Bitcoin7 Exchange Hack/Fraud: Difference between revisions
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{{ | {{Case Study Under Construction}}{{Unattributed Sources}} | ||
Once again, this is a case where the official story is unverifiable and the identities of the operators are unknown. Sources claim that Bitcoin7 had quite high withdrawal fees, which support the narrative. | [[File:Bitcoin7exchange.jpg|thumb|Bitcoin7 Exchange Logo/Homepage]]Once again, this is a case where the official story is unverifiable and the identities of the operators are unknown. Sources claim that Bitcoin7 had quite high withdrawal fees, which support the narrative.<ref name="99bitcoins-83" /><ref name="kylegibson-86" /><ref name="bitcointalklist-87" /><ref name="bitcoinexchangeguide-218" /><ref name=":0">[https://web.archive.org/web/20131127043653/https://flippa.com/2999232-bitcoin-exchange-ready-to-launch-immediately-multi-currency-14-languages Bitcoin Exchange - Ready to launch immediately! Multi-currency, 14 languages - Flippa] (Accessed Nov 15, 2024)</ref><ref>https://forum.bitcoin.org/index.php?topic=17043.msg219839#msg219839 (Accessed Dec 3, 2024)</ref><ref>https://web.archive.org/web/20110816000324/https://bitcoin7.com/ (Accessed Dec 3, 2024)</ref><ref>https://web.archive.org/web/20110619004208/http://forum.bitcoin.org/index.php?topic=17043.msg219839#msg219839</ref> | ||
== About Bitcoin7 == | == About Bitcoin7 == | ||
“Bitcoin7 was a business operating in 2011 that was once the third-largest BTC/USD exchange behind Tradehill and Mt Gox | “Bitcoin7 was a business operating in 2011 that was once the third-largest BTC/USD exchange behind Tradehill and Mt Gox.”<ref name="newsdotbitcoin-7" /> | ||
== The Reality == | == The Reality == | ||
| Line 37: | Line 15: | ||
== What Happened == | == What Happened == | ||
“On October 5, 2011, the company reported a theft of 5,000 BTC allegedly stemming from a group of Russian hackers.”<ref name="newsdotbitcoin-7" /> | |||
{| class="wikitable" | {| class="wikitable" | ||
|+Key Event Timeline - Bitcoin7 Exchange Hack/Fraud | |+Key Event Timeline - Bitcoin7 Exchange Hack/Fraud | ||
| Line 44: | Line 22: | ||
!Description | !Description | ||
|- | |- | ||
|October | |September 5th, 2011 | ||
| | |Reported Dwolla Account Seizure | ||
| | |According to information later revealed when the Bitcoin7 site was placed for auction, their issues started with their Dwolla account containing $100,000 being seized<ref name=":0" />. Those funds were reportedly lost at this point. | ||
|- | |||
|October 5th, 2011 | |||
|Hacking Event Reported | |||
|The Bitcoin7 company reports that they have experienced a theft of 5,000 BTC which they allege stems from a group of Russian hackers<ref name="newsdotbitcoin-7" />. The hacker was "officially from Eastern Europe or Russia"<ref name="bitcointalklistold-19" />. In actuality, the hack had been carried out by one of their employees<ref name=":0" />. | |||
|- | |||
|May 26th, 2012 2:39:04 PM MDT | |||
|BitcoinTalk Article Lists This Event | |||
|The event is listed in a thread put together by dree12 on BitcoinTalk, which features a list of different exchange heists, thefts, scams, and loss events<ref name="bitcointalklistold-19" />. | |||
|- | |||
|July 4th, 2013 1:48:14 PM MDT | |||
|99Bitcoin Article Published | |||
|99Bitcoin publishes a list of "the biggest scams in bitcoin's history"<ref name="99bitcoins-83" /> and features Bitcoin7 at the number 5 position. This includes some additional information and speculation on what happened. | |||
|- | |- | ||
| | |November 26th, 2013 9:36:53 PM MST | ||
| | |Flippa Auction For Bitcoin7 Website | ||
| | |An auction is run online for the Bitcoin7 website, with a minimum bid of $1,500 USD<ref name=":0" />. This provides considerable insight into the claimed sequence of events behind the exchange's collapse<ref name=":0" />. | ||
|- | |- | ||
| | |February 3rd, 2017 10:00:04 AM MST | ||
| | |Bitcoin News List Featured Hack | ||
| | |The event is featured in a list put together by the popular Bitcoin.com website<ref name="newsdotbitcoin-7" />. | ||
|} | |} | ||
== Technical Details == | |||
There have been multiple events attributed to the downfall of the exchange: | |||
=== Dwolla Account Seizure === | |||
According to information provided when the bitcoin exchange was placed for auction, "Dwolla.com seized about 100 000$ and our account. This seizure was completely illegal as they claimed they do not allow chargebacks. However someone has tricked their system and they seized our account as well as confiscated the money."<ref name=":0" /> | |||
=== Internal Bitcoin Theft Incident === | |||
While the hacking event was originally attributed to an individual "from Eastern Europe or Russia"<ref name="bitcointalklistold-19" />, many suspected that this was an inside job, which was later found to be the case. As they would later claim when listing their site for sale, "we got 5000 BTC stolen. The platform's security was NOT compromised as we later found that the theft was an inside job"<ref name=":0" /> | |||
== Total Amount Lost == | == Total Amount Lost == | ||
$50 000 USD | There was an estimate on BitcoinTalk based on the order book size that 11,000 bitcoin were taken<ref name="bitcointalklistold-19" />. This was based on the order book size of 15,000 bitcoin, and that 3 of 4 wallets were breached<ref name="bitcointalklistold-19" />. A note there lists the total loss at up to 15,000 bitcoin<ref name="bitcointalklistold-19" />. The value of the 11,000 bitcoin has been estimated at $50,000 USD at the time of the loss<ref name="bitcointalklistold-19" />. Later version of the thread would expand the lower bound to 5,000 bitcoin<ref name="bitcointalklist-87" />. | ||
99Bitcoins reported the loss at 10,000 bitcoin<ref name="99bitcoins-83" />. It is unclear where that estimate came from, however a reference in the article to "a reminder to the Bitcoin community to stop trusting new exchanges without identification" suggests the BitcoinTalk article, which reports 11,000 bitcoin<ref name="bitcointalklistold-19" />. | |||
== 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? | 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? | ||
“On October 5, 2011, the company reported a theft of 5,000 BTC allegedly stemming from a group of Russian hackers. However, many believe the breach was an inside job and employees ran off with the funds.”<ref name="newsdotbitcoin-7" /> | |||
== Ultimate Outcome == | == Ultimate Outcome == | ||
The Bitcoin7 platform ultimately shut down<ref name="bitcointalklistold-19" />. | |||
“The Bitcoin7 domain was later sold for $10,000 USD in 2013, but has been offline ever since this incident.” | |||
The incident was later featured in a thread on BitcoinTalk<ref name="bitcointalklistold-19" /> and a Bitcoin News article on Bitcoin.com<ref name="newsdotbitcoin-7" />. | |||
== Total Amount Recovered == | == Total Amount Recovered == | ||
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? TBD | ||
== Individual Prevention Policies == | |||
This is a another case where simply knowing who's holding the funds and storing them properly offline with multiple signatures would have avoided the issues. | |||
== Prevention Policies == | {{Prevention:Individuals:Placeholder}} | ||
{{Prevention:Individuals:End}} | |||
== Platform Prevention Policies == | |||
This is a another 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 another case where simply knowing who's holding the funds and storing them properly offline with multiple signatures would have avoided the issues. | ||
{{Prevention:Platforms:Placeholder}} | |||
{{Prevention:Platforms:End}} | |||
== Regulatory Prevention Policies == | |||
{{Prevention:Regulators:Placeholder}} | |||
{{Prevention:Regulators:End}} | |||
[https://bitcointalk.org/index.php?topic=576337 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses] (Feb | == References == | ||
<references> | |||
[https://bitcoinexchangeguide.com/bitcoin/scams-hacks/ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com] (Mar | <ref name="newsdotbitcoin-7">[https://news.bitcoin.com/bitcoin-exchange-thefts-forgotten/ The Bitcoin Exchange Thefts You May Have Forgotten - Bitcoin News] (Accessed Jan 29, 2020)</ref> | ||
<ref name="bitcointalklistold-19">[https://bitcointalk.org/index.php?topic=83794.msg923918#msg923918 <nowiki>List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses [Old] - BitcoinTalk</nowiki>] (Accessed Jan 28, 2020)</ref> | |||
<ref name="99bitcoins-83">[https://web.archive.org/web/20160701223324/http://99bitcoins.com/the-biggest-scams-in-bitcoin-history/ The biggest scams in Bitcoin history - 99Bitcoin Archive July 1st, 2016 4:33:24 PM MDT] (Accessed Feb 15, 2020)</ref> | |||
<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> | |||
<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] (Mar 5, 2020)</ref> | |||
</references> | |||
Latest revision as of 16:22, 3 December 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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Once again, this is a case where the official story is unverifiable and the identities of the operators are unknown. Sources claim that Bitcoin7 had quite high withdrawal fees, which support the narrative.[1][2][3][4][5][6][7][8]
About Bitcoin7
“Bitcoin7 was a business operating in 2011 that was once the third-largest BTC/USD exchange behind Tradehill and Mt Gox.”[9]
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
“On October 5, 2011, the company reported a theft of 5,000 BTC allegedly stemming from a group of Russian hackers.”[9]
| Date | Event | Description |
|---|---|---|
| September 5th, 2011 | Reported Dwolla Account Seizure | According to information later revealed when the Bitcoin7 site was placed for auction, their issues started with their Dwolla account containing $100,000 being seized[5]. Those funds were reportedly lost at this point. |
| October 5th, 2011 | Hacking Event Reported | The Bitcoin7 company reports that they have experienced a theft of 5,000 BTC which they allege stems from a group of Russian hackers[9]. The hacker was "officially from Eastern Europe or Russia"[10]. In actuality, the hack had been carried out by one of their employees[5]. |
| May 26th, 2012 2:39:04 PM MDT | BitcoinTalk Article Lists This Event | The event is listed in a thread put together by dree12 on BitcoinTalk, which features a list of different exchange heists, thefts, scams, and loss events[10]. |
| July 4th, 2013 1:48:14 PM MDT | 99Bitcoin Article Published | 99Bitcoin publishes a list of "the biggest scams in bitcoin's history"[1] and features Bitcoin7 at the number 5 position. This includes some additional information and speculation on what happened. |
| November 26th, 2013 9:36:53 PM MST | Flippa Auction For Bitcoin7 Website | An auction is run online for the Bitcoin7 website, with a minimum bid of $1,500 USD[5]. This provides considerable insight into the claimed sequence of events behind the exchange's collapse[5]. |
| February 3rd, 2017 10:00:04 AM MST | Bitcoin News List Featured Hack | The event is featured in a list put together by the popular Bitcoin.com website[9]. |
Technical Details
There have been multiple events attributed to the downfall of the exchange:
Dwolla Account Seizure
According to information provided when the bitcoin exchange was placed for auction, "Dwolla.com seized about 100 000$ and our account. This seizure was completely illegal as they claimed they do not allow chargebacks. However someone has tricked their system and they seized our account as well as confiscated the money."[5]
Internal Bitcoin Theft Incident
While the hacking event was originally attributed to an individual "from Eastern Europe or Russia"[10], many suspected that this was an inside job, which was later found to be the case. As they would later claim when listing their site for sale, "we got 5000 BTC stolen. The platform's security was NOT compromised as we later found that the theft was an inside job"[5]
Total Amount Lost
There was an estimate on BitcoinTalk based on the order book size that 11,000 bitcoin were taken[10]. This was based on the order book size of 15,000 bitcoin, and that 3 of 4 wallets were breached[10]. A note there lists the total loss at up to 15,000 bitcoin[10]. The value of the 11,000 bitcoin has been estimated at $50,000 USD at the time of the loss[10]. Later version of the thread would expand the lower bound to 5,000 bitcoin[3].
99Bitcoins reported the loss at 10,000 bitcoin[1]. It is unclear where that estimate came from, however a reference in the article to "a reminder to the Bitcoin community to stop trusting new exchanges without identification" suggests the BitcoinTalk article, which reports 11,000 bitcoin[10].
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?
“On October 5, 2011, the company reported a theft of 5,000 BTC allegedly stemming from a group of Russian hackers. However, many believe the breach was an inside job and employees ran off with the funds.”[9]
Ultimate Outcome
The Bitcoin7 platform ultimately shut down[10].
“The Bitcoin7 domain was later sold for $10,000 USD in 2013, but has been offline ever since this incident.”
The incident was later featured in a thread on BitcoinTalk[10] and a Bitcoin News article on Bitcoin.com[9].
Total Amount Recovered
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? TBD
Individual Prevention Policies
This is a another case where simply knowing who's holding the funds and storing them properly offline with multiple signatures would have avoided the issues.
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 another 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
- ↑ 1.0 1.1 1.2 The biggest scams in Bitcoin history - 99Bitcoin Archive July 1st, 2016 4:33:24 PM MDT (Accessed Feb 15, 2020)
- ↑ 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents (Jan 25, 2020)
- ↑ 3.0 3.1 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses - BitcoinTalk (Accessed Feb 15, 2020)
- ↑ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Mar 5, 2020)
- ↑ 5.0 5.1 5.2 5.3 5.4 5.5 5.6 Bitcoin Exchange - Ready to launch immediately! Multi-currency, 14 languages - Flippa (Accessed Nov 15, 2024)
- ↑ https://forum.bitcoin.org/index.php?topic=17043.msg219839#msg219839 (Accessed Dec 3, 2024)
- ↑ https://web.archive.org/web/20110816000324/https://bitcoin7.com/ (Accessed Dec 3, 2024)
- ↑ https://web.archive.org/web/20110619004208/http://forum.bitcoin.org/index.php?topic=17043.msg219839#msg219839
- ↑ 9.0 9.1 9.2 9.3 9.4 9.5 The Bitcoin Exchange Thefts You May Have Forgotten - Bitcoin News (Accessed Jan 29, 2020)
- ↑ 10.0 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses [Old] - BitcoinTalk (Accessed Jan 28, 2020)