Bit LC Theft

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Bit LC Logo/Homepage

BitLC was a service provider website which offered a mining pool, online wallet, and a bitcoin exchange. On February 13th, 2013, the website went offline with the founder Jim Nelin claiming that all coins in the cold storage wallet had been taken by an investor named Erick. Users remain with no recovery and limited answers about what happened.

About Bit LC

The exchange was reportedly based in Panama. Description from the homepage:

We are a Bitcoin Service Provider offering free and low cost Bitcoin Services, such as a high-end mining pool, online wallet service, bitcoin exchange and a lot more. We're using cutting edge technology to provide you with the best and most secure services available. Our system have full IPv6 support, is built with highest possible security measurements and we're adding new features and services continuously.

Website: bitlc.net

Director: Javier Lopez

Founder: Jim Nelin (BitcoinTalk user Jine). Reportedly from Sweden.

The Reality

Funds on the BitLC platform cold storage were apparently directly accessible by platform operators including an individual named Erick. There were no access restrictions preventing the entirety of the customer funds from being transferred away from the platform by founder Jim Nelin.

The homepage of the service emphasized the anonymous nature of the bitcoin network.

Bitcoin's peer-to-peer topology and lack of central administration make it infeasible for any authority, governmental or otherwise, to manipulate the value of Bitcoins or induce inflation by producing more of them. It also makes it near-impossible trace to you as a person.

What Happened

According to reports in February, a large investor of the BitLC exchange platform reportedly took the funds from the cold storage wallet in mid-January.

Key Event Timeline - Bit LC Theft

Date	Event	Description
May 22nd, 2011 8:46:40 AM MDT	Jine Account Registration	Jim Nelin, the founder of BitLC, registers their BitcoinTalk forum account.
January 15th, 2013 3:32:53 PM MST	Website Operating Normally	The BitLC website is captured and appears to be online and operating normally.
January 19th, 2013	Jim Nelin Notices	According to the report on the site, this is when founder Jim Nelin first became aware that the total of all funds was deficient to pay back customers.
February 13th, 2013	Website Notice Published	A notification is published on the bitlc.net website homepage on this date, although in one area the date is incorrectly stated as 2012. Erick reportedly "ha[s]n't been in contact with [Jim], anyone [he] know[s,] or tried to sign in to any of our servers for the past 3 months or so."
March 2nd, 2013 4:10:15 PM MST	Capture Of Website Notice	The BitLC website is captured with details of the bankruptcy/closure of the BitLC platform.
July 15th, 2013 11:08:33 PM MDT	Jine Reportedly Quitting Bitcoin	In his final post of 2013, Jim Nelin reports that he's "quited the bitcoin-community cause of this, and [he] won't be back anytime soon".
February 11th, 2014 10:06:43 PM MST	Still No News From Erick	In one of his posts, Jim Nelin adds a couple of sentences to update that he "still ha[s]n't heard of Erick, and [doesn't] think [he] ever will".
March 7th, 2014 12:36:26 AM MST	Last Activity Of Jine	Jim Nelin's last activity prior to the final login in 2016.
August 8th, 2016 12:55:13 PM MDT	Bitcoin Mining Equipment Sales	Jim Nelin posts on BitcoinTalk to advertise the sale of mining equipment.
November 29th, 2016 10:04:03 AM MST	Final Jine Login	The Jine account for Jim Nelin logs into the BitcoinTalk forum for the final time.
October 23rd, 2023 12:26:09 PM MDT	New Reddit Thread	A new Reddit thread is posted on the BitLC theft.

Technical Analysis

"This alleged theft was unique in that coins held in the hot wallet were safe, but coins held in a cold wallet compromised. The thief is not expected to have access to the coins regardless, so there was little financial gain from this theft. Erick, allegedly the only one with physical access to Bit LC Inc.'s cold wallet, has failed to communicate and withdraw coins. Bit LC Inc. therefore was required to declare bankruptcy. There is no proof that Erick intentionally stole the coins; indeed, some evidence asserts that he or she may simply have disappeared in some manner."

After the fact, Jim Nelin reports on having trust issues with Erick earlier in the process. It appears to suggest that some form of scheme was used to protect the cold storage key, however specific details appear elusive.

I couldn't trust even Erick with the encryption key - just to avoid situations like these - where he actually could use the funds.

I'm paranoid in that way of thinking, you wouldn't even begin to understand how much.

I actually had/have (unsure if i still do) a copy of the cold storage wallet to (not identical, but pretty close), encrypted with HIS gpg-key (this way - it became failsafe - it required 2 parties to get access to it).

Total Amount Lost

The peak amount of bitcoin on the platform was 8,000 bitcoin, and the final amount was much less than this.

The total amount lost has been estimated at $51,000 USD.

Immediate Reactions

Many users were unaware of the

Initial Notice On Bit LC Website

The Bit LC website displayed a notice approximately a month after the cold wallet was reportedly emptied.

Community Reactions To Collapse

Multiple users posted their reactions on the BitcoinTalk forum.

Posting for two reasons - firstly does anybody know what's going on here ? The "press release" raises more questions than it answers .... And also to bump it to the recent posts list.

can we get a bit more information about wtf is going on? I read the release but it really answered nothing. There are missing coins and some guy named Erick who could never guess the password or something?!

Jine's story does sound like something Elmore Leonard would have written.

Denials By Jim Nelin

Jim Nelin has denied taking the funds on multiple occasions.

Mark me as whatever you want, my mission here is to get "my baby" back online and retrieve the funds.

This wasn't anything that i either choice nor wanted, if i really wanted to scam anyone, i could have taken out all those funds my self.

If i recall correctly, the record in funds we ever had was close to 8000 BTC at one moment. That's a lot more then what's we're missing now.

An update tho:

A few interested investors have contacted me the past day wanting to buy-out everything under the agreement of supplying the us with the lost funds.

I will keep the contact with them and you some-how updated, and let you know how this turns out.

Currently that sounds a awesome solution, as I'm willing to give up everything just to get you funds back.

If if i had any savings personally, i would use those to compensate for the lost - trust me.

Ultimate Outcome

The incident was included in a list posted on the BitcoinTalk forum, and propagated to other lists. Some further updates from Jim Nelin were received, which were not very promising.

July 2013 Updates

Jine returned to BitcoinTalk in July 2013.

You deserve an update regarding this. I can say that nothing what so ever have changed in this matter.

I've given up regarding reclaiming the funds. I've personally lost about 228 BTC cause of this - and i know that I'm not alone in that...

Erick have been AWOL since the incident and I haven't had any success in contacting him.

A friend of mine visited his last know address in NY only to find out that there was noone around by that name.

Since the closure of Bitlc.net I've quited the entire bitcoin-community due to this incident. I haven't made a single transaction nor do i have any involvement in either Bit LC Inc. nor the bitcoin community anymore.

Bit LC Inc. is (as far as i know) no longer a company - i got a notification about a foreclosure due to unpaid taxes (i think), but as I'm not a board member nor responsible - I don't know anything more than that.

Final Update - February 2014

A final update from Jine was included with his post in February 2014.

By the way - I still haven't heard of Erick, and i don't think i ever will. I haven't visited bitcointalk since my last post, at all.

Jine went inactive in 2016.

The BitLC website has been replaced with another cryptocurrency website.

Total Amount Recovered

There do not appear to have been any funds recovered in this case. While some interest was reportedly expressed by potential investors to buy the platform by paying losses, it does not appear that any of those panned out.

Ongoing Developments

A recent Reddit post in 2013 has renewed the calls for an investigation, although the post faced limited engagement by the Reddit community.

About 11 years ago there was a mining pool called BitLC.net and it was pretty decent pool. A bunch of people were using it when it suddenly went offline and there is speculation that Jine, the owner, stole the funds. I'm going to consolidate some information here and it's my plan to look into things more. If it seems that the funds are still in a cold wallet and untouched over the past 10 years there likely isn't anything that can be done. If the funds have moved I will look into legal options.

Individual Prevention Policies

When using any third party custodial platform (such as for trading), it is important to verify that the platform has a full backing of all assets, and that assets have been secured in a proper multi-signature wallet held by several trusted and trained individuals. If this can't be validated, then users should avoid using that platform. Unfortunately, most centralized platforms today still do not provide the level of transparency and third party validation which would be necessary to ensure that assets have been kept secure and properly backed. Therefore, the most effective strategy at present remains to learn proper self custody practices and avoid using any third party custodial platforms whenever possible.

Store the majority of funds offline. By offline, it means that the private key and/or seed phrase is exclusively held by you and not connected to any networked device. Examples of offline storage include paper wallets (seed phrase or key written down and deleted from all electronic media), hardware wallets, steel wallet devices, etc...

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

Platform Prevention Policies

Cold storage needs to be a proper multi-signature wallet with all keys stored completely offline. One person should not hold all the keys, especially an unknown person. There needs to be training in place to ensure that all operators are fully aware of best practices.

All wallets, minting functions, and critical infrastructure should be implemented with a multi-signature requirement, with a recommended minimum of 3 signatures required. This means that making important changes or approving spending will require the keys held by at least 3 separate individuals within the organization to approve. The multi-signature should be implemented at the lowest layer possible, all key holders should have security training, and all key holders should be empowered and encouraged to exercise diligence.

Work with other industry platforms to set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

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

Regulatory Prevention Policies

All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.

Set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services within the country, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

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