Russian Intelligence Agency FSB Linked to $450 Million in Missing Bitcoin

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Russian Intelligence Agency FSB Linked to $450 Million in Missing Bitcoin

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Russia’s Federal Security Service (FSB) has been linked to the disappearance of $450 million in bitcoin from the controversial crypto exchange World Exchange Services (WEX). 

Controversial Exchange WEX/BTC-e

In late 2018, Russian-based crypto exchange WEX collapsed amidst accusations of money-laundering the disappearance of hundreds of millions of dollars in bitcoin and other cryptoassets. According to a BBC report published Nov. 15, the Russian FSB intelligence agency may have played a role in misappropriating the lost funds. 

WEX was previously known as BTC-e before being shut down in 2017 by international authorities for its alleged involvement in money-laundering activities. Alexander Vinnik, the exchange’s alleged operator, was arrested at the time and accused of laundering more than $4 billion in cryptocurrency since the exchange’s launch in 2011. 

A PwC report earlier in the year said, 

WEX is most notably known for its alleged involvement in the laundering of some $4 billion, transferring of funds to facilitate operations of the threat actor tracked by PwC as Blue Athena, and being responsible for cashing out 95% of all ransomware payments made since 2014.

FSB Crypto Fund

According to the BBC report, WEX/BTC-e co-founder Alexey Bilyuchenko says he was forced to hand over information about customer’s digital wallets to members of the FSB in 2018, which the intelligence agency allegedly used to obtain more than $450 million in user funds.

The BBC claims to have obtained audio recordings from individuals discussing the importance of bringing WEX under FSB control, including one man the BBC identifies as Konstantin Malofeev, a pro-Kremlin Russian billionaire currently under U.S. sanctions. 

Bilyuchenko reportedly received multiple calls threatening to close the WEX exchange if he did not comply. According to the report, the WEX co-founder was taken to FSB offices in Moscow over the course of three days in April 2018, where he handed over flash drives containing details on accessing exchange user funds. 

Bilyuchenko says he was told that WEX client money would be transferred to the “FSB Russia Fund.” Several months after handing over the data, WEX froze customer funds and withdrawals, before completely shutting down in late 2018. 

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Bitcoin Shakes Off Recent Negativity and Moves Back Above $8,500

Around 08:50 UTC on Sunday (November 17), Bitcoin shook off some of the negativity surrounding its price by moving above $8,550 for the first time since 14:00 UTC on November 15. 

One thing that happened on November 15 that may have increased the negative around Bitcoin was the Weibo accounts of both Binance and TRON getting blocked that day.

Anyway, here is the 24-hour price chart from CryptoCompare:

BTC-USD 24 Hour Chart - 17 Nov 2019.png

Although the Bitcoin price spent much of early Sunday hovering around the $8,500 level, at 08:50 UTC, the BTC price reached $8,565, and as you can see from the above chart, currently (as of 17:19 UTC on November 17), Bitcoin is trading around $8,577, up just over 1% in the past 24-hour period.

Although Bitcoin’s one-week return-on-investment (ROI) is -5.36%, its 30-day and one-year ROI figures are +7.50% and +54.86% respectively. Bitcoin’s market cap dominance is 65.93%.

Earlier today, Chris Burniske, a partner at crypto-focused venture capital firm Placeholder, said that he expected in the long term to see Bitcoin be used much more for collateral purposes than for payments:

He then posted some more tweets to explain. In short, Burniske believes that, in general, people want to hold deflationary-supply assets, such as Bitcoin, because “part of the promise of those supply curves is they should store value well.” 

He then said that Bitcoin should “lean into this”:

Here is how Burniske envisions the future for BTC and ETH:

 

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German Watchdog Issues Warning Over Bulgarian Crypto Broker

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German Watchdog Issues Warning Over Bulgarian Crypto Broker

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The German federal financial supervisory authority (BaFin) has issued a warning to investors over the activity of Bulgarian crypto broker 5 Capital. 

According to a report by Finance Magnates, the German watchdog said that 5 Capital offers European investors contract for difference (CFD) products that allegedly include exposure to crypto-assets. 

Crypto businesses and exchanges in Germany are required to apply for a license to BaFin by the end of 2019 as apart of compliance with new anti-money laundering regulations being adopted by the country. While derivatives that reference crypto-assets are not included in the same regulatory category, they are restricted by the European Securities and Market Authorities (EMSA) in regards to retail investors. 

According to the report, BaFin has been increasingly wary of the cryptocurrency industry, issuing regular warnings to investors about the potential risks associated with bitcoin. While 5 Capital is based out of Sofia, Bulgaria, the company will have to apply for a license and be in full compliance with BaFin by the end of the year in order to continue operating in Germany. 

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Bobby Lee Regrets Supporting the ‘Extremely Dangerous’ SegWit2x Proposal

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Bobby Lee Regrets Supporting the ‘Extremely Dangerous’ SegWit2x Proposal

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On Saturday (November 16), Bobby Lee, co-founder and former CEO of BTCC (formerly BTCChina), the first Bitcoin exchange in China, expressed regret over his support in 2017 for the hard fork proposal SegWit2x.

Bobby Lee, whose brother, Charlie Lee, is the creator of Litecoin (LTC), has long been a pioneer in the cryptocurrency industry. He recently founded a Las Vegas-headquartered startup called Ballet, which has developed the ballet hardware wallet (the startup calls this the “World’s FIRST Multicurrency Non-electronic Physical Wallet”).

On Saturday via a series of tweets, Lee expressed his regret over supporting SegWit2x, the proposal that aimed to increase the transaction throughput of the Bitcoin network by doubling the block size from 1MB to 2MB via a hard fork in November 2017.

SegWit2x was the second half of the Bitcoin Scaling Agreement at Consensus 2017, aka the New York Agreement (NYA), “a scaling proposal made jointly by over 50 companies.” This agreement “intended to put an end to Bitcoin’s long-lasting scaling debate by increasing the block capacity through activating Segregated Witness and then doubling the block size.”

Segregated Witness (SegWit), the first part of the NYA, was proposed (as a soft fork) in late 2015 by Bitcoin developer Pieter Wuille; it got activated on 24 August 2017. As for the highly controversial SegWit2X, although it had been planned for 16 November 2017, its proponents announced on 8 November 2017 that they had decided to not go ahead with this hard fork. 

Lee started his tweetstorm by saying that he realizes now that it was “extremely dangerous & irresponsible to push for a contentious hard fork”:

Next, he talked about his support for SegWit and native SegWit address format “Bech32” (described in Bitcoin Improvement Proposal 0173):

And when he was asked by one Twitter user what he thought about Bitcoin Cash, he replied:

 

Cryptocurrency Exchanges Have Come a Long Way, and That’s Good for Users

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Cryptocurrency exchanges are undoubtedly one of the main pillars of the cryptocurrency industry. They let new users buy crypto directly and bridge the gap between the traditional financial world and this nascent space.

Exchanges are now evolving to further serve users as the free market is forcing them to add new services to woo the competition and ensure they have good positioning in the market.

The first cryptocurrency exchanges to exist were rather simple: some simply connected users looking to conduct peer-to-peer trading, while others offered spot trading pairs for the top cryptoassets: bitcoin, ether, litecoin, and so on.

Over time, however, the cryptocurrency exchange landscape evolved as the market matured. To cement their positions exchanges are now adding new services on a regular basis and innovating with various products. One of the most widely-adopted ones is the exchange token.

Cryptocurrency exchanges like Binance, OKEx, KuCoin, CoinEx, and more have already launched their own token. Token holders received benefits from using the exchange, and these benefits can often come in the form of revenue share.

CryptoDiffer, a project review and trading website, noted that last month OKEx’s OKB token was the top gainer among exchange tokens, as the competition between exchanges intensifies.

New Services and Innovations

These tokens are, in a way, a window into the innovations cryptocurrency exchanges are making and into how they are performing in terms of trading volumes, regulatory compliance, future prospects, and more.

Investors price the tokens according to the advantages they get by holding them, and according to the potential future gains they may see. The market is effectively helping users know where it may be safer to trade.

OKEx’s OKB likely saw its value surge in October thanks to an announcement from the cryptocurrency exchange detailing there are 14 new use cases for the token, including in network security, financial services, and lifestyle services.

In this case, competition between exchanges directly helped improve cryptocurrency adoption and grow the space. Moreover, OKEx Pool, mining pool of OKEx, which supports both proof-of-work and proof-of-stake cryptos, has been supporting the EOS community. As CryptoGlobe reported, it vowed to maintain the network’s stability via a stable block production.

The new services being offered also including staking, allowing users to stake cryptocurrencies like TRON’s TRX, EOS, and Tezos (XTZ) on exchanges, without needing any technical knowledge. Lending top cryptoassets such as BTC, ETH, and LTC to gain interest is now also part of the offering on various exchanges. OKEx’s ecosystem supports both, contributing to OKB’s performance.

Decentralized Exchanges

The first decentralized exchanges were launched on the Ethereum blockchain. Their native cryptocurrency was ether, which could be used to buy the various ERC-20 tokens in existence. Cryptocurrency exchanges are now, through their tokens, launching their own blockchain.

This means they can also launch decentralized exchanges on them, as well as various other decentralized applications. Using OKEx’s example, the firm has launched OKChain and one of the first decentralized applications it’s looking to launch is a decentralized exchange called OKDEX, allowing users to trade from their wallets without going through KYC or even registering.

It’s worth noting decentralized cryptocurrency exchanges aren’t too popular in the space for the time being, because using them isn’t as easy as it is using centralized exchanges, and the support they offer is often limited.

Cryptocurrency exchanges offering these platforms as an alternative are likely investing resources to make the user experience easier, and to avoid any potential loss of funds. Exchanges such as the Ethereum-based IDEX have  to some extent, improved the experience when compared to the first decentralized exchanges.

What to Expect in the Future

As competition in the crypto exchange space keeps heating up, there are some key trends to look to in the future. The staking and lending trend is likely going to gain more and more traction, although only highly trusted platforms are going to gain users through this offering.

Another trend that may keep growing is that of profit-sharing schemes. Some firms distributed their revenue to token holders as encouragement, while others may distribute some of these profits according to trading volumes to offset fees.

Finally, in a bid to encourage cryptocurrency adoption, new trading baskets of various cryptocurrencies are to be expected. If exchange A can offer investors exposure to a specific sector via its basket, it may acquire some new users. Basket using cryptocurrencies that can be used for lending and staking may even give investors a yearly return.

Featured image via Pixabay

Ukrainian Railways Uncovers Bitcoin Mining Farm at Lviv Branch

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Ukrainian Railways Uncovers Bitcoin Mining Farm at Lviv Branch

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On Friday (November 15), the state-owned Ukrainian Railways (“Укрзалізниця” in Ukrainian, which is pronounced “Ukrzaliznytsia”) announced that it had found out that its Lviv branch was illegally operating a Bitcoin mining farm powered by the company’s electricity (which is paid for by taxpayers in the country).

Ukrzaliznytsia’s press release stated that its security department, along with law enforcement officials, had found a Bitcoin mining farm during an inspection of the premises of the Lviv branch; this “so-called farm” was being “organized by officials of the Lviv Railway unit.” 

The person who filed the report on the alleged criminal activity was Oleg Nazaruk, who is the Director of the Department of Economic and Information Security of Ukrzaliznytsia JSC.

Nazaruk said:

During the inspection of the premises where the so-called farm was located, more than 100 pieces of computer equipment were identified that were generating bitcoins. The aforementioned equipment was connected to the Ukrzaliznytsia power grid. The estimated amount of losses since the beginning of the year is UAH 1 million.

The press release interestingly mentioned that, according to the laws of Ukraine, “the issue and circulation of cryptocurrency in the territory of Ukraine is prohibited.”

The collected evidence has been passed to the Ternopil Police Department of the Main Directorate of the National Police in Ternopil Oblast.

According to a report by Kyiv Post, this is not the first time that state employees in Ukraine have been caught stealing electricity to mine cryptocurrencies. Back in August 2018, Ukraine’s national security agency (SBU) arrested workers at a nuclear power plant (in the city of Yuzhnoukrainsk ) who were illegally mining crypto using electricity from the plant.

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$86 Million: Blockchain Game Startup Founder Arrested After Defrauding Investors

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$86 Million: Blockchain Game Startup Founder Arrested After Defrauding Investors

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The founder of a Dutch blockchain game startup has been arrested after reportedly defrauding investors, suppliers and employees.

The firm, Komodore64, was supposedly tracking the sales of in-game collectibles using the Komodo blockchain in games it developed. Since its launch in March of this year it claimed to have raised over €78 million (around $86 million) from private investors, including Goldman Sachs.

The Next Web reports the firm also raised funds through its cryptocurrency K64, with one investor saying they sent the firm $662,000. Soon, however, reports surfaced showing it failed to pay suppliers and employees. Komodore64 is even said to have even held a lavish launch party that cost thousands of euros, but never paid for the event itself.

Its founder, reported to be Sam Narain, allegedly defrauded investors by posing with a group acting as representatives from Goldman Sachs, to draw in more investors. Narain is said to have been arrested while staying at the Hilton hotel in The Hague, where he was staying to avoid “angry crypto investors.”

Narain’s arrest and connection to Komodore64 is reportedly yet to be confirmed, although previous reports seem to show he is indeed the person behind the blockchain game startup.

Featured image via Pixabay.

Coinbase Will Support Multi-Collateral DAI, MKR Price Surges

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Coinbase Will Support Multi-Collateral DAI, MKR Price Surges

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Digital asset exchange Coinbase has announced that it will support the upcoming multi-collateral version of Maker’s DAI stablecoin.

On November 8, Maker said via a blog post that Multi-Collateral Dai (MCD) would be launched on November 18, and that this would be a “a huge milestone reached for the MakerDAO project.” It also mentioned that MCD would be introducing :exciting new features to the Maker Protocol, including the much-anticipated Dai Savings Rate (DSR) and, of course, additional collateral asset types.”

Then, on November 15, another blog post from Maker stated that at 22:25 UTC on that day, MKR holders had made history by “ratifying the collection of system parameters needed” for activating MCD, which they promised would be launched on November 18.

On the same day, Coinbase published a blog post that explained what was significant about the upcoming launch of MCD:

Multi-collateral DAI introduces changes to the existing DAI stablecoin. In single collateral DAI (the current form of DAI), only Ethereum can be used as collateral when creating DAI. With multi-collateral DAI, both Ethereum and other ERC20 tokens can be used to create DAI, with eligible collateral types voted on by Maker token holders.

Coinbase went on to say that it planned to provide support for MCD in both its Coinbase Consumer and Coinbase Pro trading platforms at 09:00 PST (or 17:00 UTC) on 2 December 2019, promising to “automatically convert any DAI you hold on Coinbase to multi-collateral DAI” at that time. 

Those users who would like their single-collateral DAI to get converted to multi-collateral DAI just need to keep their DAI on Coinbase and those users who do wish Coinbase to perform an automatic upgrade to multi-collateral DAI should either sell or withdraw their DAI tokens before 2 December 2019.

Note that you can also use the Coinbase Wallet mobile app to perform the upgrade to multi-collateral DAI yourself.

According to CryptoCompare, currently, MKR is the best-performing cryptoasset in the top 30, with a gain of 6.4% against USD in the past 24-hour period:

MKR-USD 24 Hour Chart - 16 Nov 2019.png

 

Featured Image Courtesy of Coinbase

UK Advertisement Authority Goes After Misleading Crypto Advertisement

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UK Advertisement Authority Goes After Misleading Crypto Advertisement

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The UK Advertising Standards Authority (ASA) has issued a ruling against an ad by Fortune Academy in regards to a crypto-related training course

According to the ruling , the ASA has determined that an advertisement by Fortune Academy promoting their “Crypto Masterclass” training course was misleading for consumers. The ad, which appeared on Fortune Academy’s website in August 2019, claimed to have helped 700 students since 2017 generate 2.5 million pounds from crypto investing. 

The ASA determined that the advertisement exaggerated what clients could reasonably expect in return for taking the course and that the promotion was overall misleading for consumers. Following a complainant filing, the ASA attempted to contact Fortune Academy but received no response. The ASA published the following assessment, 

The ASA was concerned by Fortune Academy’s lack of response and apparent disregard for the Code, which was a breach of CAP Code (Edition 12) rule 1.7 (Unreasonable delay). We reminded Fortune Academy of their responsibility to respond promptly to our enquiries and told them to do so in future.

According to the ruling, Fortune Academy must remove or alter their advertisement and refrain from making claims to help consumers achieve high levels of wealth from crypto in the future. 

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Two Massachusetts Men Indicted in $500,000 SIM Swapping Crypto Scam

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Two Massachusetts Men Indicted in $500,000 SIM Swapping Crypto Scam

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Two Massachusetts men have been arrested and charged by United States law enforcement for their involvement in a $500,000 crypto theft using SIM swap hacks. 

According to the release by the U.S. Department of Justice, two Massachusetts men were charged by the U.S. District Court in Boston with conducting an “extensive scheme” to take over victims’ social media accounts and steal their cryptocurrency. The report says the criminals were using “SIM swapping” and computer hacking methods to gain access to user accounts. 

Eric Meiggs, 21, and Declan Harrington, 20, are both facing an 11-count indictment, with one count of conspiracy, eight counts of wire fraud, one count of computer fraud and abuse and one count of aggravated identity theft. 

The indictment says Meiggs and Harrington allegedly targeted executives of cryptocurrency companies and individuals with significant amounts of crypto as identified through social media. Meiggs and Harrington were accused of using illegal “SIM swapping” hacks, which involves convincing a victim’s mobile provider to reassign their cell phone number to a different SIM card. Once obtained, criminals can use the number to access a client’s online accounts, including cryptocurrency exchanges. 

According to the report, Meiggs and Harrington targeted at least 10 identified victims across the country, and allegedly stole or conspired to steal $500,000 in crypto.  

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