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Former US special agents Shaun Bridges and Carl Force have been charged with stealing large amounts of Bitcoin, which came into their possession during an investigation into the notorious Silk Road marketplace.
The Department of Justice (DoJ) alleges that Shaun Bridges stole more than $800,000 in Bitcoin.
Carl Force has also been charged with money laundering.
Best known for selling illegal drugs, Silk Road was closed in 2013 following raids by the FBI and other agencies.
The man accused of running the site, Ross Ulbricht, was convicted in February, and prosecutors argued that he had earned about $18 million in Bitcoin from the operation.
Carl Force, who worked for the Drug Enforcement Administration (DEA), served as an undercover agent during the investigation into the Silk Road.
One of his tasks involved communicating with Ross Ulbricht, known online as “Dread Pirate Roberts.”
The DoJ alleges that “without authority”, Carl Force, 46, “developed additional online personas and engaged in a broad range of illegal activities calculated to bring him personal financial gain”.
“In doing so, the complaint alleges, Force used fake online personas, and engaged in complex Bitcoin transactions to steal from the government and the targets of the investigation.
“In one such transaction, Force allegedly sold information about the government’s investigation to the target of the investigation.”
Carl Force is charged with wire fraud, theft of government property, money laundering and conflict of interest.
Shaun Bridges, who worked for the US Secret Service, is charged with wire fraud and money laundering.
The DoJ alleges that Shaun Bridges transferred more than $800,000 in Bitcoin into an account at MtGox, a Japanese digital currency exchange that filed for bankruptcy in February.
“He then allegedly wired funds into one of his personal investment accounts in the United States mere days before he sought a $2.1 million seizure warrant for Mt. Gox’s accounts,” the DoJ says.
Shaun Bridges and Carl Force are appearing in a San Francisco court on March 30.
Former world’s biggest Bitcoin exchange Mt. Gox has been put in administration by a Japanese court.
Mt. Gox announced in February that hackers had stolen hundreds of thousands of Bitcoins from it, worth about $500 million.
It later said that it had found a substantial number of the Bitcoins and had hoped to find a way to continue as a business and pay back customers.
But the court dismissed this plan and appointed an administrator.
In a statement on Mt. Gox’s website the administrator said that bankruptcy proceedings were likely to follow.
Mt. Gox has been put in administration by a Japanese court
This would involve Mt. Gox customers being asked to make any claims through the court, although the administrator pointed out that there was no time frame for this process at the moment.
Customers can continue to check the balance of any Bitcoins they have with Mt. Gox but are warned that this is not necessarily the amount they would receive as the result of a claim.
Mt. Gox said at the time it went offline that the Bitcoins had been stolen from its system by hackers who exploited a loophole in the software that oversaw the Bitcoin system. The administrator said that it plans to investigate the missing Bitcoins as part of its role.
The founder of Mt. Gox, Mark Karpeles, refused a request by a US court to attend a hearing this week to answer questions about the collapse of the exchange. He has not been charged with any crime.
Bitcoin is currently trading for around $500, down from a high of more than $1,100 last year.
Bitcoin exchange Mt. Gox has given up plans to rebuild under bankruptcy protection and has asked a Tokyo court to allow it to be liquidated, the Wall Street Journal reported, citing people familiar with the situation.
The source cited the complexity of the procedure and the lack of realistic rehabilitation plans for the Tokyo-based exchange as reasons for the move, the newspaper said.
Bitcoin exchange Mt. Gox has given up plans to rebuild under bankruptcy protection and has asked a Tokyo court to allow it to be liquidated (photo Getty Images)
Mt. Gox, once the world’s biggest Bitcoin exchange, filed for bankruptcy protection in Japan last month, saying it may have lost some 850,000 Bitcoins – worth around $454 million at today’s rates – due to hacking into its computer system. It has since said it found 200,000 of those Bitcoins.
Mt. Gox’s lawyers declined to comment on the matter.
Mt. Gox CEO Mark Karpeles won’t travel to the US to answer questions about the Bitcoin exchange’s US bankruptcy case, the company’s lawyers told a federal judge this week.
Bitcoin exchange MtGox said in a filing that it has found 200,000 lost virtual coins.
MtGox said it found the Bitcoins – worth around $116 million – in an old digital wallet from 2011.
That brings the total number of Bitcoins the firm lost down to 650,000 from 850,000.
MtGox, formerly the world’s largest Bitcoin exchange, filed for bankruptcy in February, after it said it lost thousands of Bitcoins to hackers.
MtGox said in a filing that it has found 200,000 lost Bitcoins (photo Reuters)
“MtGox had certain old-format wallets which were used in the past and which, MtGox thought, no longer held any Bitcoins,” said MtGox chief executive Mark Karpeles in the filing.
However, “on March 7, 2014, MtGox confirmed that an old-format wallet which was used prior to June 2011 held a balance of approximately 200,000 Bitcoins,” Mark Karpeles said.
Mark Karpeles said MtGox moved the found Bitcoins to offline wallets on March 14 and 15 so that they could not be targeted.
At the time of the MtGox theft, about 750,000 customer Bitcoins were stolen as well as close to 100,000 of MtGox’s own Bitcoins.
That amounts to about 7% of all the Bitcoins in existence.
MtGox recently won brief bankruptcy protection in the US as the firm’s case works its way through Japanese courts.
MtGox Bitcoin exchange has won a temporary bankruptcy protection in the US.
A judge in Dallas, Texas, agreed to protect MtGox’s assets and temporarily halt two US lawsuits while bankruptcy proceedings occur in Japan.
MtGox filed for bankruptcy in Japan in February after losing about $473 million worth of customers’ Bitcoins to what it says was a hacking attack.
The company is scheduled to return to court on April 1 to extend the protections.
MtGox filed for Chapter 15 protection in the US late on Sunday.
The filing asks the US bankruptcy court to recognize MtGox’s bankruptcy in Japan and protect its US assets.
MtGox Bitcoin exchange has won a temporary bankruptcy protection in the US
And it gives MtGox a temporary reprieve against two US lawsuits: one a class-action suit in Chicago filed by an Illinois resident, and another a $75 million breach-of-contract case filed in Seattle by Coinlab Inc.
At the time of the MtGox theft, about 750,000 customer Bitcoins were stolen as well as close to 100,000 of MtGox’s own bitcoins.
That amounts to about 7% of all the Bitcoins in existence.
Steven Woodrow, the lawyer leading the Chicago class-action suit, told Judge Harlin Hale that the case was a “massive fraud”.
MtGox’s attorney, David Parham, denied there was any fraud and said the company and its founder, Mark Karpeles, were complying with the terms of the Japanese bankruptcy proceeding.
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The web accounts of Mark Karpeles – boss of the troubled MtGox Bitcoin exchange – have been attacked by hackers.
The attack on Mark Karpeles accounts seems to have been motivated by growing frustration over the actions of MtGox.
Last month MtGox stopped trading and filed for bankruptcy after finding out that $465 million in Bitcoins had been lost via a security bug.
Many have called on the exchange to release more information about what happened to the lost Bitcoins.
The attacks were mounted on the personal blog and Reddit account of Mark Karpeles and left the hackers in charge of both social media accounts.
The attack on Mark Karpeles accounts seems to have been motivated by growing frustration over the actions of MtGox
Hackers used their access to grab detailed information about trading activity at MtGox. They then shared their findings by posting a 716MB file containing much of what they had found.
The material posted included an Excel spreadsheet of more than one million trades, entries from MtGox’s business ledger and information about its back-office administration software.
“It’s time that MtGox got the Bitcoin community’s wrath instead of [the] Bitcoin community getting Goxed,” wrote the hackers in a message accompanying the data dump. The word “Goxed” has been used to describe the sudden interruptions in trading MtGox imposed when it was going through technical problems before its final closure.
According to Forbes writer Andy Greenberg, although $465 million in Bitcoins (approximately 744,000 coins) had supposedly gone astray from MtGox, no activity suggesting they had been traded had been seen in the blockchain – the central list of buying and selling that underpins the entire Bitcoin network.
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MtGox Bitcoin exchange has reportedly filed for bankruptcy protection in Japan.
The application was made in Japan by lawyers acting on behalf of the exchange and comes only days after MtGox went offline.
On Tuesday, the exchange’s boss said he was working hard to find a “solution to our recent issues”.
Before going offline, technical troubles meant it prevented customers transferring digital cash to other exchanges on February 7.
MtGox Bitcoin exchange has filed for bankruptcy protection in Japan
Details of the bankruptcy are scant but the application for protection has been accepted by a district court in Tokyo, reported AFP. At the court hearing, the company said it had outstanding debts of about 6.5 billion yen.
MtGox’s lawyers are believed to have decided to apply to the court for protection after US regulators filed a subpoena against the company.
Reports suggested the site shut down after it discovered that an estimated 744,000 Bitcoins – about $350 million – had been stolen due to a loophole in its security.
MtGox’s troubles have put pressure on the price Bitcoin owners can get for their holdings. Currently one Bitcoin is worth about $561, a price far lower than the high of $1,000 per coin it hit in November 2013.
Meanwhile, Vietnam has banned its banks from handling Bitcoin saying the virtual cash is not legal tender. Vietnam’s state bank said trading in Bitcoins carried “potential risks” for users.
At the same time, Japan’s deputy finance minister said any regulation of Bitcoin would have to involve international cooperation to avoid opening up loopholes that traders could exploit.
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MtGox, one of the biggest Bitcoin exchanges, has gone offline.
MtGox has been hit by technical issues and recently halted all customer withdrawals of Bitcoin after it spotted what it called “unusual activity”.
The move is a setback for backers of Bitcoin, who have been pushing for greater adoption of the currency.
Meanwhile, six other major Bitcoin exchanges issued a joint statement distancing themselves from MtGox.
The move by MtGox to halt withdrawals had resulted in a sharp decline in the value of Bitcoin.
“This tragic violation of the trust of users of MtGox was the result of one company’s actions and does not reflect the resilience or value of Bitcoin and the digital currency industry,” the exchanges, including Coinbase and BTC China, said in a statement.
“As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today.
“We are confident, however, that strong Bitcoin companies, led by highly competent teams and backed by credible investors, will continue to thrive, and to fulfil the promise that Bitcoin offers as the future of payment in the internet age,” they added.
MtGox halted transfers of the digital currency to external addresses on February 7.
MtGox has been hit by technical issues and recently halted all customer withdrawals of Bitcoin
The Tokyo-based firm said it had found a loophole that thieves could use to fool the transaction process into sending double the correct number of Bitcoins.
The issue also left it vulnerable to attacks, which slowed down the rate at which coins could be bought and sold.
The loophole was also thought to have been exploited by thieves, who stole about $2.7 million in Bitcoins from the Silk Road 2 website earlier this month.
However, last week, the exchange said that customers would be able to starts withdrawals “soon”.
So far, MtGox has not issued any statement about reasons behind the site going offline and whether it would be back.
However, one report claimed that MtGox had become “insolvent” after losing 744,408 Bitcoins – worth about $350 million at Monday’s trading prices.
Unlike real currencies, Bitcoins are not regulated by any central bank or government financial institutions.
They are created as part of a technique called “mining”, which is used to process transactions.
With only a limited number or Bitcoins in circulation, their price has risen significantly in recent months driven by a variety of factors.
Some have been betting that the digital currency may get the backing of regulators as a legitimate financial service and have been investing in it.
Their popularity has also been driven in part by it being difficult to trace transactions carried out using Bitcoins, and the currency has been linked to illegal activity online.
Its growing popularity has seen backers of the currency push for greater mainstream adoption. They have had some success with a few firms starting to accept Bitcoins as a form of payment.
However, there have also been concerns over the currency’s long-term future, not least due to a lack of proper regulation and laws.
At the same time, some have warned that the rapid surge in Bitcoin’s price was merely due to speculation and was not sustainable.
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MtGox chief executive Mark Karpeles has quit the board of the Bitcoin Foundation, which oversees and develops the virtual currency software.
It comes shortly after Bitcoin exchange MtGox halted transfers of the digital currency to external addresses after it spotted what it called “unusual activity”.
The halt resulted in a sharp decline in the value of Bitcoins.
Last week, MtGox – one of the largest Bitcoin exchanges – said customers should be able withdraw funds “soon”.
Meanwhile, all tweets on MtGox’s Twitter account have also been deleted.
The Bitcoin Foundation said that Mark Karpeles’s resignation would be “effective immediately”.
MtGox chief executive Mark Karpeles has quit the board of the Bitcoin Foundation
It is the foundation’s second high-profile resignation in the past month.
Another board member, Charles Shrem, stepped down in late January after being arrested and charged with money laundering in connection with his Bitcoin company.
Charles Shrem, the chief executive of New York-based Bitcoin exchange BitInstant, has pleaded not guilty.
The issues with MtGox had sparked a dispute between the exchange and the Bitcoin Foundation.
The Tokyo-based firm said that its investigation into the unusual activity revealed a loophole that could be exploited to fool the transaction process into sending double the correct number of Bitcoins.
It also left it vulnerable to attacks, which slowed down the rate at which coins could be bought and sold.
As it halted the withdrawals, MtGox had suggested that a flaw in Bitcoin’s underlying software was to blame for the problem.
The value of Bitcoin has dropped sharply after MtGox – one of the largest trading exchanges – said there was a flaw in the virtual currency’s underlying software.
MtGox said it had halted transfers to external Bitcoin addresses on Friday after detecting “unusual activity”.
It said an investigation had revealed it was possible for thieves to fool the transaction process so that double the correct amount of bitcoins would be sent.
Bitcoins fell from $700 to $540.
The Tokyo-based firm said it was now working with the Bitcoin core development team to “mitigate this issue”, which it said was not limited to its own Bitcoin-wallet system.
The value of Bitcoin has dropped sharply after MtGox said there was a flaw in the virtual currency’s underlying software
A Bitcoin wallet is the place where Bitcoin addresses – the virtual post-boxes where each bitcoin is stored -are kept.
It added that cash withdrawals and transfers of bitcoins to – rather than from – Bitcoin Wallets were unaffected.
MtGox said in a statement: “A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a Bitcoin wallet did not occur when in fact it did occur.
“Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent.”
Gavin Andresen, chief scientist at the Bitcoin Foundation – which oversees and develops the Bitcoin software – denied the problem was its fault.
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