Veritaseum Peer To Peer Platform

Notice: This page is a freshly imported case study from the original repository. The original content was in a different format, and may not have relevant information for all sections. Please help restructure the content by moving information from the 'About' and 'General Prevention' sections to other sections, and add any missing information or sources you can find. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Notice: This page contains sources which are not attributed to any text. The unattributed sources follow the initial description. Please assist by visiting each source, reviewing the content, and placing that reference next to any text it can be used to support. Feel free to add any information that you come across which isn't present already. Sources which don't contain any relevant information can be removed. Broken links can be replaced with versions from the Internet Archive. See General Tutorial on Wikis, Anatomy of a Case Study, and/or Citing Your Sources Guide for additional information. Thanks for your help!

Veritaseum

Veritaseum was launching a peer to peer exchange platform. Investors were able to purchase VERI tokens on the open market and as part of the ICO.

Some of these VERI tokens were stored in the wallet of Reggie Middleton, which was secured using SMS-based two factor authentication. The phone was SIM-swapped, and this was used to authorize the withdrawal of the tokens, which were promptly sold on the market.

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

About Veritaseum

"Veritaseum builds blockchain-based, peer-to-peer capital markets as software on a global scale. We enable the seamless connection of parties and assets without the need for a third or authoritarian interest." "Any entity with internet access can participate in these capital markets on a peer-to-peer and one-on-one basis."

"Despite very low scores which were published pre-ICO across the board on ICO tracker and scoring websites, Veritaseum raised $14.8 million in ETH from investors during their 2017 ICO and through subsequent efforts thereafter."

"In May 2017 Veritaseum completed an ICO, aiming to build a peer-to-peer platform for trading without the need for brokerages, traditional exchanges or banks. It is not known how much was raised in the ICO."

"But only one month later, in July 2017, the founder of Vertiaseum, Reggie Middleton, posted in the Veritaseum Slack group that hackers had stolen 36,000 VERI tokens at the time worth approximately USD$8.7M (USD$32.5M as at 1 January 2017)."

"After one user posted a screen capture of Veritaseum founder Reggie Middleton mentioning the hack on Slack, Middleton later confirmed the theft. There, he said the hackers "dumped" the tokens within a few hours and without the public knowing about the hack."

"Middleton claimed that the hackers defeated two factor authorisation on two different accounts and “fineggeled 3rd parties security (sic)”. The sale of the stolen VERI tokens for Ether caused a flash crash in the price of VERI and a substantial (USD$80 or so) drop in the price, which has only recovered in late 2017."

"If Middleton’s comments are true, then even with multiple security layers, the business was still exposed to a determined hack."

"The hack seemed to be very sophisticated, but there is at least one corporate partner that may have dropped the ball and be liable," Middleton said. "We'll let the lawyers sort that out, if it goes that far." Bleeping Computer reached out to the Veritaseum CEO, but Middleton declined to provide additional comment at this time.

"Veritaseum says hackers gained control of the phone belonging to Middleton in a SIM-swap attack – where a victim's phone number is transferred to another device."

"While there is no indication that the Vertiaseum hack was an inside job, it would be a very determined hacker to break through two factor authentication protocols."

"Based on the address of the hacker or hackers that Middleton located in his post, all the stolen tokens were exchanged on EtherDelta, a decentralized trading platform, of which 80 percent of the volume is in VERI. The exchange only supports the VERI to ETH trading pair." "According to the transaction time, nearly $8 million worth of VERI were traded to ETH, the consecutive large sell orders for which led to a major drop of VERI exchange price to ETH."

"The good news is that actual investors weren’t affected by the Ethereum theft. Instead, Middleton says that tokens were only stolen from him and his team, and not actual token buyers. When questioned on whether Veritaseum was being blasé about the theft, Middleton fired back."

“There are 100M tokens issued, the hackers stole about 37k. As I said, it is quite disconcerting, but it is not the end of the world,” said Middleton. “In the scheme of things, this is small. I am not downplaying the seriousness of the heist either, but I am looking at the heist for what it is. A company that we use was compromised, the vulnerability was closed, and we are investigating whether we should move against that company or not.”

"The SEC issued a press release recently outlining multiple fraud claims against Veritaseum and its founder and ‘financial guru’, Reginald Middleton. In the statement, they requested from the court an emergency freeze on Veritaseum’s remaining $8 million in assets."

"Additionally, the SEC charges that Veritaseum, led by Middleton, engaged in price manipulation on an unregulated exchange. Not only that, there are several instances where the SEC accused Middleton of moving investor assets into his personal account."

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.

Key Event Timeline - Veritaseum Peer To Peer Platform

Date	Event	Description
July 23rd, 2017	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

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

The total amount lost has been estimated at $8,600,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

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

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

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

Company assets should be stored in multi-signature wallets with all keys in cold storage.

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.