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07 September 2012, 11:37

Robbery and blackmail with Bitcoins

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Bitcoin logo The electronic currency Bitcoin is just like real cash money its proponents say, and recent events seem to confirm that. This week has seen two incidents, one with it being stolen from a currency exchange and another where it's the currency a blackmailer wants to be paid in.

The BitFloor Bitcoin exchange has apparently been hacked with the attackers managing to steal around 24,000 Bitcoins. The Preev currency calculator says this sum is currently equivalent to €207,000. According to Roman Shtylmann, the operator of the exchange, the robbery was possible because the attackers had access to the unencrypted backups of wallet keys. These keys allowed them to transfer the Bitcoins.

Shtylmann published a public forum post announcing that he has had to suspend the service for the time being. "This attack took the vast majority of the coins BitFloor was holding on hand", said Shtylmann, but he emphasised that he has access to the current logs of all transactions and existing accounts, and that these can be used to initiate account repayments to BitFloor customers if required. Whether or how BitFloor will be able to continue is currently uncertain.

Bitcoins are a digital, non-government currency that is generated within a distributed network using a cryptographic algorithm. As anonymity is part of this currency's concept, stealing a digital wallet from services such as BitFloor has the same effect as stealing a physical wallet: the money is gone. Bitcoins have repeatedly been a desirable target: in May 2012, attackers stole coins from the Bitcoinica exchange, and in March 2012, Bitcoins worth €150,000 were stolen during a break-in at the Linode cloud service. Major Bitcoin exchange Mt. Gox was hit in 2011, which dramatically decreased the value of the currency.

However, some hacks have a positive effect on the virtual currency – albeit indirectly: for example, US hackers claim they have gained access to the tax information of Mitt Romney, the US Republican's Presidential candidate, via the servers of accountancy firm PriceWaterhouseCoopers. The hackers say that they have sent encrypted copies of the documents to numerous US media services and threaten to release the keys. However, the hackers added that Romney, who has often been criticised for having a tax rate of 13 per cent, could prevent the release of the documents by paying some hush money – amounting to one million Bitcoins. Venture Beat reports that the demand gave immediate momentum to the currency's exchange rate: on Wednesday, the value of Bitcoins was reported to have increased by 6 per cent against the US dollar.

Whether the hackers are actually holding sensitive material remains unclear; according to CNet, the US Secret Service has started to investigate the matter. The report notes that PriceWaterhouseCoopers has issued a statement saying that it has so far found no evidence of an intrusion into its own computer system.


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