BitPay Social Engineering
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Although not a cryptocurrency exchange, this kind of exploit could apply to many exchanges that have more personal relationships with customers.
This exchange or platform is based in United States, or the incident targeted people primarily in United States.[1][2][3][4]
About BitPay
This exchange or platform is based in United States, or the incident targeted people primarily in United States.
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.
| Date | Event | Description |
|---|---|---|
| December 11th, 2014 | Bitcoin Payments Made | BitPay CEO Stephen Pair and executive chairman Tony Gallippi authorize 3 payments totaling 5,000 bitcoin on December 11th and 12th[2]. They believe that these bitcoin are headed for SecondMarket, but instead they are sending them to a malicious entity who has gained unauthorized access to Bryan Krohn's email account to forward the request. |
| June 8th, 2015 | Insurance Claim Denied | Massachusetts Bay Insurance Company denies the claim to cover the lost bitcoin which was submitted by BitPay[2]. |
| September 15th, 2015 | BitPay Files Lawsuit | BitPay files a lawsuit against the Massachusetts Bay Insurance Company in the US District Court for the Northern District of Georgia[2]. |
| September 16th, 2015 9:51:00 PM MDT | CoinDesk Article About Lawsuit | CoinDesk publishes an article about the lawsuit[2]. |
Technical Details
The attack appears to have taken place over multiple stages.
Infiltration Of BTC Media CEO David Bailey
According to a lawsuit and documents obtained by the Atlanta Business Chronicle, the first stage of intrusion was through the infiltration of BTC Media CEO David Bailey, whose computer was reportedly infiltrated[2]. It is unclear whether the computer was infiltrated or just the email account, and how this intrusion happened.
Phishing Email To Access BitPay CFO Bryan Krohn
According to the lawsuit files, Bryan Krohn, who was acting as BitPay's chief financial officer, was sent an email from BTC Media CEO David Bailey's account. This reportedly asked Krohn to comment on a bitcoin industry document. The industry document, however, was a ruse to get Bryan Krohn to click on a link to the attacker's website, which captured his email access credentials when he attempted to log in to view the document.
Impersonation To Fraudulently Purchase Bitcoin
The hacker used Mr. Krohn's credentials to determine that SecondMarket had a relationship with BitPay where they did not have to pay upfront to purchase bitcoin. They created a fictitious email conversation history between Mr. Krohn and SecondMarket for a purchase of 1,000 BTC. This was then forwarded to BitPay CEO Stephen Pair and executive chairman Tony Gallippi.
Continuation Of Further Fraudulent Purchases
The hacker proceeded to purchase another 1,000 BTC under similar pretext, then attempted a larger purchase of 3,000 BTC. The BitPay CEO Stephen Pair emailed Krohn to confirm this was valid, and the hacker responded to confirm it was. In this email, SecondMarket employee Gina Guarnaccia was copied, who quickly revealed that the bitcoin had not been purchased by their company.
Further, the insurance company argued that because bitcoins exist in an electronic medium, any incident resulting in their loss wouldn't be considered as taking place on BitPay’s "premises". "It is Hanover's understanding that the bitcoins were held online, and transferred online, and are not on the physical premises of BitPay. It does not appear that the bitcoin transactions involved a transfer of property from inside the premises to outside the premises," the insurer wrote. "As such, Hanover must respectfully decline to provide coverage for this loss under the Computer Fraud Insuring Agreement."
Total Amount Lost
The total amount lost has been estimated at $1,800,000 USD.
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
“The scam was apparently discovered because the CEO copied Bitpay's real customer on the final email about the transfer of the 3,000 coins, and the customer then replied back that they did not purchase the bitcoins.”
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
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
- ↑ 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents (Accessed Jan 25, 2020)
- ↑ 2.0 2.1 2.2 2.3 2.4 2.5 2.6 BitPay Sues Insurer After Losing $1.8 Million in Phishing Attack - CoinDesk (Accessed Mar 5, 2020)
- ↑ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Accessed Mar 5, 2020)
- ↑ Atlanta's Bitpay got hacked for $1.8 million in bitcoins - BizJournals (Accessed Mar 14, 2020)