BTC-E Domain Seized, ICOs in the SEC’s Crosshairs: BTCManager’s Week in Review July 31
For the week ending July 30, BTC-E’s involvement in the Mt.Gox hack was revealed by a WizSecruity Report according to which Hackers collaborated with BTC-E and its owner Alexander Vinnik to steal the wallet.dat file stored in the centralized databases of Mt. Gox to gain access to nearly 630,000 bitcoin. The wallet.dat file was stolen in September 2011 and the hackers moved the coins from Mt. Gox to BTC-E owner Vinnik’s personal wallet in mid-2013.
“After the coins entered Vinnik’s wallets, most were moved to BTC-e and presumably sold off or laundered. In total some 300,000 BTC ended up on BTC-e, while other coins were deposited to other exchanges, including MtGox itself. Some of the funds moved to BTC-e seem to have moved straight to internal storage rather than customer deposit addresses, hinting at a relationship between Vinnik and BTC-e,” wrote the WizSecurity team.
Vinnik was was arrested on July 25, while on holiday in Greece on several charges including money laundering and the domain of BTC-E has been seized by U.S. law enforcement. Now that the exchange is offline, the question for users is what will happen to their cryptocurrency holdings on the exchange?
So far, no withdrawals have been possible and the only information available on the possibility of future withdrawal comes from a four-day old tweet from BTC-E’s official Twitter account stating that BTC-E is working on restoration of the service, which can be expected to occur within five to ten days. According to a Russian language post on bitcointalk, BTC-E will start to process of refunding traders from September 1 and also stated, “in the next 1-2 weeks, we will evaluate and publish information about how much money fell into the hands of the FBI and what amount of funds is available for return.” In the event that law enforcement agencies are revealed to have seized all (or a majority of) coins on BTC-E and sell them off on auctions, as other federal agencies have done in the past, this will create some downward pressure on both bitcoin and altcoins.
The price of bitcoin, however, was largely unaffected by the BTC-E news and continued to stay strong ahead of the expected Bitcoin fork on August 1 that will create bitcoin and the new altcoin ‘bitcoin cash.’ BTC-USD started the week at $2,750 and ended the week roughly on the same level after reaching an intra-week low of around $2,450.
The altcoin market had a bumpy week after the SEC announced in a press release on July 25 that some digital tokens will be subject to securities laws going forward stating that US Securities law “may” apply to offers, sales, and trading of interests in virtual organization, targeting the increasingly popular Initial Coin Offerings (ICOs). This marks the first official ICO regulation to hit the market and has stirred up mix emotions in the cryptocurrency community and among U.S.-based startups looking to launch their own tokens through an ICO.
The price of ether traded around $225, but then declined to $185 following the SEC announcement. However, by July 30 the ETH-USD managed to recover back to above the $200 mark suggested that there are not as many loose hands holding ether as some had previously thought.
On August 1, the Bitcoin network will split with the emergence of Bitcoin Cash (BCH). This article will outline the choices you have if you hold bitcoin and some potential outcomes of the split. If you own bitcoin and it is held by an exchange or third party storage provider, then there is a chance you may not receive the BCH that is due to you. Given the surprise announcement, many exchanges do not have the time to adjust to the changing landscape. For example, exchanges such as Coinbase and Bitstamp will not be crediting customer’s accounts with Bitcoin Cash. However, exchanges like Bittrex and Kraken, as well as hardware wallets providers, will be crediting BCH balances.
Blockchain startup Veritaseum has become the latest victim of an ICO hack. During its July 24 sale, the platform was compromised and lost about $8.4 million worth of cryptocurrency.
Veritaseum is a blockchain project that seeks to utilize the blockchain in order to create smart contracts that allow for direct peer-to-peer engagement within the capital markets space.During the crowdsale on July 23, the company was allowing users to buy VERI tokens for the financial platform is about to launch. However, an unknown hacker was able to steal some of the tokens that he or she then sold to other unsuspecting buyers who were participating in the sale.
The swift takedown of the darknet markets (DNMs) AlphaBay and Hansa, an announcement to exit the market from Bitmixer and the arrest of Alexander Vinnik for laundering $4 billion have all shown that fungibility is still an area for improvement for Bitcoin. As bitcoin shakes off its shady image, Monero has drawn increased attention. The privacy-focused cryptocurrency experienced an outburst over July 26, peaking at $46.99.
Not long after the two largest DNMs get taken down, the largest bitcoin mixer goes offline. Mixing services attempt to negate the public blockchain and provide anonymity. With the largest DNMs infiltrated, the exit of Bitmixer brings additional risk to using bitcoin for illicit purposes as it raises the question of whether mixing services are even safe anymore.
A hacker, operating under the pseudonym “PhishKingz,” has allegedly generated over one million dollars in just 14 months on the recently closed down dark web marketplace AlphaBay by running a phishing scam.
The hacker gave an interview to DeepDotWeb detailing how profitable the operation has been. “I have a trade volume on LocalBitcoins of about 500 BTC in total. This is all on an account I created one year and two months ago. Everything is stolen BTC from phishing and I have a cryptopay.me account that has had over £400,000 ($515,000) worth in BTC over the last six months. Phishing is very profitable on the dark web.”
On July 19, the National Bank of the Republic of Belarus (NBRB) announced plans to incorporate blockchain technology into a wide range of industries and it will start with financial services.
Following its commitment to becoming a leading European IT hub, Belarus reported the creation of an information network based on distributed ledger technology. Through a press release published on the NBRB’s website, the central bank detailed its intended plans for widespread blockchain adoptions in Belarus.
Due to the potential offered by these features, an information network for Belarusian use was built on the blockchain. In order for consensus mechanisms and verification of data to function at an optimum, the bank is allowing any bank or other non-bank financial institutions to own a verifying node on the blockchain.
Wider markets showed anything but confidence in the Federal Reserve last week, as the central bank, and everyone else, begins to wonder, ‘how will they wind down the biggest monetary stimulus in the history of mankind?’ The Fed stated at the July meeting that it, “expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated.”
No one knows how far the Fed’s balance sheet reduction will go and Janet Yellen is set to leave the position of chair in February 2018, leaving many question marks about how the central bank will manage the normalization and whether or not inflation may grow even stronger under loose monetary policy. The USD weakened against major currencies. If the US experiences greater inflation resulting from low interest rates and a desire to reduce the debt load on the US economy, then BTC-USD will serve as the perfect carry trade to take advantage of a growing inflation differential.