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Corrupt Russian agents arrested over $1M Bitcoin extortion scheme

Law enforcers from around the globe seem to finally be getting up to speed with tackling cryptocurrency crimes. But it seems the lure of Bitcoin BTC is still too much for some, even for those that should be protecting citizens from cyber-criminals. An operation to rid the Russian Federal Security Service (FSB) of corrupt officials…

Corrupt Russian agents arrested over $1M Bitcoin extortion scheme

Law enforcers from around the globe seem to finally be getting up to speed with tackling cryptocurrency crimes. But it seems the lure of Bitcoin BTC is still too much for some, even for those that should be protecting citizens from cyber-criminals.

An operation to rid the Russian Federal Security Service (FSB) of corrupt officials has reached a crescendo. Two FSB agents involved in a Bitcoin extortion scam were arrested last week, a local news outlet reports.

Two law enforcement agents, Sergei Belousov and Aleksey Kolbov, are being charged with fraud totaling 65 million rubles ($1 million), according to another report.

The real kicker though, is that the pair in question are anti-fraud agents who are usually responsible for investigating financial crimes, not committing them.

Expoiting their power

The pair were investigating a fraud case against Erast Galumov, the former director of media firm Izvestiya. Galumov was arrested in secret last year whilst his family believed he was away on a business trip.

The perpetrators went on to threaten Galumov into admitting the fraud case against him and blackmailed him for 65 million rubles ($1 million). Galumov was supposedly the figurehead in a 43 million ruble ($675,000) fraud case, however, his legal team have continually denied the claims.

That wasn’t all, the pair also went after Galumov’s son, Alexander Galumov. Kolbov used an alternate identity and contacted Alexander ordering him to leave the country else he too would face similar charges as his father.

Kolbov also demanded 65 million rubles ($1 million) from Alexander Galumov, claiming it was to pay for Galumov’s bail.

Eventually, both Galumov and his son complied with the crooked agents’ demands.  But little did Kolbov and Belousov know, the Galumov’s were working with another branch of the FSB responsible for weeding out bent agents.

After Bitcoin payments were made, investigators were able to trace the funds and link the receiving wallet address to Kolbov, reports state.

Guilty as charged

Both Kolbov and Belousov pleaded guilty, but it is still thought that another 15 agents were involved in this extortion. The case is currently being handed over to the courts to further interrogate and sentence the pair.

Using Bitcoin as a payment method in extortion scams is nothing new.

Last year, an American-Israeli teenager was sentenced to 10 years in prison for sending hoax bomb threats. He threatened to bomb a number of institutions unless they paid a Bitcoin ransom.

Sextortion scams are always doing the rounds, too. Residents of a town in Kansas are some of the latest to report a Bitcoin extortion scam where hackers threaten to leak sensitive information unless victims pay up.

Sadly it’s not the first time a  law enforcement agent has been wooed by Bitcoin. Drug Enforcement Agency operative Carl Force who investigated defunct dark web marketplace Silk Road and Ross Ulbricht for numerous crimes, had been exploiting his position by siphoning off Bitcoin for his own personal riches, Ars Technica reported at the time.

One thing is for sure though, fraud investigators are probably the last people we would expect to be carrying out fraud crimes.

Did you know? Hard Fork has its own stage at TNW2019, our tech conference in Amsterdam. Check it out.

Published April 23, 2019 — 12:14 UTC

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Bitcoin News

Moonday Mornings: Binance to resume deposits and withdrawals after $40M Bitcoin hack

It’s time for Moonday Mornings, Hard Fork’s wrap-up of the weekend’s top cryptocurrency and blockchain headlines. Here’s what happened. 1. Binance says it will resume deposits and withdrawals on its platform on Tuesday. The cryptocurrency exchange had suspended the functions following an attack in which hackers stole over $40 million worth of Bitcoin. 2. The…

Moonday Mornings: Binance to resume deposits and withdrawals after $40M Bitcoin hack

It’s time for Moonday Mornings, Hard Fork’s wrap-up of the weekend’s top cryptocurrency and blockchain headlines.

Here’s what happened.

1. Binance says it will resume deposits and withdrawals on its platform on Tuesday. The cryptocurrency exchange had suspended the functions following an attack in which hackers stole over $40 million worth of Bitcoin.

2. The figureheads of the fake cryptocurrency scheme, OneCoin, are being sued. Brother and sister duo, Konstantin Ignatov and Ruja Ignatova are facing a class action law suit for their involvement in the scam which was “based completely on lies and deceit,” ZDNet reports.

3. A Bitcoin BTC fueled ransomware attack hit the Baltimore City government last week. Despite being cleaned of the ransomware, hackers are allegedly still accessing the infected computers, ZeroHedge reports. The Federal Bureau of Investigation is now investigating the attack.

4. The creator of the Bitcoin treasure hunt Satoshi’s Treasure is claiming nearly 60,000 people are following the global challenge, CoinDesk reports. One player has already claimed the first prize, and didn’t even have to go anywhere to claim it.

And finally.

5. William Shatner is putting William Shatners on the blockchain. The former Star Trek actor is joining Mattereum, a legaltech firm, to document the authenticity of science collectibles and memorabilia from a range of franchises on the blockchain.

That’s another weekend’s headlines for you. Live long and prosper.

Published May 13, 2019 — 07:58 UTC

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Amazon granted patent for Bitcoin-style system to fight DDoS attacks

Cryptocurrency rumor mongers are likely to be dancing today as Amazon has successfully filed a patent for a Bitcoin-styled Proof-of-Work system. But don’t get ahead of yourself, it doesn’t look like the Seattle-based ecommerce giant will be accepting Bitcoin for payments. Despite first being filed in December 2016, Amazon’s patent application was granted earlier this…

Amazon granted patent for Bitcoin-style system to fight DDoS attacks

Cryptocurrency rumor mongers are likely to be dancing today as Amazon has successfully filed a patent for a Bitcoin-styled Proof-of-Work system. But don’t get ahead of yourself, it doesn’t look like the Seattle-based ecommerce giant will be accepting Bitcoin for payments.

Despite first being filed in December 2016, Amazon’s patent application was granted earlier this week and appears to outline a system that uses Proof-of-Work to prevent distributed denial-of-service (DDoS) attacks.

“One way to mitigate against such attacks is to configure a service such that requests to the service incur some sort of expense, thereby providing a disincentive to participating in the attack,” the application reads.

Planting a Merkle Tree

Amazon proposes to use Merkle Trees to present a Proof-of-Work challenge and make it too costly for a series of computers to perform a DDoS attack.

But what’s a Merkle Tree? In short, Merkle Trees are cryptographic tools where blocks of data are manipulated to give them a unique identifier also known as a hash.

These hashes are then manipulated again to create a parent hash. Parent hashes are always a combination of two or more child hashes. It’s layers on layers of hashed data.

Since computing power is required to build a Merkle Tree, performing such hashes could get very costly in terms of time, electricity, and resources. In turn, this makes DDoS attacks economically unfeasible.

In the case of Amazon’s patent, imagine having to construct a Merkle Tree before you’re allowed to access a website hosted on one of its servers. To an individual the cost might be insignificant, but to an organization trying to carry out a DDoS attack – which might involve many hundreds of computers – it could become prohibitively expensive.

Amazon’s Merkle Tree

Merkle Trees are also used in Proof-of-Work blockchains like Bitcoin as part of its consensus mechanism. But for now that’s as close as Amazon will get to Bitcoin.

Indeed, with this news it seems Amazon is still of the “blockchain, not Bitcoin” mantra. Earlier this month, the web giant said that AT&T, Accenture, and Nestlé are all using its cloud-based blockchain tools.

Read next:

South African voters fear mobile political campaigns will steal their personal info

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