BitMart suspends withdrawals after hackers drained almost $200 million in cryptocurrencies using a stolen private key

Hacker
Hacker

  • Crypto exchange BitMart suspended withdrawals Sunday after hackers ran off with $196 million from wallets.  
  • Sheldon Xia, BitMart’s CEO, said on Monday the crypto was taken using a stolen private key. 
  • Crypto fraud is on the rise. The BXH exchange lost $139 million last month after an admin key was leaked.
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Close to $200 million in cryptocurrencies has been stolen from wallets from the BitMart exchange using a stolen private key, according to the company’s chief executive. 

On Monday BitMart’s CEO Sheldon Xia said that they discovered that the cryptocurrencies were withdrawn using a stolen private key which usually enables a user to access their cryptocurrency.

“We have identified a large-scale security breach related to one of our ETH (ether) hot wallets and one of our BSC (binance smart chain) hot wallets, ” Xia said on Twitter.

PeckShield inc, a data analytics company said on Twitter Sunday $100 million was taken from the ethereum network and $96 million from the binance smart chain blockchain. The assets affected included meme coins floki inu and shiba inu, among several other altcoins. 

PeckShield inc. said that the money was stolen using a “pretty straightforward: transfer-out, swap, and wash” technique. 

After getting the funds out of BitMart, the hackers may have used a decentralized exchange aggregator to swap the stolen tokens for ether, according to PeckShield’s tweet. Then the hacker could have deposited the funds into a privacy protocol, which makes the money difficult to trace.

Xia had said on Twitter Sunday approximately $150 million was stolen from the centralized global exchange that is based in the Cayman Islands and BitMart suspended withdrawals from its crypto wallets. 

He has since said the company hopes to gradually resume the deposit and withdrawal functions on December 7. Xia also said BitMart will use its own funding to compensate affected users and they were talking to project teams about the most reasonable solutions such as token swaps. 

BitMart is not the only exchange to be hacked using a private key. In early November, $139 million was taken from the Boy X Highspeed, decentralized cross-chain exchange. The company’s CEO Neo Wang told CoinDesk this was due to a leaked administrator key and was probably an inside job

Last week, the Celsius Network’s CEO Alex Mashinsky said the crypto lending platform had lost $120 million from a hack on BadgerDAO, a decentralized finance platform.

In August, more than $600 million worth of cryptocurrencies was stolen from the poly network, but nearly half of the money was later returned.

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‘You shall not pass!’ Lord of the Rings-themed crypto token has been blocked by JRR Tolkein’s estate

A gold ring
A gold ring

  • The family of Lord of the Rings author JRR Tolkien have won a court ruling to shut down a “ring trilogy-themed” crypto token.
  • The creator of the “JRR token” must cease trading and remove all infringing content, according to media reports.
  • A number of cryptocurrencies have arisen from pop culture such as dogecoin, the Squid Game token and even Elon Musk’s dog.
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A cryptocurrency inspired by the “Lord of the Rings” trilogy was barred from operating on Tuesday after the family and estate of author JRR Tolkien brought legal action against the digital token’s creator. 

The “JRR token”, created by Florida-based developer Matthew Jensen, launched in August this year. Tolkien’s estate brought a copyright infringement complaint to the World Intellectual Property Organization (WIPO) within weeks, stating the token’s website included references to the writer’s famous fantasy fiction series, including its characters and other images.

At the center of the complaint was the use of the domain name “www.jrrtoken.com”. The WIPO arbitration process found in favor of Tolkein’s estate. According to a press release emailed on Tuesday by the Tolkein family’s lawyers – Maier Blackburn Solicitors – Jensen must immediately cease trading and remove all content referring to the token across its website and social media accounts. 

 The token which had launched in August had managed to accumulate 512 wallet addresses according to BSC scan. It also listed nine non-fungible tokens for sale on the OpenSea marketplace. 

“This was a particularly flagrant case of infringement, and the estate is pleased that it has been concluded on satisfactory terms,” Steve Maier, of Maier Blackburn Solicitors, said in the statement.

Jensen was not immediately available for comment when contacted by Insider. 

As part of the WIPO arbitration, Jensen had said the domain name was not identical to the Lord of the Rings creator’s name. “Specifically, the Complainant’s J R R TOLKIEN trademark contains the additional letters “L” and “I” which are conspicuously absent from the disputed domain name. The pronunciation is also different,” he said.

The JRR Token’s website, Twitter account and YouTube channel have now been deleted.

With hundreds of new cryptocurrencies created daily, it’s unlikely that the demise of the Lord of the Rings-inspired token will mark the end of digital tokens inspired by mainstream culture. Dogecoin, one of the world’s most widely traded cryptos, was based on a popular internet meme, giving rise to spinoffs that include the floki inu token, named after Elon Musk’s dog.  They’re not all harmless though. Earlier this month saw the sudden rise of the Squid Game token, which took its name from the record-breaking Korean Netflix show, that later turned out to be fraudulent.

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El Salvador removes bitcoin pricing feature scalpers were exploiting on its Chivo system

A Chivo sign for El Salvador's bitcoin system is displayed at a cafe in San Salvador, El Salvador.
A Chivo sign for El Salvador’s bitcoin system is displayed in San Salvador.

  • El Salvador yanks a feature on its Chivo network that people were illegally using to profit from bitcoin trades, Bloomberg reported.
  • The price-freezing feature gave users time to check bitcoin rates on other exchanges and decide whether to buy or sell.
  • Users said the Chivo wallet is now restricting trades to one every three minutes.
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El Salvador has taken away a pricing feature on its Chivo bitcoin network that people were illegally using to profit quickly from transactions with the cryptocurrency, according to a Bloomberg report.

Chivo no longer freezes bitcoin’s price for one minute before confirming a trade. The feature gave users time to check bitcoin pricing on other cryptocurrency exchanges and decide whether to buy or sell, an activity called scalping.

“Unfortunately many of our users used it for scalping, which is legal but without the option of having a frozen rate,” according to a translated Twitter post from Chivo. “Doing it with a frozen rate, comparing it with other exchanges in real time is a type of fraud.”

El Salvador in September became the first country in the world to allow bitcoin as a payment option and, with that, rolled out its Chivo crypto wallet.

With last week’s change in the pricing feature, users said the wallet is now restricting trades to one every three minutes and that the price at which they sell bitcoin isn’t the rate they receive when a transaction is approved, the report published Monday said.

A programmer in El Salvador who has closely tracked the Chivo rollout said it’s unclear if the price difference is a fee for using the wallet, a spread charged by Chivo, or the result of price swings during the three-minute delay.

Bitcoin during Monday’s session rose 4% to $62,967.52. Last week, the world’s most-traded cryptocurrency reached an all-time high of $66,930.39, according to CoinMarketCap, a day after the first bitcoin-futures ETF launched.

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The creator of a cryptocurrency called AriseCoin was sentenced to 5 years in prison for $4 million fraud scheme

This illustration photograph taken on July 19, 2021 in Istanbul shows a physical banknote and coin imitations of the Bitcoin cryptocurrency.
  • The person behind cryptocurrency AriseCoin was sentenced to five years in federal prison by the US Department of Justice.
  • AriseCoin CEO Jared Rice masterminded a scheme that swindled investors out of more than $4 million.
  • Rice, 33, pleaded guilty to one count of securities fraud in March 2019.
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The person behind cryptocurrency AriseCoin was sentenced to five years in federal prison by the US Justice Department for mastermiding a scheme that swindled investors out of more than $4 million.

AriseBank CEO Jared Rice, Sr. was also ordered to pay $4,258,073 in restitution by US District Judge Ed Kinkeade on August 25. CoinDesk was first to report.

Rice, 33, pleaded guilty to one count of securities fraud in March 2019, making him one of the first individuals who pleaded guilty to securities fraud involving a cryptocurrency in US federal court, according to the department. He was arrested in Texas in 2018.

The scheme was built on the claim by Rice that AriseBank was the world’s “first decentralized banking platform” based on the proprietary digital currency AriseCoin, the DOJ said.

Rice would tell investors they could open accounts insured by the Federal Deposit Insurance Corporation and use traditional banking services such as credit cards linked to Visa.

The claims were false, and Rice, according to the DOJ, was not FDIC insured and was not a Visa partner.

Still, hundreds of investors believed him and bought approximately $4,250,000 in AriseCoin using digital currencies like bitcoin, ether, litecoin, as well as fiat money.

Rice then covertly converted these funds for his own personal use, according to the DOJ, instead of putting them with his bank. He spent the money on hotels, food, transportation, and a family law attorney.

Rice also failed to disclose that he pleaded guilty to state felony charges in 2018 in relation to an internet-related business scheme.

In the same year, Rice settled a civil action for a fraudulent initial coin offering involving AriseCoin.

Cryptocurrency fraud schemes have been on the rise as digital assets gain popularity, and fraudsters have become creative in how they swindle people.

Some instances have included fraudulent cryptocurrency domain registrations, blockchain scams, overseas investment schemes, and criminals impersonating Elon Musk.

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Finland is looking to hire a broker to sell 1,981 bitcoins seized in drug bust

A Bitcoin ATM machine, to buy or sell cryptocurrencies, is placed within a safety cage on January 29, 2021 in Barcelona, Spain.
A bitcoin ATM machine in Barcelona, Spain.

  • Finland is looking for a broker to sell 1,981 bitcoins seized in drug busts, Bloomberg reported.
  • The bitcoins, worth around $79 million at time of publication, are currently with Finnish Customs.
  • Hiring a broker, the government said, will allow for the safe and reliable selling of cryptocurrencies.
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Finland is looking to hire a broker to sell 1,981 bitcoins seized in drug busts to convert them into hard currency, Bloomberg first reported.

The bitcoins, worth around $79 million at time of publications, are currently with Finnish Customs.

According to Pekka Pylkkanen, the authority’s director of financial management, a broker will ensure the safe and reliable selling of cryptocurrencies.

The country’s customs authority is expecting to sign up to three brokers for a two-year agreement valued at roughly €250,000 ($297,000) and could reach as much as €2 million in the event of more seizures, Bloomberg reported. The range takes into consideration the volatile price movement of the assets.

Most of the seized bitcoins (1,666 out of 1,981) were confiscated in 2016 after the arrest of Finnish drug dealer Douppikauppa, according to The Block. The government, at that time, told authorities they were prohibited from storing the coins on virtual currency exchanges and must keep them off digital platforms.

The customs authority was reportedly looking to sell as early as 2018 but feared this might fall into the hands of criminals yet again, The Block reported.

The rocketing price of bitcoin, however, seems to have prompted Finnish authorities to liquidate.

Multiple countries in recent years have sold cryptocurrencies seized during criminal investigations with the US first taking the step in 2014.

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Hong Kong police arrest four over alleged $155 million Tether money laundering scheme

Bitcoin symbol atm
Regulators are paying close attention to the crypto world.

  • Hong Kong authorities arrested four men over an alleged $155 million money laundering scheme, according to reports.
  • The men, aged between 24 and 33, had made transactions in Tether on a trading platform, officials said.
  • Cryptocurrencies have long been used in crime, as they can provide anonymity and be hard to trace.
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Hong Kong customs authorities have arrested four people in connection with a suspected $155 million money laundering scheme using the cryptocurrency Tether.

According to reports in Bloomberg and local media, four men aged between 24 and 33 were arrested in an operation called “Coin Breaker.”

Hong Kong customs officials told the media that the men had opened various bank accounts and then made transactions in Tether – the biggest stablecoin – through a crypto exchange, outlets reported. The transactions involved HK$1.2 billion of cryptocurrency, worth roughly $155 million.

The officials said it was the first time they had detected a suspected money laundering scheme that used digital currency. They did not name the crypto trading platform involved. Insider has contacted the Hong Kong customs office.

Read more: Your ultimate crypto reading list: 27 books that experts say everyone should read to better understand digital currencies and invest in them profitably

Cryptocurrencies have long been used in crime, thanks to the fact that they can be used anonymously and are hard to trace.

On Friday, the US District Court in Seattle said a 33-year old identity thief who used bitcoin to avoid detection was sentenced to three years in prison.

And on Tuesday, London’s Metropolitan Police said it had seized $249 million worth of cryptocurrency in a suspected money laundering case.

Top lawmakers have repeatedly raised concerns about crypto crime. US Treasury Secretary Janet Yellen in January suggested “curtailing” cryptocurrencies saying: “Many are used – at least in a transaction sense – mainly for illicit financing.”

In Hong Kong, as in the UK, crypto companies have to register with the financial watchdog for anti-money laundering purposes.

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UK police seize $250 million in cryptocurrency tied to an international money-laundering operation

A hand holds a bitcoin toward the sky in this photo representation of the cryptocurrency.
Suspected criminals have been using cryptocurrency in money-laundering operations.

  • UK police seize £180 million in cryptocurrency, Metropolitan Police said Tuesday.
  • The team of detectives who seized the funds just weeks ago took hold of a then-record £114 million in crypto.
  • A 39-year old woman was arrested on suspicion of money-laundering offenses.
  • See more stories on Insider’s business page.

Police in the UK following a criminal investigation took hold of about £180 million in cryptocurrency, with the seizure topping a record amount made just weeks before by law enforcement.

Metropolitan Police on Tuesday said detectives with its Economic Crime Command received intelligence about the transfer of criminal assets, leading to the July 10 discovery of nearly £180 million ($249 million) worth of cryptocurrency. The Met didn’t specify the type of cryptocurrency that was seized. The detectives have been focusing on an ongoing investigation into a suspected international money laundering.

A 39-year-old woman was arrested on suspicion of money laundering offenses on June 24, the Met said, adding that she was released on bail.

The same team of detectives on June 24 seized £114 million in cryptocurrency – then a record amount – as part of their probes.

“Proceeds of crime are laundered in many different ways. While cash still remains king in the criminal world, as digital platforms develop we’re increasingly seeing organized criminals using cryptocurrency to launder their dirty money,” said Graham McNulty, the Met’s deputy assistant commissioner, in a statement.

Police said the investigation has been complex and wide-ranging and will continue for months to identify the people at the center of the money-laundering ring.

Meanwhile, in the US, a “prolific identity thief” who fraudulently used credit cards, pocketed $500,000, and bought bitcoin has been sentenced to three years in prison, according to the federal court in Seattle.

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