Leaked Database of Transactions of the Cryptocurrency Exchange, Celsius, is a “dream come true” for analysts
The paradoxical nature of cryptocurrency’s privacy is that the blockchain, that unchangeable ledger of all a cryptocurrency’s transactions, serves as both a map and a mask: Bitcoin are easy enough to follow from one address to the next. The strings of numbers and letters in addresses are difficult to match, so only a few entities, such as thecryptocurrencies exchanges, are able to do that. When one of those exchanges suddenly dumps an internal user database online, they aren’t only leaking their own data. They’ve offered a key to decipher a vastly larger set of financial secrets.
That’s what happened last week when Celsius, a cryptocurrency exchange facing bankruptcy, leaked an enormous collection of its users’ transaction data through an unusual sort of privacy breach: a court filing. The company’s owners are accused of pulling tens of millions of dollars worth ofCryptocurrencies out of the exchange before revealing its insolvency, and so the company’s attorneys released a document that may include the transaction data of half a million users from April. After the database was briefly posted as a 14,500- page PDF to the court records website, it was taken down but not before it was widely downloaded by Gizmodo and the Internet Archive.
The data dump includes the names and transaction details of Celsius’ users along with the dates and amounts of each payment. The database doesn’t include the cryptocurrency addresses that directly identify senders and recipients on cryptocurrencies’ blockchains, but the unique payment amounts, detailed down to more than a dozen decimal places of precision in many cases, nonetheless make it possible to match the payments to blockchains’ records.
Nick Bax, head of research at security consulting and asset recovery firm, says that the hack is the worst since Mt. Gox. He refers to the Celsius leak as a “dream come true” for analysts, despite comparing it to Mt. Gox, which was bankrupted by hackers in 2014) and had its transaction database leaked online.
“You can find someone’s balance, deposits, and withdrawals and then correlate all that to the blockchain,” Bax says. “We can use it for good, but it can absolutely be misused too. Criminals are looking for whoever has the biggest balance. Once they’re identified, Bax warns, those wealthy crypto holders could be targeted with spear-phishing, scams, and even physical extortion.
Bitcoin Trading in the Dark: When James Zhong’s Bitcoins First Arrived and Found, They Reveal Their Real Self, And They Came Back Again
It took weeks for the legal request to bear fruit. Ali was in a class at the law school when she got the call from the FBI agent saying the subpoena results had come back.
Over the next month, Ali andErin continued to identify more high-value addresses in the AlphaBay cluster into at least one exchange. Cazes’ fingerprints became part of his identity after they came to know what they looked like, even in his trade of bitcoins.
“When we saw millions of dollars in crypto flowing to him from what appeared to be AlphaBay-associated wallets, I was fairly confident that we had the right person,” Rabenn says. You start to get ready to indict when you hit that point.
Continued next week: When investigators find Cazes’ online alter ego on a pickup artist forum, they also discover a new challenge to catching him red-handed—and hatch a plan for the most ambitious sting in dark-web history.
The IRS Criminal Investigations, or IRS-CI, has used various techniques in the past, including the use of currency tracing, which has led to record-breaking troves of ill-gotten Bitcoins. The second Silk Road hacker to turn over a billion dollar cache of coins to the IRS-CI was one who stole tens of thousands of Bitcoins from the drug market. The IRS-CI’s case against two alleged money launderers in New York broke the records again, this time for allegedly pocketing 4.5 billion dollars of stolen digital currency from the Bitfinex exchange.
The US Department of Justice said that a Georgia man named James Zhong pleaded guilty to wire fraud nine years after stealing more than 50,000 bitcoins from the Silk Road. It would have been the biggest DOJ seizure of all time, if it hadn’t been for Zhong’s forfeiture of the massive haul of bitcoins. The bitcoins were ultimately found stored on what’s described in court records as a “single-board computer” hidden in a popcorn can, along with more than $600,000 in cash and precious metals, all held in a safe under the floorboards of a bathroom closet in Zhong’s home.
Editor’s Note: Emily Parker is executive director of global content at CoinDesk, a media, event, indices and data company, and a former policy advisor at the US State Department and writer/editor at The Wall Street Journal. She is the author of “Now I Know Who? My Comrades Are: Voices From the Internet Underground.” Her opinions in this piece are her own, not those of the commentary. CNN has more opinion.
The Financial Misfortunes of FTX: A Crypto-Cryptanalysis of a Onetime Millionaire’s Money
And then, just like that, it was over. A onetime millionaire lost a large amount of his money in one day. On Friday FTX filed for bankruptcy and Bankman-Fried resigned as CEO. The contagion has already begun. A company Bankman-Fried tried to rescue has paused client withdrawals. So who will save them now?
The answer is no one, because it is not necessary. The whole point of crypto is that it is supposed to be decentralized and transparent. The rise and fall of Bankman- Fried demonstrates how far the industry has deviated from the ideal. There are large-than-life personality who run today’s crypto world. There is no better example than FTX and its leader.
The way was supposed to be different. Bitcoin, the world’s first major cryptocurrency, came into the world on the heels of the 2008 financial crisis, which led to a deep disappointment in bankers and politicians. The idea was that the new system doesn’t require you to trust anyone at all, because of the distrust in financial institutions. No bad actors should be allowed to alter the transactions that are recorded on the digital ledger known as a ‘blockade’.
The Clumpy Coin Coins of Alameda and Binance: Failures, Mistakes and the Censorship of Blockchains
FTX collapsed in a matter of moments after last week’s report fromcoindesk, which indicated that Alameda Research relied on the sister token FTT. This led Binance CEO Changpeng “CZ” Zhao to announce that his exchange would sell off its FTT tokens, causing the coin’s value to plummet and other customers to jump ship. As FTX struggled to make up for the reported $8 billion shortfall caused by the influx of withdrawal requests, Binance offered to buy the firm, but walked back on its plans just one day later, stating its “issues are beyond our control or ability to help.”
Bankman-Fried takes full responsibility for his mistakes. He wrote in a long thread that he was responsible for making sure that things went well. I, ultimately, should have been on top of everything. I failed in that. I am sorry.
It is a perfect illustration of how a technology isn’t supposed to work. The whole idea of a decentralized ledger is to remove a single point of failure and decrease the risk of human error. And yet, FTX would be far from the first player in the crypto space, led by an outsized personality, to suddenly deflate. Other examples included Alex Mashinsky, the founder and CEO of the crypto lending platform Celsius, and Do Kwon, who co-founded the company that created TerraUSD, a so-called algorithmic stablecoin that was intended to trade at $1 USD. Both of those projects imploded this past year, leading to billions of dollars in losses. Many of the figures’ huge followings learned the hard way that these supposedly powerful leaders did not have the power to return money.
The cult of personality problem is not limited to crypto. It’s also seen in social media and is a supposedly leaderless and Decentralized technology. Musk, the richest man in the world and owner of Twitter, has many opinions on how the network is run.
In the case of crypto, many have long pointed out the risk of powerful centralized exchanges like FTX, with some people preferring to hold their own coins instead of storing them in an exchange. Another option is to actually use blockchain technology to provide greater visibility, something that Bankman-Fried is now promising to do. In his long Twitter thread on Thursday, he said his priority would be “radical transparency,” or “giving as close to on-chain transparency as it can: so that people know exactly what is happening on it.” It is most likely too late in the case of FTX.
“FTX has been hacked. All funds seem to be gone,” an admin on FTX’s official Telegram channel writes, while also instructing users to delete FTX’s apps and warning against going on the platform’s websites due to the presence of malware. FTX.com and FTX.us are currently down at this time of writing.
The bank robbery: What can you do with it? A story of a bank thief who stole a large amount of money
“We’re definitely watching the movements of these funds,” says Chris Janczewski, the head of investigations at TRM Labs and a former special agent at the IRS’s criminal investigations division. The potential thief has hundreds of millions of dollars. But it’s like they went into a bank, took as much cash as they could carry, and then the dye packs went off. They’ve got all this money, but now everyone knows it’s connected to this bank robbery. What can you do with it?