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In the crypto space this practice is so common it has earned it's own name, the "exit scam"

by tCfD 9y ago

tinus_hn 9y ago
It’s kind of difficult to do something with the bitcoins because it’s immediately visible.
- syntaticSugar 9y ago
  The perks of being an exchange is you get access to many streams. Things are already broken up on little pieces for you. You act as a Tumblr
- richardknop 9y ago
  You can mix the stolen coins. Change them to many different coins, shuffle them around in and out of different tokens. In the end, move everything back to BTC and sell on localbitcoins in some offshore country like Hong Kong or Macau (and spread this around too not to raise suspicion, so travel around different countries and sell couple BTC on every stop, open local bank account, deposit money, rinse and repeat).
  - zht 9y ago
    it's not actually that easy to open a local bank account everywhere is it
- disconnected 9y ago
  Is anyone seriously tracking where these "stolen" coins from these past several hacks are going? This is like saying that open source software is more secure than closed source software because the code is public and auditable. Sure it is auditable, but nobody is doing it. And then shellshock happens.
  - wu-ikkyu 9y ago
    >Is anyone seriously tracking where these "stolen" coins from these past several hacks are going? Yeah https://youtu.be/l70iRcSxqzo https://youtu.be/l70iRcSxqzo
  - mv4 9y ago
    Tracking won't accomplish much, they run transactions through mixers/tumblers, and you quickly lose track. Here's the money from the NiceHash hack two weeks ago (or "hack") getting moved out, in plain sight: https://bitinfocharts.com/bitcoin/address/1EnJHhq8Jq8vDuZA5ahVh6H4t6jh1mB4rq https://bitinfocharts.com/bitcoin/address/1EnJHhq8Jq8vDuZA5a... You can kinda see what's happening (how it's being laundered) but you can't pin it on a given entity or idividual, unless they make a mistake.
- throwawayReply 9y ago
  It's not visible at all, because you can sell coins which never existed because exchange transactions don't happen on the blockchain. You start off selling maybe 100 bitcoins which you've 'created', so the value of bitcoins on your exchange is 100 higher than in your 'wallet'. No-one can audit that and no one will notice because it's a tiny amount compared to the total volume. The more you do this, the more popular your exchange looks and the more you can repeat it and get away with it. Eventually you be holding only a tiny fraction of the exchange book in actual bitcoin having cashed out 90% of it generating large amounts of money for yourself in the process. If it ever looks like there's a run and you can't provide people with their bitcoin you claim "hack". By the time you exit scam and claim "hack" the missing coins are gone but really they didn't exist so there's nothing to trace.
  - tinus_hn 9y ago
    If you’re willing to go this far then it is just a plain pyramid scheme, that doesn’t really have anything to do with cryptocurrency.
    - pavel_lishin 9y ago
      Yup. The past decade has been geeks who think they're smarter than everyone else slowly re-discovering the reason why financial regulations exist.
      - dmoy 9y ago
        There's an xkcd for this, isn't there? https://xkcd.com/1831/ https://xkcd.com/1831/
  - Brotkrumen 9y ago
    I'm not sure I understood correctly. Could you elaborate? Wouldn't selling created bitcoin lower the price of bitcoin at your exchange? A lower price would attract USD and the exchange would leak BTC with people doing arbitrage. Then if you claim a hack wouldn't you have to show that value moved to the hackers wallets and that value and the value you retain had to add up to the total value received in BTC? And if the "stolen" amount of BTC couldn't be shown to be in another wallet, wouldn't the fraud be discovered?
user5994461 9y ago
It's the most common form of scam. The owner of the exchange leaves with the money. That's why exchanges are regulated. Step one of the regulation is getting the identity of all the owners. Step two is having servers and backups on regulated soils so you can seize everything at any time and reconstruct the ledgers.
dustinmoris 9y ago
> crypto space Sorry, but this is so bloody annoying that I have to tell you: "crypto" = cryptography (stuff like symmetric/asymmetric encryption, hashing, etc.) "crypto currency" = useless shit like bitcoin So I think you meant "exit scams" in the crypto currency space.
- Kurtz79 9y ago
  One of the most important features that still makes the human brain superior to a machine is its innate ability to use context to discern meaning.
  - lmkg 9y ago
    In fact, one would need context to conclude that "crypto" refers to cryptography, and not something else like cryptozoology or cryptofascism. There's also probably at least one legitimate metal band with "crypto" in their name.

In the crypto space this practice is so common it has earned it's own name, the "exit scam"

by tCfD 9y ago

In the crypto space this practice is so common it has earned it's own name, the "exit scam"

tinus_hn 9y ago

It’s kind of difficult to do something with the bitcoins because it’s immediately visible.

syntaticSugar 9y ago
The perks of being an exchange is you get access to many streams. Things are already broken up on little pieces for you. You act as a Tumblr
richardknop 9y ago
You can mix the stolen coins. Change them to many different coins, shuffle them around in and out of different tokens. In the end, move everything back to BTC and sell on localbitcoins in some offshore country like Hong Kong or Macau (and spread this around too not to raise suspicion, so travel around different countries and sell couple BTC on every stop, open local bank account, deposit money, rinse and repeat).
- zht 9y ago
  it's not actually that easy to open a local bank account everywhere is it
disconnected 9y ago
Is anyone seriously tracking where these "stolen" coins from these past several hacks are going? This is like saying that open source software is more secure than closed source software because the code is public and auditable. Sure it is auditable, but nobody is doing it. And then shellshock happens.
- wu-ikkyu 9y ago
  >Is anyone seriously tracking where these "stolen" coins from these past several hacks are going? Yeah https://youtu.be/l70iRcSxqzo https://youtu.be/l70iRcSxqzo
- mv4 9y ago
  Tracking won't accomplish much, they run transactions through mixers/tumblers, and you quickly lose track. Here's the money from the NiceHash hack two weeks ago (or "hack") getting moved out, in plain sight: https://bitinfocharts.com/bitcoin/address/1EnJHhq8Jq8vDuZA5ahVh6H4t6jh1mB4rq https://bitinfocharts.com/bitcoin/address/1EnJHhq8Jq8vDuZA5a... You can kinda see what's happening (how it's being laundered) but you can't pin it on a given entity or idividual, unless they make a mistake.
throwawayReply 9y ago
It's not visible at all, because you can sell coins which never existed because exchange transactions don't happen on the blockchain. You start off selling maybe 100 bitcoins which you've 'created', so the value of bitcoins on your exchange is 100 higher than in your 'wallet'. No-one can audit that and no one will notice because it's a tiny amount compared to the total volume. The more you do this, the more popular your exchange looks and the more you can repeat it and get away with it. Eventually you be holding only a tiny fraction of the exchange book in actual bitcoin having cashed out 90% of it generating large amounts of money for yourself in the process. If it ever looks like there's a run and you can't provide people with their bitcoin you claim "hack". By the time you exit scam and claim "hack" the missing coins are gone but really they didn't exist so there's nothing to trace.
- tinus_hn 9y ago
  If you’re willing to go this far then it is just a plain pyramid scheme, that doesn’t really have anything to do with cryptocurrency.
  - pavel_lishin 9y ago
    Yup. The past decade has been geeks who think they're smarter than everyone else slowly re-discovering the reason why financial regulations exist.
    - dmoy 9y ago
      There's an xkcd for this, isn't there? https://xkcd.com/1831/ https://xkcd.com/1831/
- Brotkrumen 9y ago
  I'm not sure I understood correctly. Could you elaborate? Wouldn't selling created bitcoin lower the price of bitcoin at your exchange? A lower price would attract USD and the exchange would leak BTC with people doing arbitrage. Then if you claim a hack wouldn't you have to show that value moved to the hackers wallets and that value and the value you retain had to add up to the total value received in BTC? And if the "stolen" amount of BTC couldn't be shown to be in another wallet, wouldn't the fraud be discovered?

user5994461 9y ago

It's the most common form of scam. The owner of the exchange leaves with the money. That's why exchanges are regulated. Step one of the regulation is getting the identity of all the owners. Step two is having servers and backups on regulated soils so you can seize everything at any time and reconstruct the ledgers.

dustinmoris 9y ago

> crypto space Sorry, but this is so bloody annoying that I have to tell you: "crypto" = cryptography (stuff like symmetric/asymmetric encryption, hashing, etc.) "crypto currency" = useless shit like bitcoin So I think you meant "exit scams" in the crypto currency space.

Kurtz79 9y ago
One of the most important features that still makes the human brain superior to a machine is its innate ability to use context to discern meaning.
- lmkg 9y ago
  In fact, one would need context to conclude that "crypto" refers to cryptography, and not something else like cryptozoology or cryptofascism. There's also probably at least one legitimate metal band with "crypto" in their name.