Holders of significant digital funds are being threatened with physical violence as thieves seek to rob the digitally wealthy of their cryptocurrency funds.
Those with wealth have always been targeted. This is only different because of the anonymity cryptocurrency affords and the catchup game law enforcement is playing to prevent it coupled with the fact that the value of cryptocurrency has soared in the last year.
Last month in Phuket, Thailand, thieves robbed a young Russian man, holding him hostage in his apartment until he logged into his computer to transfer around $100,000 worth of Bitcoin into the online wallet they controlled.
Weeks before that, Pavel Lerner, chief executive of the virtual currency exchange in Ukraine, was held ransom for $1 M in Bitcoin. An Exmo spokeswoman said that the money came from Lerner’s personal funds, The New York Times reported. “Mr. Lerner was on leave from the company but would return.”
In New York City, a friend held a man captive until he transferred $1.8 M worth of Ether, the virtual currency second in value to Bitcoin.
When you’re your own bank, you’re also your own security. Banks can stop/reverse large electronic transactions made under duress. There’s an established process/checks to protect you.
“There is no Bitcoin bank to halt or take back a transfer, making the chances of a successful armed holdup frighteningly enticing,” The New York Times reported.
The impact of the situation directly correlates with countries where organized crime is prevalent. The New York Times wrote:
“Many big virtual currency holders privately say that they will no longer travel to Russia, Turkey or other countries where they assume that attacks may be easier to pull off because of organized crime.”
However, armed attacks aimed at cryptocurrency holders have also targeted the Bitcoin exchange in Canada and individuals in New York City and Oxford, England.
Anonymity is a Thief’s Advantage
Virtual currencies can be transferred to anonymous addresses, which offers an attractive angle to theft.
“This is now becoming more pervasive and touching more law enforcement divisions that deal with organized crime and violent crime on a local level,” Jonathan Levin, founder of Chainalysis (which works with law enforcement on virtual currency crime), said.
The cryptocurrency community should proactively confront the threat and let thieves know that people are developing ways to protect themselves, Jameson Lopp, a Bitcoin engineer and virtual currency holder, said.
“If you are rich and you own real estate, or stocks or a sports team, somebody can’t mug you and take your sports team away,” he said. “Having liquid crypto assets makes you much more attractive for that kind of criminal attack.”
Lopp keeps his virtual currency in multisignature wallets created by BitGo, the company he works for. Multiple people must sign off on the transaction before any assets move are released.
“We’re in the very early days of this becoming a problem,” Lopp said. “The attackers are still trying to figure out what the risk-reward really is.”
Crime is ever-evolving, but so are methods of property protection.
“Programmers are working to develop methods of signing virtual currency transactions that can quietly alert the authorities that a transaction is being made under duress,” Levin said. “Something like the hidden button under the bank teller’s desk.”
Money motivates crime, but it also motivates innovation.
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