5 ms·

Feds seized $2.9M from Mt. Gox, court docs show

82 points by bdb 13y ago

dwaltrip 13y ago
Misleading title, USD funds were frozen, not actual bitcoins.
- CoreSet 13y ago
  Doesn't the technical architecture of the Bitcoin system make the seizure of actual Bitcoins by a third-party impossible or at least very difficult?
  - dwaltrip 13y ago
    Yeah definitely more difficult, but it depends on the storage mechanism. But I suppose even if you simply had a private key hidden in some random folder or written down somewhere (there are more secure ways - one is breaking a key into multiple parts and spreading to separate people), it would be hard to locate or identify.
    - CoreSet 13y ago
      I suppose the bitcoin ethos of a decentralized network - with no single vulnerable point of attack - breaks down once you consider that until you can buy groceries, pay rent, and just generally use the currency everywhere, there's always the last point of vulnerability: wherever you convert it to "actual" money. But maybe that's an unfair assessment.
      - dwaltrip 13y ago
        For a non-governmental currency that hasn't yet had its 5th birthday, I think bitcoin is doing decently well in terms of merchant acceptance. My personal opinion is that broad merchant acceptance will only come after it is widely used for investment/asset protection (if ever, of course). One indication for this idea is the magnitude by which forex volumes dwarf actual GDP. But it's all speculation :)
    - synchronise 13y ago
      It also depends on what possible legal action those parties might have taken against them for not complying with a disclosure request on those funds.
      - CoreSet 13y ago
        So basically: "we can't find your money so you're going to jail unless you find it for us?" I was talking to a friend about encryption the other day and that was his salient point. Unbreakable key? Break it or go to jail.
        lucb1e 13y ago
        Physical security is an integral part of information security. But if governments start doing things like that, what kind of country are we living in?
        anewthrowaww 13y ago
        USA and UK are already doing it: [1] http://news.cnet.com/8301-31921_3-57364330-281/judge-americans-can-be-forced-to-decrypt-their-laptops/ http://news.cnet.com/8301-31921_3-57364330-281/judge-america... [2] http://www.bbc.co.uk/news/uk-england-11479831 http://www.bbc.co.uk/news/uk-england-11479831
        qq66 13y ago
        "Break it or go to jail" is already established law that pre-dates computers ("open this combination safe or go to jail"), but courts have generally held that this law also applies to encryption keys.
        derekp7 13y ago
        And if the contents of the safe are written in code, or some made up language that the courts don't understand, can they compel you to translate them?
        13y ago
  - stordoff 13y ago
    Actually seizing the Bitcoins would be very difficult, but there is (AFAIK) nothing stopping the Courts ordering a person not to deal with or dispose of the Bitcoins (or else be in contempt of court).
- speeder 13y ago
  The worst part is that if we fix the title, the HN mods will "fix" it again.
  - deleted 13y ago
    [deleted]
deleted 13y ago
[deleted]
- nullc 13y ago
  The government didn't seize Bitcoins, they seized USD. But your general idea cannot work either. Bitcoin is _primarily_ a zero trust system, the vast majority of the system's rules are autonomously validated by all the participating full nodes. Straight up reassigning coin would require changing the Bitcoin software _everywhere_, not just winning in a consensus algorithim. The Byzantine Generals problem only comes into play when deciding transaction _ordering_, since in our universe ordering can't exist as a simple decentralized function. Moreover, the ordering work is cumulative to make it jamming resistant. The consensus can't undo a little piece of ordering in the past and leave the rest alone, changing any of the past requires rewriting all the future consensus as well. [Edit: I'm sad you deleted your post. The misleading title making you think they seized USD wasn't interesting, but I think pointing out that your idea to simply retake stolen coin isn't as easy as you thought was substance for an interesting discussion]
mrb 13y ago
They seized these $2.9M months ago, but this re-hashing of the news is causing a run on the money: people are frantically buying bitcoins on MtGox to transfer them out of MtGox (since dollars withdrawals have been somewhat delayed and generally very slow to execute). This is pushing the exchange rate to 120 USD at MtGox, instead of ~100 USD as seen on other exchanges. http://bitcoincharts.com/markets/ http://bitcoincharts.com/markets/
- Centigonal 13y ago
  Doesn't that mean that there's some crazy arbitrage potential right now for cycling BTC through exchanges?
  - mrb 13y ago
    There is a crazy opportunity. But it comes with risk. Risk that it may take months for you to eventually withdraw the dollars from MtGox to your bank account (wire transfers are executed at a glacial pace as reported by users). By that time, who knows what the BTC exchange rate will be. It may not be possible anymore to then buy BTC at $100 on other exchanges. The last withdrawal I executed from MtGox (1000 EUR in April) took 3 months to be done (saw the money hit my bank account in July). MtGox was apologetic in support ticket I filed, but did not explain why it took so long other than they had "issues".
    - kalleboo 13y ago
      > MtGox was apologetic in support ticket I filed, but did not explain why it took so long other than they had "issues". Elsewhere MtGox employees have explained that their bank has limited them to 10 international wire transfers per day due to capacity issues - they claim at one point they were responsible for 50% of the international wire transfers of their bank, the second largest in Japan. Apparently international wire transfers aren't very popular in Japans o they're all processed manually, which doesn't scale to what MtGox are doing.
    - runeks 13y ago
      > By that time, who knows what the BTC exchange rate will be. This isn't relevant if you do the following: 1) Transfer USD to Bitstamp from your bank account 2) Buy BTC with your USD on Bitstamp 3) Transfer BTC to Mt. Gox 4) Sell BTC for either EUR or USD on Mt. Gox 5) Transfer EUR/USD to your bank account In this scenario you are only exposed to exchange rate risk from the time it takes you to transfer BTC from Bitstamp to Mt. Gox and sell it (I think Mt. Gox requires 6 confirmations, so that's - on average - less than an hour currently). As I see it the largest risk is Mt. Gox defaulting on its USD or EUR obligations, in which case you'll lose everything.
create_account 13y ago
Since when is Union Square been renamed "Satoshi Square"?
runeks 13y ago
It appears Mt. Gox CEO Mark Karpeles (MagicalTux on #mtgox) declines to comment: http://www.reddit.com/r/Bitcoin/comments/1kp4uf/gigaom_reporting_that_feds_seized_29million_from/cbr88ch http://www.reddit.com/r/Bitcoin/comments/1kp4uf/gigaom_repor... (6:39:17 PM) *Blitzboom*: http://gigaom.com/2013/08/19/feds-seized-2-9m-in-bitcoin-funds-from-mt-gox-court-docs-show/ (6:39:59 PM) *Blitzboom*: MagicalTux: good thing we hear this from the media, and not you guys (6:40:13 PM) *Blitzboom*: now everybody is going to be very calm about this i'm sure (6:41:55 PM) *Blitzboom*: though i'm sure mtgox has at least 29k BTC even if it didn't have the cash (6:42:01 PM) *AnonX*: god (6:42:56 PM) *AnonX*: Reminds me of when the DOJ cracked down on online poker (6:45:36 PM) *Blitzboom*: MagicalTux: can we hear something substantial now on this? (6:45:40 PM) *Blitzboom*: cat's out of the bag (6:45:43 PM) *Blitzboom*: do you have the money or no (6:46:43 PM) *Blitzboom*: i mean, if you said you have 90% of the money you owe, then even that would be an improvement to the current spread if it's to be believed (6:46:51 PM) *Blitzboom*: that would be only 10% spread (6:46:55 PM) *MagicalTux*: Blitzboom: we cannot comment on this (6:47:10 PM) *Blitzboom*: you can't comment on whether or not you are solvent? (6:47:21 PM) *MagicalTux*: We can't comment on the legal actions in the US (6:47:28 PM) *dust-otc*: MagicalTux: as in, compelled by the government not to comment, or advised by your own lawyers not to comment? (6:47:32 PM) *Blitzboom*: can you comment on your solvency? (6:47:53 PM) *dust-otc*: Blitzboom: Roger Ver can comment on solvency, apparently (6:47:53 PM) *Blitzboom*: can you pay out the people you owe? (6:47:54 PM) *MagicalTux*: I could comment on the fact that our income since April is around 8 million USD (6:48:14 PM) *MagicalTux*: (anyone seeing trading volume can compute that one) (6:48:31 PM) *Blitzboom*: all i'm asking is, do you have the money to pay everyone's balance? (6:48:38 PM) *dust-otc*: MagicalTux: no, they could estimate your revenue, not income (6:49:02 PM) *MagicalTux*: dust-otc: our transparency reports show the costs of running mtgox, and it hasn't changed much

82 points by bdb 13y ago

dwaltrip 13y ago

Misleading title, USD funds were frozen, not actual bitcoins.

CoreSet 13y ago
Doesn't the technical architecture of the Bitcoin system make the seizure of actual Bitcoins by a third-party impossible or at least very difficult?
- dwaltrip 13y ago
  Yeah definitely more difficult, but it depends on the storage mechanism. But I suppose even if you simply had a private key hidden in some random folder or written down somewhere (there are more secure ways - one is breaking a key into multiple parts and spreading to separate people), it would be hard to locate or identify.
  - CoreSet 13y ago
    I suppose the bitcoin ethos of a decentralized network - with no single vulnerable point of attack - breaks down once you consider that until you can buy groceries, pay rent, and just generally use the currency everywhere, there's always the last point of vulnerability: wherever you convert it to "actual" money. But maybe that's an unfair assessment.
    - dwaltrip 13y ago
      For a non-governmental currency that hasn't yet had its 5th birthday, I think bitcoin is doing decently well in terms of merchant acceptance. My personal opinion is that broad merchant acceptance will only come after it is widely used for investment/asset protection (if ever, of course). One indication for this idea is the magnitude by which forex volumes dwarf actual GDP. But it's all speculation :)
  - synchronise 13y ago
    It also depends on what possible legal action those parties might have taken against them for not complying with a disclosure request on those funds.
    - CoreSet 13y ago
      So basically: "we can't find your money so you're going to jail unless you find it for us?" I was talking to a friend about encryption the other day and that was his salient point. Unbreakable key? Break it or go to jail.
      - lucb1e 13y ago
        Physical security is an integral part of information security. But if governments start doing things like that, what kind of country are we living in?
        anewthrowaww 13y ago
        USA and UK are already doing it: [1] http://news.cnet.com/8301-31921_3-57364330-281/judge-americans-can-be-forced-to-decrypt-their-laptops/ http://news.cnet.com/8301-31921_3-57364330-281/judge-america... [2] http://www.bbc.co.uk/news/uk-england-11479831 http://www.bbc.co.uk/news/uk-england-11479831
      - qq66 13y ago
        "Break it or go to jail" is already established law that pre-dates computers ("open this combination safe or go to jail"), but courts have generally held that this law also applies to encryption keys.
        derekp7 13y ago
        And if the contents of the safe are written in code, or some made up language that the courts don't understand, can they compel you to translate them?
        13y ago
- stordoff 13y ago
  Actually seizing the Bitcoins would be very difficult, but there is (AFAIK) nothing stopping the Courts ordering a person not to deal with or dispose of the Bitcoins (or else be in contempt of court).
speeder 13y ago
The worst part is that if we fix the title, the HN mods will "fix" it again.
- deleted 13y ago
  [deleted]

deleted 13y ago

[deleted]

nullc 13y ago
The government didn't seize Bitcoins, they seized USD. But your general idea cannot work either. Bitcoin is _primarily_ a zero trust system, the vast majority of the system's rules are autonomously validated by all the participating full nodes. Straight up reassigning coin would require changing the Bitcoin software _everywhere_, not just winning in a consensus algorithim. The Byzantine Generals problem only comes into play when deciding transaction _ordering_, since in our universe ordering can't exist as a simple decentralized function. Moreover, the ordering work is cumulative to make it jamming resistant. The consensus can't undo a little piece of ordering in the past and leave the rest alone, changing any of the past requires rewriting all the future consensus as well. [Edit: I'm sad you deleted your post. The misleading title making you think they seized USD wasn't interesting, but I think pointing out that your idea to simply retake stolen coin isn't as easy as you thought was substance for an interesting discussion]

mrb 13y ago

They seized these $2.9M months ago, but this re-hashing of the news is causing a run on the money: people are frantically buying bitcoins on MtGox to transfer them out of MtGox (since dollars withdrawals have been somewhat delayed and generally very slow to execute). This is pushing the exchange rate to 120 USD at MtGox, instead of ~100 USD as seen on other exchanges. http://bitcoincharts.com/markets/ http://bitcoincharts.com/markets/

Centigonal 13y ago
Doesn't that mean that there's some crazy arbitrage potential right now for cycling BTC through exchanges?
- mrb 13y ago
  There is a crazy opportunity. But it comes with risk. Risk that it may take months for you to eventually withdraw the dollars from MtGox to your bank account (wire transfers are executed at a glacial pace as reported by users). By that time, who knows what the BTC exchange rate will be. It may not be possible anymore to then buy BTC at $100 on other exchanges. The last withdrawal I executed from MtGox (1000 EUR in April) took 3 months to be done (saw the money hit my bank account in July). MtGox was apologetic in support ticket I filed, but did not explain why it took so long other than they had "issues".
  - kalleboo 13y ago
    > MtGox was apologetic in support ticket I filed, but did not explain why it took so long other than they had "issues". Elsewhere MtGox employees have explained that their bank has limited them to 10 international wire transfers per day due to capacity issues - they claim at one point they were responsible for 50% of the international wire transfers of their bank, the second largest in Japan. Apparently international wire transfers aren't very popular in Japans o they're all processed manually, which doesn't scale to what MtGox are doing.
  - runeks 13y ago
    > By that time, who knows what the BTC exchange rate will be. This isn't relevant if you do the following: 1) Transfer USD to Bitstamp from your bank account 2) Buy BTC with your USD on Bitstamp 3) Transfer BTC to Mt. Gox 4) Sell BTC for either EUR or USD on Mt. Gox 5) Transfer EUR/USD to your bank account In this scenario you are only exposed to exchange rate risk from the time it takes you to transfer BTC from Bitstamp to Mt. Gox and sell it (I think Mt. Gox requires 6 confirmations, so that's - on average - less than an hour currently). As I see it the largest risk is Mt. Gox defaulting on its USD or EUR obligations, in which case you'll lose everything.

create_account 13y ago

Since when is Union Square been renamed "Satoshi Square"?

runeks 13y ago

It appears Mt. Gox CEO Mark Karpeles (MagicalTux on #mtgox) declines to comment: http://www.reddit.com/r/Bitcoin/comments/1kp4uf/gigaom_reporting_that_feds_seized_29million_from/cbr88ch http://www.reddit.com/r/Bitcoin/comments/1kp4uf/gigaom_repor... (6:39:17 PM) *Blitzboom*: http://gigaom.com/2013/08/19/feds-seized-2-9m-in-bitcoin-funds-from-mt-gox-court-docs-show/ (6:39:59 PM) *Blitzboom*: MagicalTux: good thing we hear this from the media, and not you guys (6:40:13 PM) *Blitzboom*: now everybody is going to be very calm about this i'm sure (6:41:55 PM) *Blitzboom*: though i'm sure mtgox has at least 29k BTC even if it didn't have the cash (6:42:01 PM) *AnonX*: god (6:42:56 PM) *AnonX*: Reminds me of when the DOJ cracked down on online poker (6:45:36 PM) *Blitzboom*: MagicalTux: can we hear something substantial now on this? (6:45:40 PM) *Blitzboom*: cat's out of the bag (6:45:43 PM) *Blitzboom*: do you have the money or no (6:46:43 PM) *Blitzboom*: i mean, if you said you have 90% of the money you owe, then even that would be an improvement to the current spread if it's to be believed (6:46:51 PM) *Blitzboom*: that would be only 10% spread (6:46:55 PM) *MagicalTux*: Blitzboom: we cannot comment on this (6:47:10 PM) *Blitzboom*: you can't comment on whether or not you are solvent? (6:47:21 PM) *MagicalTux*: We can't comment on the legal actions in the US (6:47:28 PM) *dust-otc*: MagicalTux: as in, compelled by the government not to comment, or advised by your own lawyers not to comment? (6:47:32 PM) *Blitzboom*: can you comment on your solvency? (6:47:53 PM) *dust-otc*: Blitzboom: Roger Ver can comment on solvency, apparently (6:47:53 PM) *Blitzboom*: can you pay out the people you owe? (6:47:54 PM) *MagicalTux*: I could comment on the fact that our income since April is around 8 million USD (6:48:14 PM) *MagicalTux*: (anyone seeing trading volume can compute that one) (6:48:31 PM) *Blitzboom*: all i'm asking is, do you have the money to pay everyone's balance? (6:48:38 PM) *dust-otc*: MagicalTux: no, they could estimate your revenue, not income (6:49:02 PM) *MagicalTux*: dust-otc: our transparency reports show the costs of running mtgox, and it hasn't changed much