GBL Exchange Exit Scam: Difference between revisions

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(COMPLETE 30 minutes. Review of wiki article. Updated template. Updated date to October 26th, 2013. Integrated information from Kyle Gibson, BitcoinTalk, BitcoinExchangeGuide, Comparitech, a news article by Network World, and a news article by The Daily Beast. Several new sources with additional information were examined and added to the article.)
 
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{{Imported Case Study 2|source=https://www.quadrigainitiative.com/casestudy/gblexchangeexitscam.php}}
{{Case Study Under Construction}}{{Unattributed Sources}}
{{Unattributed Sources}}


This highlights the importance of mandating transparency and a proper registry for exchanges. The operators claimed to be from Hong Kong, when in fact they were three citizens of mainland China. This actually ended fairly quickly with their arrest within 3 months in December 2013.
GBL Exchange was a cryptocurrency exchange which claimed to be based in Hong Kong. The perpetrators were arrested within 3 months in December 2013.


This exchange or platform is based in China, or the incident targeted people primarily in China.<ref name="kylegibson-86" /><ref name="bitcointalklist-87" /><ref name="bitcoinexchangeguide-218" />
This exchange or platform is based in China, or the incident targeted people primarily in China.<ref name=":0">[https://www.thedailybeast.com/the-missing-bitcoin-millions The Missing Bitcoin Millions - The Daily Beast] (Accessed Nov 8, 2024)</ref><ref>http://www.coindesk.com/4-1m-goes-missing-chinese-bitcoin-trading-platform-gbl-vanishes/</ref><ref>https://www.businessinsider.com/bitcoin-exchange-gbl-holding-41-billion-vanishes-2013-11</ref><ref name=":1">http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20131105000045&cid=1102</ref>


== About GBL Exchange ==
== About GBL Exchange ==
"Unfortunately for the GBL investors the exchange turned out to be a con and on October 26 the people behind the scheme absconded with all of the funds"... "Bitcoin reached an all-time high of more than $400 on Wednesday, just weeks after a multimillion-dollar exchange in China disappeared."
The operators claimed to be from Hong Kong<ref name="kylegibson-86" /><ref name="bitcointalklist-87" />, when in fact they were three citizens of Beijing in mainland China<ref name="bitcointalklist-87" />.


This exchange or platform is based in China, or the incident targeted people primarily in China.
"At the time, there was a Bitcoin craze in China, which lasted for much of the latter half of 2013 and was credited as the leading cause of the November 2013 bubble."<ref name="bitcointalklist-87" /> "The rise of Bitcoin, the famous open source virtual currency, has been a fascinating story. Started just four years ago, the value of a Bitcoin (abbreviated as “BTC”) recently hit a new high of 425USD, an impressive jump considering that its value at the beginning of 2013 was around 13USD. Even more impressively the market cap for the entire Bitcoin currency system of 11,986,700 BTC is, as of writing, just over 4.75 billion USD."<ref name=":2">[https://www.networkworld.com/article/2225793/software/chinese-bitcoin-exchange-vanishes-along-with-bitcoins.html Chinese Bitcoin exchange vanishes along with bitcoins - Network World] (Accessed Nov 8, 2024)</ref>


The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.
The exchange reportedly promoted itself extensively online by barraging online communities with fee waivers for new users<ref name=":0" /><ref name=":1" />.
 
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 ==
== The Reality ==
This sections is included if a case involved deception or information that was unknown at the time. Examples include:
"There were more than a few clues that GBL was not on the up-and-up. A big red flag was the issue that the company’s servers were located in Beijing even though the GBL web site claimed to be in Hong Kong. Then there was the problem that while the exchange had registered with the Hong Kong authorities a financial services license had never been issued. Finally there was the capping by the exchange in early October of  the amount of money users could convert into other currencies and the issuing of shares in GBL in lieu."<ref name=":2" />


* When the service was actually started (if different than the "official story").
"The company registered its domain in Hong Kong, but was based in China. It never obtained the licenses to run a financial services firm. The site lifted some of its content from elsewhere on the web and used a Gmail address instead of a corporate email domain."<ref name=":0" />
* 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.
"Unfortunately for the GBL investors the exchange turned out to be a con and on October 26 the people behind the scheme absconded with all of the funds"
{| class="wikitable"
{| class="wikitable"
|+Key Event Timeline - GBL Exchange Exit Scam
|+Key Event Timeline - GBL Exchange Exit Scam
Line 44: Line 25:
!Description
!Description
|-
|-
|October 1st, 2013 12:00:21 AM MDT
|May 2013
|Main Event
|Start Of GBL Exchange
|Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.
|According to BitcoinTalk, the exchange ran between "Between May 2013 to October 2013"<ref name="bitcointalklist-87" />. This is matched by an article in Network World<ref name=":2" />.
|-
|-
|
|October 26th, 2013
|
|Absconding With Funds
|
|The platform shut down on October 26th, 2013<ref name="kylegibson-86" /><ref name="bitcointalklist-87" /><ref name=":0" />. "Unfortunately for the GBL investors the exchange turned out to be a con and on October 26 the people behind the scheme absconded with all of the funds".<ref name="kylegibson-86" /> "on October 26 the people behind the scheme absconded with all of the funds in the form of Bitcoins which are, of course, untraceable"<ref name=":2" />
|-
|November 13th, 2013 8:55:32 PM MST
|Network World Article Published
|Online news outlet Network World publishes information about the GBL exchange<ref name=":2" />. This includes some background on the bitcoin price at the time, the exchange, red flags, and the ultimate outcome<ref name=":2" />. This article describes bitcoin as "untracable"<ref name=":2" />.
|-
|November 14th, 2013 3:45:00 AM MST
|The Daily Beast Article Published
|The Daily Beast mentioned the price rise of bitcoin, along with the recent multi-million dollar loss stemming from the GBT exchange<ref name=":0" />.
|-
|December 2013
|Founders Arrested
|The founders of the GBL exchange are arrested in mainland China. (They had incorrectly claimed to be from Hong Kong.)
|}
|}
== 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 ==
== Total Amount Lost ==
The total amount lost has been estimated at $4,100,000 USD.
Kyle Gibson reported the amount lost at 9,640 BTC<ref name="kylegibson-86" />, with an estimated value of $4,100,000 USD<ref name="kylegibson-86" />. Comparitech also uses the figure of $4.1m USD<ref name="comparitech-10032" />. An article from Network World notes that "almost 1,000 people deposited around $4.1 million in Chinese Yuan"<ref name=":2" />. Daily Beast says "as much as $4.1 million USD worth" of bitcoin<ref name=":0" />.


How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?
A post on BitcoinTalk estimated that 22000 BTC were taken<ref name="bitcointalklist-87" /> and lists the value of the stolen bitcoin at $3,437,446 USD<ref name="bitcointalklist-87" />, or the equivalent of 4185.734 BTC in January 2014 when compared against other events at a similar time frame<ref name="bitcointalklist-87" />.


== Immediate Reactions ==
== Immediate Reactions ==
Line 62: Line 58:


== 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?
... "Bitcoin reached an all-time high of more than $400 on Wednesday, just weeks after a multimillion-dollar exchange in China disappeared."<ref name="kylegibson-86" />
 
This actually ended fairly quickly with their arrest within 3 months in December 2013.
 
The incident was included in a timeline put together by Kyle Gibson<ref name="kylegibson-86" />, a post on BitcoinTalk<ref name="bitcointalklist-87" />, and a guide on BitcoinExchangeGuide<ref name="bitcoinexchangeguide-218" />. The incident is also included in a summary by Comparitech<ref name="comparitech-10032" />.
 
"While this virtual heist should have dampened overall Bitcoin market confidence it has hardly made a ripple and the price of BTC has remained strong. In the long term however this is yet another lure for regulators in every country to start looking at Bitcoin with an eye to reigning the currency in to bring it under some kind of governmental control and inevitably tax it into submission."<ref name=":2" />


== Total Amount Recovered ==
== Total Amount Recovered ==
Line 84: Line 86:


== Regulatory Prevention Policies ==
== Regulatory Prevention Policies ==
This highlights the importance of mandating transparency and a proper registry for exchanges.
{{Prevention:Regulators:Placeholder}}
{{Prevention:Regulators:Placeholder}}


Line 89: Line 93:


== References ==
== References ==
<references><ref name="kylegibson-86">[https://medium.com/@kylegibson/100-crypto-thefts-a-timeline-of-hacks-glitches-exit-scams-and-other-lost-cryptocurrency-873c87fd5522 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents] (Jan 25, 2020)</ref>
<references>
 
<ref name="kylegibson-86">[https://medium.com/@kylegibson/100-crypto-thefts-a-timeline-of-hacks-glitches-exit-scams-and-other-lost-cryptocurrency-873c87fd5522 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents - Kyle Gibson] (Accessed Jan 25, 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="bitcointalklist-87">[https://bitcointalk.org/index.php?topic=576337 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses - BitcoinTalk] (Accessed Feb 15, 2020)</ref>
 
<ref name="bitcoinexchangeguide-218">[https://bitcoinexchangeguide.com/bitcoin/scams-hacks/ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com] (Accessed Mar 5, 2020)</ref>
<ref name="bitcoinexchangeguide-218">[https://bitcoinexchangeguide.com/bitcoin/scams-hacks/ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com] (Mar 5, 2020)</ref></references>
<ref name="comparitech-10032">[https://www.comparitech.com/crypto/cryptocurrency-scams/ Worldwide crypto & NFT rug pulls and scams tracker - Comparitech] (Accessed Dec 15, 2022)</ref>
</references>

Latest revision as of 15:13, 8 November 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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GBL Exchange was a cryptocurrency exchange which claimed to be based in Hong Kong. The perpetrators were arrested within 3 months in December 2013.

This exchange or platform is based in China, or the incident targeted people primarily in China.[1][2][3][4]

About GBL Exchange

The operators claimed to be from Hong Kong[5][6], when in fact they were three citizens of Beijing in mainland China[6].

"At the time, there was a Bitcoin craze in China, which lasted for much of the latter half of 2013 and was credited as the leading cause of the November 2013 bubble."[6] "The rise of Bitcoin, the famous open source virtual currency, has been a fascinating story. Started just four years ago, the value of a Bitcoin (abbreviated as “BTC”) recently hit a new high of 425USD, an impressive jump considering that its value at the beginning of 2013 was around 13USD. Even more impressively the market cap for the entire Bitcoin currency system of 11,986,700 BTC is, as of writing, just over 4.75 billion USD."[7]

The exchange reportedly promoted itself extensively online by barraging online communities with fee waivers for new users[1][4].

The Reality

"There were more than a few clues that GBL was not on the up-and-up. A big red flag was the issue that the company’s servers were located in Beijing even though the GBL web site claimed to be in Hong Kong. Then there was the problem that while the exchange had registered with the Hong Kong authorities a financial services license had never been issued. Finally there was the capping by the exchange in early October of  the amount of money users could convert into other currencies and the issuing of shares in GBL in lieu."[7]

"The company registered its domain in Hong Kong, but was based in China. It never obtained the licenses to run a financial services firm. The site lifted some of its content from elsewhere on the web and used a Gmail address instead of a corporate email domain."[1]

What Happened

"Unfortunately for the GBL investors the exchange turned out to be a con and on October 26 the people behind the scheme absconded with all of the funds"

Key Event Timeline - GBL Exchange Exit Scam
Date Event Description
May 2013 Start Of GBL Exchange According to BitcoinTalk, the exchange ran between "Between May 2013 to October 2013"[6]. This is matched by an article in Network World[7].
October 26th, 2013 Absconding With Funds The platform shut down on October 26th, 2013[5][6][1]. "Unfortunately for the GBL investors the exchange turned out to be a con and on October 26 the people behind the scheme absconded with all of the funds".[5] "on October 26 the people behind the scheme absconded with all of the funds in the form of Bitcoins which are, of course, untraceable"[7]
November 13th, 2013 8:55:32 PM MST Network World Article Published Online news outlet Network World publishes information about the GBL exchange[7]. This includes some background on the bitcoin price at the time, the exchange, red flags, and the ultimate outcome[7]. This article describes bitcoin as "untracable"[7].
November 14th, 2013 3:45:00 AM MST The Daily Beast Article Published The Daily Beast mentioned the price rise of bitcoin, along with the recent multi-million dollar loss stemming from the GBT exchange[1].
December 2013 Founders Arrested The founders of the GBL exchange are arrested in mainland China. (They had incorrectly claimed to be from Hong Kong.)

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

Kyle Gibson reported the amount lost at 9,640 BTC[5], with an estimated value of $4,100,000 USD[5]. Comparitech also uses the figure of $4.1m USD[8]. An article from Network World notes that "almost 1,000 people deposited around $4.1 million in Chinese Yuan"[7]. Daily Beast says "as much as $4.1 million USD worth" of bitcoin[1].

A post on BitcoinTalk estimated that 22000 BTC were taken[6] and lists the value of the stolen bitcoin at $3,437,446 USD[6], or the equivalent of 4185.734 BTC in January 2014 when compared against other events at a similar time frame[6].

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

... "Bitcoin reached an all-time high of more than $400 on Wednesday, just weeks after a multimillion-dollar exchange in China disappeared."[5]

This actually ended fairly quickly with their arrest within 3 months in December 2013.

The incident was included in a timeline put together by Kyle Gibson[5], a post on BitcoinTalk[6], and a guide on BitcoinExchangeGuide[9]. The incident is also included in a summary by Comparitech[8].

"While this virtual heist should have dampened overall Bitcoin market confidence it has hardly made a ripple and the price of BTC has remained strong. In the long term however this is yet another lure for regulators in every country to start looking at Bitcoin with an eye to reigning the currency in to bring it under some kind of governmental control and inevitably tax it into submission."[7]

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

Coming soon.

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

This highlights the importance of mandating transparency and a proper registry for exchanges.

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. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 The Missing Bitcoin Millions - The Daily Beast (Accessed Nov 8, 2024)
  2. ↑ http://www.coindesk.com/4-1m-goes-missing-chinese-bitcoin-trading-platform-gbl-vanishes/
  3. ↑ https://www.businessinsider.com/bitcoin-exchange-gbl-holding-41-billion-vanishes-2013-11
  4. ↑ 4.0 4.1 http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20131105000045&cid=1102
  5. ↑ 5.0 5.1 5.2 5.3 5.4 5.5 5.6 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents - Kyle Gibson (Accessed Jan 25, 2020)
  6. ↑ 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses - BitcoinTalk (Accessed Feb 15, 2020)
  7. ↑ 7.0 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 Chinese Bitcoin exchange vanishes along with bitcoins - Network World (Accessed Nov 8, 2024)
  8. ↑ 8.0 8.1 Worldwide crypto & NFT rug pulls and scams tracker - Comparitech (Accessed Dec 15, 2022)
  9. ↑ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Accessed Mar 5, 2020)
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