.org/index.php?topic=95738.0;topicseen
  8. ↑ http://www.theverge.com/2012/8/10/3233711/second-bitcoin-lawsuit-is-filed-in-california
  9. ↑ 9.0 9.1 9.2 9.3 9.4 9.5 Brian Cartmell Et Al vs. Bitcoinica LP - Scribd (Accessed Aug 7, 2024)
  10. ↑ 10.0 10.1 10.2 10.3 10.4 10.5 The Bitcoin Exchange Thefts You May Have Forgotten - Bitcoin.com News (Accessed Jan 29, 2020)
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