Bitfinex, a famous cryptocurrency exchange located in Hong Kong, has announced a security compromise that has been controlled. The incident was the result of a phishing effort that was directed at one of the company’s customer care representatives. The incident took place between the 30th of October and the 5th of November and entailed illegal access to a portion of the company’s customer support boards. These boards contained user information that was out of current and incomplete.
Bitfinex provided more details on the security breach in a statement that was made public on November 4 and emphasized that the impacted customer support forums only included “partial, incomplete, and outdated information.” Because the compromised agent did not have senior-level rights, the phishing attempt did not result in a broad data breach. This kept the infected agent from having access to support tools and helpdesk requests.
Bitfinex has certified that the fundamental infrastructure of the exchange, including servers, wallets, and database systems, has remained intact and unbreached despite the unlawful access that was granted to the company. The prompt action taken by the exchange to resolve the problem guaranteed that there would be no loss of client cash and that the confidentiality of password information would be maintained.
Bitfinex has responded to the situation by conducting a review of the information that was exposed and has begun communicating with the impacted clients, the majority of whom owned dormant or empty accounts. The relevant authorities have been informed, which demonstrates Bitfinex’s dedication to both legal compliance and joint efforts to track down and capture the offender(s).
After the incident, Bitfinex reaffirmed its commitment to providing its employees with continual security training and the implementation of stringent security standards. In spite of the fact that the exchange has a history of achieving convictions against previous attackers, this most recent episode serves as a reminder of the ever-present hazards that exist inside the area of digital assets. The proactive approach that Bitfinex takes with regard to cybersecurity is shown by the solid connection that the exchange has with law enforcement authorities and the regular security checks that are performed.
Amidst an imminent government shutdown due to Congress’s stalled federal appropriations bill for the fiscal year beginning October 1, 2023, the financial sector holds its breath. The potential shutdown’s ripple effects are poised to stretch beyond traditional markets, reaching into the cryptocurrency sphere, particularly Bitcoin, according to Greg Cipolaro, Global Head of Research at NYDIG.
Federal Shutdowns: An Emerging Norm
The occurrence of federal shutdowns is becoming less sporadic. Over the years, 10 instances have been recorded, with the most recent one in 2018 – 2019 lasting a record 35 days, costing the government an estimated $5 billion. It’s difficult to predict a shutdown’s duration, as it largely hinges on lawmakers’ negotiations. However, the increasing political polarization hints at a longer standoff this time around.
Credit Rating Agencies on High Alert
Moody’s, holding a AAA credit rating on the US, sounded the alarm on September 27, 2023, cautioning against adverse impacts of a shutdown. This echoes past sentiments, like the 2011 S&P downgrade amidst debt ceiling debates, spotlighting weakened US fiscal policymaking. The persisting discord among political factions continues to unsettle credit rating agencies, potentially foreshadowing broader financial market disruptions.
Bitcoin ETF Awaits SEC Green Light
A direct casualty of the possible shutdown is the delay in the Securities and Exchange Commission (SEC) approval for a spot Bitcoin ETF. The furlough would significantly trim down SEC’s staff from 4,604 to a mere 437, stalling critical financial product approvals. Notably, the SEC has already postponed decisions on most ETFs, anticipating a prolonged shutdown. The spotlight is on the iShares Bitcoin Trust from BlackRock, among others, awaiting SEC’s nod, which now hinges on the resumption of federal operations post-shutdown.
Law Enforcement and Financial Regulation: The Dual Impact
Two pivotal areas within the crypto realm stand to bear the brunt: law enforcement, chiefly the Department of Justice (DOJ), and financial regulation, predominantly the SEC. While the DOJ is slightly insulated with 84% of its 114,521 staff exempted from furloughs, SEC faces a more stark reality. The severely reduced staff could mean a longer wait for the crypto industry on crucial financial product approvals, particularly the Bitcoin ETF.
Market Reactions Amidst Uncertainty
Bitcoin nudged up by 1.9% over the week despite the ETF decision delay, possibly finding a silver lining in the US’s fiscal woes. Conversely, traditional hedges and markets felt the heat. Gold dipped by 2.9%, the S&P 500 by 1.3%, and the Nasdaq Composite by 0.2%. The bond market too saw a slump, while oil bucked the trend with a 2.3% rise, reflecting a mixed bag of market reactions as the shutdown looms.
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KuCoin, which is a famous cryptocurrency exchange, has just verified that the address of a user is related to the start of hundreds of frauds using memecoin. This news was recently reported. A user on Twitter discovered on April 26 that the in question address had been responsible for the creation of two to five memecoins each and every day for the previous two years. The community member also brought up the fact that KuCoin “owned and controlled” the wallet addresses, which they mentioned in their post. Despite the fact that the blockchain explorer Etherscan has identified the address as belonging to a false phishing wallet, KuCoin has declared that they would not freeze the user’s funds in the absence of an official warning from law enforcement.
However, KuCoin has also stated that they will assist and cooperate with law enforcement agencies to take temporary risk control measures if the reporting party provides relevant legal documents, procedures, or reporting records. KuCoin made this statement in response to a question about whether or not they would do this. This action will be carried out in compliance with user agreements, complaints and reports, as well as the laws of the Seychelles.
The KuCoin platform had a security breach on April 24, which led to the official Twitter account of the platform being hacked. This issue arises as a consequence of that incident. The account intentionally uploaded misleading activities, which resulted in the loss of assets for several of its followers. After discovering the security flaw, KuCoin collaborated with Twitter to restore the hacked social media account and made a commitment to compensate the users whose accounts were compromised.
Some people in the cryptocurrency community have voiced their disagreement with KuCoin’s decision to not place a freeze on the user’s assets. These individuals believe that it is the responsibility of the exchange to protect its users from fraudulent behavior on its platform. On the other hand, some people have pointed out that KuCoin does not have the legal power to freeze assets since it has not received an official warning from law authorities.
This incident demonstrates how vitally important security is in the cryptocurrency business and how essential it is for exchanges to take preventative steps to thwart fraudulent conduct. Although KuCoin has pledged to assist law enforcement agencies, it is not yet clear how this situation will be resolved or what steps will be taken to prevent incidents of this nature from occurring in the future. KuCoin has stated that it will assist law enforcement agencies.
The International Criminal Police Organization (INTERPOL) which has its headquarters in Lyon, France has established a police metaverse unit that is expected to function worldwide.
The news was announced in a press statement made at the 90th INTERPOL General Assembly in New Delhi, India.
The metaverse is expected to run via the INTERPOL Secure Clouds so as to guarantee its objectivity.
The INTERPOL platform will enable registered persons to interact with other officers via their avatars persona, explore a virtual replica of the INTERPOL headquarters in Lyon, France, without regard to the user’s physical location, and even enroll in advanced training programs in forensic analysis and other policing skills when it fully begins its operations.
Law enforcement agencies can benefit from the metaverse in a variety of ways, including remote work, networking, gathering and preserving evidence from crime scenes, and providing training.
As the Metaverse’s user population increases and technology improves, there will undoubtedly be more crimes that might be committed, including crimes against children, data theft, money laundering, financial fraud, phishing, and harassment. These crimes could pose a challenge to law enforcement agents because not all crimes committed physically are categorized as fraudulent when committed in the digital space.
According to Madan Oberoi, Executive Director of Technology and Innovation at INTERPOL,
“By recognizing these dangers early on, we can collaborate with stakeholders to develop the required regulatory frameworks and shut off potential criminal markets before they are completely formed.”
The Metaverse Experience
The Metaverse has become more than just a gaming platform. More individuals and corporations are already using the metaverse for everyday activities such as working, studying, shopping and socializing.
Usain Bolt, an 11-time world champion and eight-time Olympic gold winner, has partnered with Step App to elevate fitness and exercise through the metaverse and Web3. Users of the Step App can earn rewards when they participate in exercise activities such as jogging and running with friends and strangers.
The United States’ popular retail store, Walmart also showed its interest to launch its own metaverse that may enhance customers’ shopping experience.
The U.S. Department of Justice (DOJ) is creating a new team to go after criminal activity within the digital asset space.
The National Cryptocurrency Enforcement Team (NCET) will operate under the department’s Criminal Division to prosecute illegal activity and attempt to recover illicit proceeds.
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The new DOJ press release says,
“Deputy Attorney General Lisa O. Monaco announced today the creation of a National Cryptocurrency Enforcement Team (NCET), to tackle complex investigations and prosecutions of criminal misuses of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.”
According to Assistant Attorney General Kenneth A. Polite Jr.,
“The creation of this team will build on this leadership by combining and coordinating expertise across the Division in this continuously evolving field to investigate and prosecute the fraudulent misuse, illegal laundering, and other criminal activities involving cryptocurrencies.”
The NCET plans to build relationships with law enforcement agencies at federal, state, and local levels as well as seek out partnerships with private sector entities well-versed in cryptocurrencies.
“Areas for increased investigative and prosecutorial focus [include] professional money launderers, ransomware schemes, human traffickers, narcotics traffickers, and financial institutions working with cryptocurrency.”
The announcement comes on the heels of a broader international push to crack down on cybercrime which has cheated consumers out of billions of dollars annually.
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Security Service of Ukraine (SBU) has shut down several crypto exchanges reportedly involved in illegal financial transactions since the start of 2021.
According to a statement by the SBU on Wednesday, the network of “clandestine cryptocurrency exchanges” were based in the country’s capital Kyiv and collectively processed a monthly turnover of $1.1 million in funds linked to criminal activity.
The SBU’s announcement claimed that the illegal crypto exchanges provided anonymous transaction services, which made them a money laundering risk. Indeed, Ukraine’s state security service stated that some individuals funneled funds through these platforms to organize protests across the country.
According to the SBU, these illegal funds came from e-wallets linked to banned Russian payment processors like Qiwi, WebMoney and Yandex.
Ukraine’s state security service also reportedly recovered computers containing evidence of suspected illegal activity and allegedly forged incorporation documents for the companies during raids of the crypto exchange platforms.
Related:New bill in Ukraine to allow payments in cryptocurrency, says official
The news of the shutdown comes on the heels of a similar raid against a warehouse suspected of diverting electricity to mine cryptocurrency using PlayStation 4 consoles. However, an investigation by Delo, a local business publication, revealed that the facility was being used to generate in-game currency and not for farming crypto.
Meanwhile, as previously reported by Cointelegraph, Ukraine’s parliament is considering a new bill to legalize crypto payments in the country. However, the legislative action will not change the status quo of Bitcoin (BTC) and cryptocurrencies not being classified as legal tender in Ukraine.
The country’s central bank is also working on a national digital currency project. The National Bank of Ukraine received official authorization to issue a central bank digital currency back in July. The Ministry of Digital Transformation partnered with the Stellar Development Foundation on a joint strategy for digital assets and CBDCs.
On paper, the Financial Action Task Force (FATF) was created more than 30 years ago by G7 countries to fight organized criminal and narcotic financial flows. The intergovernmental organization describes itself as a “dynamic contributor to peace and security” and issues recommendations that most countries transpose into national laws.
In practice, it’s a totally different story than just laudable intentions with limited effects on society. The FATF can decide to arbitrarily place jurisdictions on gray and black lists, which has the effect of putting certain countries under immense financial pressures or even cutting them off from the global financial system almost entirely. The root of all existing bureaucracy in the finance industry these days is the fruit of dozens of standards and guidelines published by the FATF that are updated on a regular basis. The FATF even went as far as to publish recommendations for counter-terrorist financing rules that have been interpreted and implemented by national governments and banks in a way which has delayed aid and put NGO staff at greater security risk in some countries. The FATF will always talk about how drug dealers and cybercriminals are misusing the financial system to serve their ends, but never will you hear any serious questioning on loss of financial privacy, financial exclusion and the administrative costs their standards impose to all members of society.
Given its track record, it is a surprise to no one that the organization spent the last few years gathering ammunition and has started aiming at a new target of choice: bitcoin (or what they call “VAs, virtual assets”) and the ecosystem around it (e.g., what they refer to as “VASPs, virtual assets service providers”). Cash has always been given the worst reputation by the anti-money laundering experts; it is only logical that electronic cash without rulers was never going to get away with it and the most recent public consultation launched by the FATF is here to prove it.
Nonelected officials are becoming increasingly worried that money is becoming as frictionless as communication is and more importantly, that they have no ability to control and censor financial flaws at will. Instead of having local law enforcement agencies prosecuting bad actors when a crime has been committed, the FATF has been pushing for our society to become one of surveillance, control and censorship by having governments around the world weaponize the financial system, forcing institutions to spy on customers and scrutinize every transaction even without any legitimate concern.
“But if it helps catch criminals, the trillions spent every year by all actors of society subject to anti-money laundering laws have to be worth it, right?” one may ask.
Three simple questions should help in this context:
Were know-your-customer (KYC) measures proven effective at detecting bad actors trying to utilize bank accounts?
Are anti-money laundering laws stopping a significant percentage of illicit fiat money from entering the financial system?
How efficacious are counter-terrorism financing measures when it comes to deterring terrorists from financing themselves?
The answers are obvious: it doesn’t take any special skill to open an account with a fake passport, to forge documents with software and to lie about the true purpose of one’s financial transactions. It must once and for all be acknowledged that criminal behavior is not prevented by hundreds of guidances and laws, but by incentive systems that are naturally provided in a sound money society with less government.
Recent analysis demonstrate the benefits versus costs ratio of anti-money laundering (AML) has been going in one direction only:
Image via https://www.ledgerinsights.com/anti-money-laundering-has-less-than-1-impact-on-crime-at-what-cost/
The evidence cannot be disputed, yet more AML requirements are popping up around the world every year. This trend is very similar to the way central banks handle quantitative easing (QE), pouring gasoline on the fire that is the problem.
Now pause and think; the introduction of central bank digital currencies is planned to be the final assault on cash. Are we to believe paper money will be eradicated from the streets while there would be no parallel attempts to restrict digital peer-to-peer transactions or at least make it as impractical as possible?
Let’s not be naive, the transfer of information between exchanges on the senders and beneficiaries of a transaction (aka “The Travel Rule”) is only the start of something much bigger. The ultimate goal of the FATF and various policy makers is an attempt at absolute control and it should be expected that they will defend their position with fierceness and stubbornness.
In recent years, bitcoiners have had to learn to deal with draconian KYC measures and chain surveillance. These are enabled by software developed by members of the private sector who are financially incentivized to push for more regulation.
The coming reality will be an even harder pill to swallow if the FATF is successful in making transactions from exchanges to private wallets impractical or even a thing of the past. AML experts are also calling for further steps saying things such as, “Regulators should require merchants to place transaction-volume limits on payments received from self-custodied wallets,” and, according to a Forbes article, “Users could still keep custody of their private keys, but would connect their crypto addresses to their real world identity that could be uncovered by a court ordered subpoena.”
Even if new significant regulations and restrictions are inevitably rolled out in the course of this decade, the only way to avoid being impacted is by making the choice to depend less on trusted third parties and actively participate in the Bitcoin circular economy today. There are trade-offs to not walking down the KYC path (mostly in terms of UX and liquidity), but the feeling of resilience that comes with trading directly with peers is liberating.
This decade will consist of decisive battles, and even if Bitcoin is bulletproof technology, the FATF knows the only way to undermine this movement is to try to overregulate the gatekeepers and disgust the users into eventually making them capitulate. We shall not let their acronyms define us nor influence the way we choose to hold our money or transact. Choosing Bitcoin should always be the equivalent of choosing freedom and no one organization should be given the possibility to change that. The time to start pushing back is now.
This is a guest post by UTXOxo. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
