$4.1m goes missing as Chinese bitcoin trading platform GBL vanishes

http://www.coindesk.com/4-1m-goes-missing-chinese-bitcoin-trading-platform-gbl-vanishes/

by chaz • 13 years ago

175 173 13 years ago

nwh2• 13 years ago

Amusingly enough, this isn't even an uncommon occurrence in the Bitcoin world. Either compromises or shady actors seem to take down a large portion of their services, usually taking large sums of money with them.

It does look like a similar case to inputs.io and a few other sites too, people "invest" or store large amounts of money with a person despite the community making every attempt to warn people that it is a terrible, awful, terrible idea to do so.

dualogy5• 13 years ago

All these incidents give more weight to the conspiracy theory that Bitcoin is a govt. or central-bank project. "See? This is what happens without central authority. Now go back to trusting our currency. While we don't guarantee decades of stable purchasing-power preservation, we're not as volatile and our banks don't just appropriate your deposits outright.." ;)

They wouldn't even have to be behind every exchange and instead could let stuff like this (and off-shoots like LiteCoin etc.) happen quite organically and still prove their point, as clearly visible..

sanskritabelt5• 13 years ago

Can bitcoin guarantee weeks of "stable purchasing-power preservation"?

dragontamer8• 13 years ago

They'll need to choose a government to blame, before just generically blaming "some government" before I start listening.

Last week it was Britain, the week before that it was the US Government. Today, its the Chinese Government???

sliverstorm2• 13 years ago

In what way do the incidents substantiate a conspiracy? This is exactly what I would expect to happen; electronic scams are older than the internet.

Unless I misunderstand, your "evidence" is like saying "the moon landing is bulletproof, impossible to disprove- which is proof they faked it, because if they faked it they would make it as real as possible"

nwh2• 13 years ago

If a government produced Bitcoin, they probably would have made it work before they announced it. The original Bitcoin was awful. You could spend /anybodies/ coins! The fact that it gained a community is pure luck.

jusben13692• 13 years ago

No they don't. People who are predisposed to conspiracy theories will view this as some sort of data point. But given their mind is already made up they don't need more weight.

anigbrowl2• 13 years ago

Oh please. Every anti-government ideologue I've ever met seems to think that absent government humanity is made up of angels or Rousseau-style noble primitives. There are plenty of scumbags to go round, always have been.

dualogy5• 13 years ago

Wow! Well I didn't say I subscribe to that conspiracy theory and didn't mean to peddle it either. Just that these incidents work in its favour.. funny how emotional everyone is getting here immediately! :D

verroq3• 13 years ago

From a game theoretic perspective where no parties can be held accountable, being a scammer or hacker will always yield higher pay-offs. This is why Bitcoin will tear itself apart.

sneak3• 13 years ago

The same problem applies to cash. Your argument does not support your conclusion.

nawitus• 13 years ago

I disagree. A service can, on average, be sold for more money than what's stored in it.

mtgx• 13 years ago

You could say that about banks being robbed a while ago, too. Innovation is chaotic and not well understood in the early days.

broolstoryco• 13 years ago

people will adapt, they are just used to a world where this is not so easily possible

VMG• 13 years ago

Not in the repeated prisoner's dilemma

klipt2• 13 years ago

What's funny is that because the bitchain (the transaction history of EVERY BITCOIN EVER) is public knowledge, one could easily blacklist stolen bitcoins (simply blacklist the wallet that received the stolen goods and all subsequent receiving wallets, and refuse to accept bitcoins from any of them).

The difficulty would be making the blacklist fast but accurate, i.e. there'd need to be high standards of proof that coins were stolen rather than traded fairly. But if blacklisting took too long the thief could already have fenced the coins for real assets before the blacklist took effect.

Ultimately it could end up looking like credit card fraud alerts - suspicious bitcoin transactions could be put on hold (temporarily blacklisted) until confirmed by the wallet owner. But at that point you lose anonymity. I guess you can't have anonymity and accountability...

larsonf2• 13 years ago

Interesting (slight?) counterexample is the foreign exchange market 10-20 years ago, just as it was going electronic. Lots of levered investment but lots and lots of fraud as there was almost no regulation. Like this example, you would have brokerages just take customer funds and then just disappear. The move towards foreign exchange trading was, also like bitcoin, driven by the lack of regulation, speculative possibilities, etc. Since then it's become regulated heavily globally and the game-theoretic defection has not held. Probably something similar will happen to bitcoin.

kerkeslager• 13 years ago

You have so many options for storing your Bitcoins which don't even involve trusting that your own internet connection is secure, let alone trusting someone else with your Bitcoins.

We need trustworthy exchanges for buying and selling BTC, but once you have BTC I am not sure why anyone would trust someone else to store them long-term.

kybernetikos• 13 years ago

Because they don't trust themselves and their equipment not to lose their private key.

iSnow• 13 years ago

That's toothing troubles. Smarter people store their coins offline or on a secure laptop only they control.

Some years down the road, maybe we'll see large corporations offering exchange, escrow and hosted wallet services. Currently it's the wild west.

frandroid2• 13 years ago

So bitcoin has given us untraceable currency without the state, except that without traceability, you also have no accountability, no justice, no law. This libertarian nightmare will soon come crashing down.

waterlesscloud2• 13 years ago

Why do you imagine there's no traceability?

Anderkent2• 13 years ago

Yeah, exactly. That's why no one uses cash anymore. Just think of it! If you give someone your cash, they might just disappear!

Bitcoin won't die just because people that want to ride the bubble lose some of their investments. It'll slow down, of course, but storing wealth is not bitcoins selling point, and trusted central exchanges are not essential to the model.

dragontamer8• 13 years ago

How do you exactly expect to convert your current dollars into BTCs without an exchange?

Also, exchanges are natural monopolies. The more people that go to a particular exchange increases the network effect of an exchange. More people == faster trades, faster trades == more fair prices.

Exchanges will centralize because the economics and network effects of exchanges demand centralization.

tedunangst4• 13 years ago

I've never had someone on another continent take cash out of my wallet.

Frozenlock• 13 years ago

Yeah! That's exactly what happened with cash!

Civilization crumbled and humanity disappeared.

In fact you are just dreaming this life. Time to wake up!

jacques_chester5• 13 years ago

Cash certainly used to be stolen in this way (by the deposit-taker).

What changed is that it became less valuable per unit of volume and mass (due to inflation) and that it became more traceable (due to regulation).

In bitcoin's case, it's designed to be immune to both of these. The wild west is here to stay.

smtddr• 13 years ago

This libertarian nightmare will soon come crashing down.

That sentence tells me everything I need to know about your thought process.

frandroid2• 13 years ago

I didn't pretend to hide it... :)

Houshalter5• 13 years ago

Credit card fraud is far far more common, and cash is also completely untraceable. Untraceable doesn't mean "no accountability or justice or law".

sashaeslami2• 13 years ago

Does coinmkt.com or Mtgox.com solve this issue?

sashaeslami2• 13 years ago

From my understanding Coinmkt.com is the only venture in the space that has the red tape as locked up as possible.

pmorici2• 13 years ago

No, you have to keep either coins or cash on deposit with an exchange in order to trade. The smart thing to do is not store your coins on the exchange unless you are actively buying to selling them but plenty of people get lazy and just let them sit there.

dragontamer8• 13 years ago

And if you've got money holed up in Mt. Gox, who's exchange rate is significantly worse than every other exchange, what do you do?

Ask anyone 9 months ago whether or not trusting Mt. Gox was a good idea. They were the largest and most reliable exchange, and now it has become increasingly difficult to get your money out of it. And now the exchange rate on Mt. Gox itself has been effected by their problems...

M4v3R• 13 years ago

Shameless plug: Bitalo [1] will solve this problem very soon, because we don't use hosted shared wallets. Instead, we use a feature of Bitcoin protocol named multi signature addresses, in which two private keys are used to spend funds, only one of which will be stored on the server.

[1] http://Bitalo.com

antonius• 13 years ago

Being someone who got scammed out of ~5BTC back when they were ~$50 dollars, this happens way too frequently. We only get to hear about the large cases.

hatred• 13 years ago

I am new to BitCoin. Can someone help me understand how the money was stolen ? I thought coins are stored in user wallets ?

Anderkent2• 13 years ago

People transfer bitcoins or fiat to the service, then never withdraw.

vinhboy• 13 years ago

GBL is for bitcoin like what Etrade is for US dollars (well, sort of). Imagine one day Etrade just disappeared... Then all the money people had in their Etrade account would disappear with it. If you had your money in your wallet, and Etrade disappears, nothing happens to your money. Same with a bitcoin wallet.

MAGZine• 13 years ago

They are, but if you wish to exchange currency to/from real dollars, then you need to use an exchange like this, who will "trade" you BTC for currency. Unfortunately, if you had currency stored with the exchange, but did not make a transaction for real currency, it has simply disappeared.

jafaku4• 13 years ago

You can also trade in person, like people have done for thousands of years with gold.

LAMike• 13 years ago

Unfortunate. Hope it doesn't scare off China's BTC community

malandrew• 13 years ago

Seems to me like bitcoin is the perfect business opportunity for people with the security skills and know-how to do really really well. The bitcoin world needs solid reputable security professionals to operate the exchanges and wallets. I'd love to hear cperciva's or tptacek's take on bitcoin as a startup opportunity since they are prime examples of people who could startup a bitcoin business and instantly attract people since people would trust them to do what is right.

dragontamer8• 13 years ago

You mean, financial services? Financial Service companies build trust and relationships with people.

This has nothing to do with "security", and everything to do with "How can I be sure that the other guy isn't a jackass??". Paypal became popular as a financial service to Ebay purchases.

The startups that are running themselves as trustworthy businesses will get ahead. But a year, two years, or even three years is not enough to gain a decent relationship. Lets see if "Coinbase" can weather the storm

simonebrunozzi• 13 years ago

Which storm is Coinbase going through?

PeterisP3• 13 years ago

The current case has zero problems with technical security - it's the ages-old problem of someone holding money of consumers and then running off with it.

There's a single solution (that bitcoiners tend to dislike) - regulate all such entities, requiring them to (a) verify their identities, and (b) post bonds/statutory capital in proportion to all held funds, to ensure that depositors are paid back if the company folds or turns out to be a fraud, i.e., the same rules as banks have to follow.

avolcano• 13 years ago

This is why I always find skyrocketing conversion rates of Bitcoin so funny: it's certainly not impossible to get money out as a traditional currency, but it's damn sure fraught with peril.

alttab• 13 years ago

Also known as theft. Pesky regulations...

As more people use bitcoin, they can only react when things like this happen. Take that lesson and carry it with you.

MysticFear• 13 years ago

Nothing to do with regulations, all to do with law enforcement. Theft is illegal.

PeterisP3• 13 years ago

It has everything to do with regulations - "theft is illegal" wasn't stopping bankers from simply running away with customers' deposits, which used to happen - only regulation did that.

jusben13692• 13 years ago

It's important to remember that millions of dollars are lost daily globally to CC fraud.

anigbrowl2• 13 years ago

Out of trillions of $ worth of transactions. It's the rate, not the absolute value, that matters here.

Houshalter5• 13 years ago

True but credit cards are inherently vulnerable as you just need their number, whereas your bitcoin wallet is completely safe until you give it to someone else.

otterley• 13 years ago

While true, it's irrelevant to the Bitcoin account holder. The risk of credit card fraud is spread across the global merchant pool, which comes in the form of a risk premium attached to their fees. This provides the "free insurance" for credit card holders that reverses fraudulent charges.

The cost of stolen Bitcoins, on the other hand, will be borne exclusively by the account holders. It's the equivalent of having one's checking account emptied to due a bank robbery or a bankruptcy. Ordinarily the FDIC insures account holders against this (in the USA), but there's no such protection for Bitcoin account holders.

Bank with care.

lobotryas• 13 years ago

Yes, but victims of CC fraud have numerous laws and protections on their side that make it much easier to recover from this incident.

On the other hand, if a BC user had their wallet stolen, then they have zero recourse.

dajohnson89• 13 years ago

Is it not the case that one can back up their BC wallet into a locally encrypted file, in the event that their online wallet is compromised? I'm a user of coinbase, and have a local backup. I was advised to do just this: take a backup of my wallet, just in case something bad happened to the server. That way, I have legal recourse if push comes to shove.

baddox4• 13 years ago

Yes, but victims of CC fraud have numerous laws and protections on their side that make it much easier to recover from this incident.

Very true, and likewise, CC users (both buyers and sellers) have numerous laws and protections that can make transactions annoying, difficult, or even impossible, and Bitcoin fixes some of those problems. Obviously, you shouldn't use Bitcoin unless you feel that Bitcoin's attributes are favorable to credit cards' attributes.

hvidgaard2• 13 years ago

Maybe for the consumer, but if someone walks into a store (or online for that matter) and buy with a stolen CC, the bank will issue a chargeback and the store have to hand over the money, regardless of getting the goods back or not. All shops operate with a fee to cover losses like this.

In short, the consumers pay in the end. So at best we have protections in place such that the consumers share the bill.

betterunix4• 13 years ago

"It's important to remember that millions of dollars are lost daily globally to CC fraud."

...and that Bitcoin is not even a blip on the radar compared to the daily volume of CC transactions.

vertis• 13 years ago

The currency may be P2P, but the trading of it is mostly certainly not.

I wonder if it's possible to create a more P2P trading platform for digital currencies.

fat0wl2• 13 years ago

for anyone unfortunate enough to have clicked this comments link....

the tl;dr is "the GOOOOVernment mannnn money money govt sucks MUGGERS. bitcoin is stupid. bitcoin is GREAT! credit cards are like bitcoin but the BANKS are the REAAAAL thiefs post-modernism post-modernism capitalism 'Hello!' the government. THE government. wallets were stupid to begin with. Electronic currency is flawed i hate bitcoin/creditcard cash is flawed cash. Rousseau."

My 2 cents, FWIW... the people I see locally spoutin bitcoin aren't true patriots who believe in ultimate freedom, they're more like get-rich-quick-schemers lol

fat0wl2• 13 years ago

(which for some reason makes me paranoid that it's always on the verge of erupting into some banking world version of Amway...)

sanskritabelt5• 13 years ago

The only bitcoin person I've met IRL consistently made a bunch of bad decisions on a wide variety of topics.

clarkm• 13 years ago

You don't know very many techies, do you?

jafaku4• 13 years ago

So I guess the moral of the story is "Take risks"? Surely those bad decisions don't nullify becoming a "bitcoin person" (or a rich person).

sidcool• 13 years ago

The article mentions that GBL vanished "without a trace". It's a disconcerting statement.

beagle32• 13 years ago

All the Bitcoin-doom prophets in this thread should just consider that larger amounts of money disappeared when Refco and when MF Global went down; and that did not spell the end of brokerage, USD or anything else

atmosx• 13 years ago

Probably not complete but interesting list of bitcoin heists:

https://bitcointalk.org/index.php?topic=83794.0

dror• 13 years ago

Tulips, tulips, tulips.

Some people never learn.

jafaku4• 13 years ago

What does that have to do with a theft?

Is gold or the USD a tulip too?

netcan• 13 years ago

The interesting thing about all these bitcoin headlines is how they don't seem to slow bitcoin's advancement. I guess if the proposition is compelling enough it can survive a lot of hiccups.

Slightly tangental: I wish there was some way of judging how much bitcoin is being used as a medium of exchange as opposed to a value store/speculation vehicle.

shangrula• 13 years ago

This looks like theft of fiat money, not BTC. I.e. you deposit and then buy BTC. So they took the deposits. Hence why it's not that traceable, iconically it's easier to start looking for BTC's as the transactions are public. Cash, especially internationally, can be fuzzier.

wehadfun• 13 years ago

Novice question. If the transaction history of every bitcoin is public why couldn't the owners find their bitcoin?

Do you have to have the bitcoin to get the history? Does the transaction history not say where the bitcoin went?

dwaltrip• 13 years ago

It tells you the bitcoins have moved to address 1ekcj57h2kde45... (made up example). But you have no idea who owns this random address

$4.1m goes missing as Chinese bitcoin trading platform GBL vanishes

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