Updated August 20, 2018
Increase of over 100% in 2018 of attacks on Bitcoin executives and traders
Digital currency exchange owners and key executives are increasingly at high risk for murders, thefts, violent home invasions and extortion attempts. In the first six months of 2018, there was an increase of over 100% in the number of violent attacks against executives of digital currency exchanges and traders since 2017.
Unfortunately, many in the digital currency ecosystem do not take security and safety seriously.
Four recent examples:
(a) Canadian exchange owner murdered in Mexico by cartel
Two weeks ago, a Canadian Bitcoin exchange owner, Giuseppe Bugge, was murdered in Guadalajara, Mexico, likely by a Mexican drug cartel. Bugge was ambushed by eight to ten men and shot 140 times with AK-47 and AR-15 assault guns. Bugge operated an exchange called GS Crypto Currency that provided OTC services for the sale and purchase of Bitcoin. The Vancouver Police said Bugge was associated with a transnational criminal organization and was involved in drug trafficking.
(b) ICO founder robbed by employees at home
The founder of the ICO Skycoin, Brandon Smietana, and his girl friend, Sarah, were threatened, beat up, robbed and forcibly confined at their home in China on June 12, 2018, for several hours by their own employees who forced them to transfer 18 Bitcoin to them. The incident, however, seems full of unusual aspects, as you can see here, during the interview with Smietana.
According to the CEO’s version of the events of the kidnapping, which are rather surreal, Skycoin is actually an exchange that lists ICOs, and not an ICO, in China. Skycoin hired an accountant who discovered that Skycoin employees had stolen millions of dollars from Skycoin. And as a result of that, Smietana says he was stalked at home, held for 8 hours and severely beat up by an employee named Mary, who also tried to stab him, allegedly, with 5 members of a gang. In order to protect his safety, Smietana says he uses a fake passport in another name. Apparently, the people who allegedly attacked Smietana were prevented from completing a larger robbery by the owners of C2CX, another exchange in China, who informed him, he says, of multiple users on their platform trading digital currencies who use fake identity products. Smietana says he is under the protection of Israel post-incident.
(c) Massachusetts armed home invasion for Bitcoin
Earlier in the summer, a Bitcoin trader in Massachusetts, who runs a digital currency exchange on Localbitcoins, was robbed at gun point in his home by two men who demanded he turn over Bitcoin and cash. The two suspects were arrested by state police. It is believed that they staked out the home before, and were aware that the home owner operated a digital currency exchange. The home owner, Austin Nedved, managed to run out the front door and call police.
(d) 23 year old Bitcoin kid murdered
Earlier this year, a well known Bitcoin trader named Pavel Nyashin, who boasted about his Bitcoin wealth online, was violently beaten and robbed of US$425,000 in Bitcoin in Russia. His apartment was trashed and his computer equipment stolen. As you can tell from his face, below, he took to Youtube and used the incident of what happened to him to raise awareness of the risks of violence to those in the Bitcoin community. He was later murdered, likely because he filed a police report, although some believe he committed suicide. Doubtful. He was 23 years old.
Growing number of attacks on Bitcoin executives around the world
A Bitcoin developer on Github, jlopp, has a really good list of over 30 instances of extortions and physical violent attacks on digital currency executives and traders in the last three years. There are not similarly, such attacks on CEOs of banks.
Here is a sample, below:
- New York – February 20, 2015, Bitcoin trader, Dwayne Richards was robbed and stabbed by two men who were after his Bitcoin.
- New York – February, 2015, Bitcoin trader, Dean Katz, was robbed at gun point for $12,000 in Bitcoin.
- Florida - July 27, 2015, Bitcoin trader, Steve Manos, was robbed at gun point for $28,000 in Bitcoin.
- Canada – August 14, 2016, a Bitcoin purchaser was robbed and stabbed by teenagers while buying Bitcoin.
- Brazil – February 26, 2107, the Wife of the founder of the Brazilian digital currency exchange CoinBR, was kidnapped at gun point by six men outside her child’s daycare and held for several days during which time thieves demanded a ransom of US$29 million in Bitcoin.
- New York, November 4, 2017, a Bitcoin trader was kidnapped at gun point, shoved into a van and forced to give his kidnappers access to his wallets whereby the criminals then went to his home and stole $1.8M in Ether.
- Istanbul, November 15, 2017, a Bitcoin investor who led an extravagant online lifestyle was stalked, kidnapped and robbed of $3.5M worth of Bitcoin by a gang.
- Ukraine, December 26, 2017, an employee of a UK digital currency exchange, Pavel Lerner, was kidnapped at gun point by 6 men and released after three days after the exchange paid $1M in ransom.
- Russia, January 14, 2018, Bitcoin trader and blogger, Pavel Nyashin, who often boasted about his Bitcoin wealth, was beaten and robbed of $425,000 in Bitcoin. He was later murdered in Russia.
- Thailand, January 15, 2018, Bitcoin investor, Maxsim Latsoka, was kidnapped at gunpoint by a gang of Russians in Thailand and forced to pay $100,000 in Bitcoin.
- Hong Kong, January 18, 2018, a Bitcoin trader was robbed of HK$1.4 million while he was attempting to buy Bitcoin.
- Canada, January 23, 2018, a digital currency exchange that operated out of an apartment was robbed, unsuccessfully, at gun point.
- England, January 27, 2018, the owners of a digital currency exchange were the victims of a home invasion. One was tied up while the other was forced to transfer an undisclosed amount of Bitcoin at gun point to the robbers.
- Taiwan, February 21, 2018, a Bitcoin trader was assaulted while conducting a trade with several men and forced to transfer 18 Bitcoin to them.
- Russia, February 23, 2018, a digital currency developer and ICO founder, Yury Mayorov, was beaten, mutilated and forced to transfer over $1M in Bitcoin to robbers on the streets of Moscow.
- Florida, April 11, 2018, a Bitcoin trader, Ryan Rice, was attacked during a Bitcoin deal over $30,000 at a Whole Foods store and shot one of the robbers in self defence.
- Dubai, April 25, 2018, two brothers trying to buy $1.9M of Bitcoin were attacked and robbed by a gang of ten men and were forced to hand over their cash to them.
- Austria, June 19, 2018, a couple was attacked in their home, tied up and forced to transfer $250,000 in Bitcoin to robbers, who posed as mailmen to enter the house.
Security protocols are important
Security procedures for Bitcoin executives are important to have in place and to follow. They should set out security procedures and escalation processes.
A risk to consider early on is the protection against the disclosure of where Bitcoin executives live and work. Once this information is breached, it can’t be undone and harms an entire company. Most digital currency exchanges do not have physical offices or disclose their location because of the insurmountable security risks it poses for key executives and the risks of employees, premises and systems being compromised. Most Bitcoin executives also carefully protect the location of their residence at all costs for security purposes for their family and the business, since most Bitcoin-related robberies occur during home invasions.
Insurance is important and executives need to be careful about how they project their lifestyle to employees and those outside an organization. Executives of Bitcoin exchanges will likely find it more difficult to obtain insurance if they boast about newly acquired wealth or don’t take security protocols seriously because the probability of an adverse violent incident happening to them is statistically higher than Bitcoin executives who lead a conservative lifestyle.
If you work in the ecosystem, or at a Bitcoin-related business, it is important to remember that everyone has a duty to ensure security of the environment. One security breach, whether its the disclosure of the address of an executive or the unsafe retention or storage of business documents, presents a real security risk to the whole organization and exposes employees to potential harm.
The most important risk, bar none, is employees, particularly employees in less well paid positions who are more susceptible to influence.
Its important to know and be able to recognize red flags when they occur, as well as to mitigate risks of harm. Common red flags include:
- Being followed home or to hotels;
- Customers coming to an exchange for non-transactional reasons or for multiple nominal transactions;
- Employees asking for access to employment records or information about where executives live;
- Meetings that are suggested for trades at locations with public wifi access; and
- Customers attempting to form friendships with employees to gain intel.
Often Bitcoin executives are stalked by vehicles before a kidnapping. You should look for signs of surveillance such as:
- Illegally parked vehicles;
- Occupied parked vehicles;
- Vehicles that move with you;
- Vehicles that pass, then park;
- Vehicles signaling for turns but which do not turn; and
- The same vehicle day after day, particularly if occupied.
If you think you are being followed, circle the block or change directions several times to confirm the surveillance. Let the surveillants know you have seen them, but do not provoke them. Learn to be alert to events that could signal the start of a plan to stop your car such as workman stopping your car, an unusual detour, a fake police or government checkpoint or an accident in which your car is deliberately struck.
As a final note of advice, if you work at an exchange or in the Bitcoin space with people who do not take security seriously, leave immediately. Don’t put your own personal safety at risk. Attacks typically originate from within (clients or employees), not from the exterior of an organization.