Shaurya Malwa · 8 hours ago · 3 min read
2018 has seen the cryptocurrency market suffer from a spate of exchange hacks and exit scams as a fraudulent activity within the industry seem to be increasing. While the Trump administration may have recently launched a task force to deal with cyber fraud, a less technologically advanced form of crime appears to be on the rise within the crypto ecosystem — real-life, strong-arm robbery.
The dramatic rise in physical Bitcoin theft and extortion has been cataloged by Statoshi.info creator Jameson Lopp, who published a detailed list of physical attacks targeting cryptocurrency holders on GitHub.
23 physical attacks targeted against crypto owners cataloged thus far. 10 of them occurred in the past 6 months. Seems to be strong evidence that the rate of physical attacks is accelerating. https://t.co/wqawX5OpEc
— Jameson Lopp (@lopp) July 8, 2018
Crypto Criminals Take Attacks to Real World
Cryptocurrency related robbery and extortion appears to have increased significantly over the last year as criminals become aware of the lucrative nature of crypto assets and the irreversible manner in which they can be separated from their owners.
Lopp’s list of crypto-related physical robberies includes a number of attacks targeting crypto infrastructure, such as the theft of Bitcoin ATMs or mining hardware, but the rise in attacks targeting cryptocurrency owners in which victims are kidnapped or extorted for crypto assets is particularly concerning.
Reports from Brazil in May 2017 demonstrate an increase in kidnappers requesting digital currency in return for the release of hostages. The first crypto-related kidnapping, which occurred in 2015, saw New York firefighter Dwayne Richards kidnapped and robbed of $1,100 in crypto, with more recent reports from Russia in showing an increase in violent attacks with the mutilation and robbery of a cryptocurrency holder in Moscow.
Home invasions of cryptocurrency holders are also increasing, with five men arrested in Cumming, Georgia for planning an armed home invasion of a cryptocurrency investor in January 2018. The home invasion of Skycoin architect “Synth” became one of the most notable physical Bitcoin robberies of 2018, with assailants stealing over 18 BTC.
Cryptocurrencies, while offering a broad spectrum of advantages in allowing holders to operate as their own bank, also require holders to maintain similar security standards. Hardware wallets such as the Ledger Nano S now integrate “plausible deniability” functionality that allows users to leverage advanced passphrase options that splits access between two pin codes — one that delivers access to the main wallet of a users, and one that allows access to a hidden account that can be used to secure large amounts of capital.
Despite the security offered by hardware wallets, however, many physical cryptocurrency robberies occur as a result of criminals targeting individuals that advertise cryptocurrency-related wealth, with attackers aware of the asset value of the victim.
High-Profile Crypto Holders and Traders Targeted
The rise of physical crypto crime can be attributed to the highly fungible nature of cryptocurrencies such as Bitcoin and the ease with which they can be forcibly taken from unsuspecting cryptocurrency holders who, in many cases, either practice insufficient security techniques or are outspoken regarding their cryptocurrency gains.
Pavel Makushin, a 23-year old Russian cryptocurrency investor, was found dead in a St. Petersburg apartment subsequent to a robbery where assailants stole over $3 million in cryptocurrency. The high-profile nature of Makushin’s cryptocurrency holdings were apparent via the investor’s youtube channel, which boasted over 20,000 subscribers.
In addition to targeting high net worth individuals within the cryptocurrency ecosystem, criminals also appear to be targeting cryptocurrency traders operating via the highly popular LocalBitcoins platform, which facilitates face-to-face cryptocurrency trades.
A recent July 6 robbery in Massachusetts saw LocalBitcoins trader Austin Nedved targeted in a home invasion that resulted in the arrest of two suspects. While this most recent attack targeting LocalBitcoins traders did not result in the loss of assets, a Hong Kong-based trader was lured to a bogus trade meeting in January 2018 and robbed of HK $1.4 million, emphasizing the importance of situational awareness and caution when dealing in real-life cryptocurrency trades.