The Anatomy of Binge Hackers: A WIRED Investigative Look at Nearly 90 Indirect CP Violation Cases
In the aftermath of A swatting spree, WIRED investigated more than 90 incidents and found possible connections between many of them. “In speaking to a number of people who experienced it, I can tell you that the anxiety and fear—it was real to them for 15 minutes,” Amanda Klinger, director of programs and cofounder of the Educator’s School Safety Network, told WIRED. “There’s a period of time in these incidents where people are literally running for their lives, law enforcement is responding with their weapons, and people think it’s the real thing.”
After extensive sanctions against Russia were put in place, investigators around the world are still trying to keep money from going to Russian military and paramilitary groups. Former Uber executive Joe Sullivan was convicted this week of obstructing a Federal Trade Commission investigation and failure to report a felony, a development that is being watched closely by the tech industry because it is likely the first time a corporate executive has faced criminal charges related to a data breach. The Biden administration’s new executive order addressing privacy seems like more of a Band-Aid than a panacea, as it attempts to reassure Europeans that their data is safe when stored in the US, despite government surveillance.
Meanwhile, Meta released findings on more than 400 malicious Android and iOS apps that it says were harvesting Facebook credentials to take over users’ accounts. And we took a look at the toll of living your life online, the potential erosion of privacy that comes with consistent social media posting, and the ways it can impact your sense of self.
There is more. We highlight the news that we did not cover in-depth. Click on the headlines below to read the full stories. Stay safe out there.
Source: https://www.wired.com/story/binance-hackers-minted-569-million/
Cazes and the AlphaBay sting: The first two months of trading cryptocurrency through a coin flaw revealed by an FBI agent
Unknown hackers were able to take 2 million of the company’s token, worth $569 million, through a flaw in the BNB Chain token. That money wasn’t actually stolen from Binance, in other words, but rather fabricated out of thin air thanks to a flaw in the security of Binance’s cryptocurrency. The hack looked poised to cause the market to price BNB at less than its worth, which in turn, would allow the hackers to walk away with half a billion dollars.
That legal request took weeks to bear fruit. Finally, one evening in the early weeks of January 2017, Ali was in the middle of a law school night class when she got a call from the Sacramento-based FBI agent with the news: The subpoena results had come back.
In total, the two analysts traced Cazes’ commissions to a dozen cryptocurrency exchanges. Cazes’ and his wife’s names were found in the accounts subpoenaed by the prosecutors. And as those results came in, a yearslong pattern emerged: Cazes would open an account with an exchange and attempt to use it to cash out a chunk of AlphaBay’s profits. At some point—often within months of his cash-out transactions—the exchange would grow suspicious about the origin of these massive cryptocurrency trades and ask for more know-your-customer information from him.
Rabenn was pretty sure they had the right person after seeing millions of dollars flowing into his account from what looked like an AlphaBay wallet. When you hit that point, you get ready to indict.
When investigators discover Cazes’ online alter ego is on a pickup artist forum, they find a new challenge to catch him and come up with the most ambitious sting in dark-web history.
Cryptocurrencies: Financial Stability in the Age of Digital Collapse and Wall-to-wall Insights from the FTX Case
Less than a day after FTX filed for Chapter 11 in the wake of its collapse, it appears that the exchange’s remaining funds were stolen. An administrator in the Telegram channel wrote that FTX had been hacked. “FTX apps are not safe.” Delete them.” Exactly how FTX might have been breached—and whether its apps are, in fact, compromised—is far from clear, and FTX hasn’t officially announced any theft. But the company’s US general counsel wrote in a tweet that “unauthorized access to certain assets has occurred.” FTX did not reply to WIRED’s request for comment.
The downfall of the company had triggered a Lehman moment like the 2008 collapse of the investment bank, according to some industry insiders.
The co-founder of a California-based blockchain startup said it would take some time to recover from the fact that this was a trusted entity in the space.
The company’s value was $32 billion in its latest funding round and had attracted high profile backers including Softbank, Tiger Global and Gistella Bndchen. The arena where the Miami Heat play is named after it.
The situation is still developing quickly. One concern is how it might affect the entire sector, which was worth more than $1 trillion in August.
Over the summer, as digital assets tumbled in value, Bankman-Fried put up about $1 billion to bail out firms and shore up assets to try to keep the entire industry afloat. Now, few white knights are left to rescue FTX and others in distress.
“The number of entities with stronger balance sheets able to rescue those with low capital and high leverage is shrinking within the crypto ecosystem,” strategists at JPMorgan said in a note to clients this week.
Even though traditional investors have been burned, they are reassuring clients that they can handle it. Despite uncertainty, the Ontario Teachers’ Pension Plan said that its $95 million investment would have a limited impact on its assets.
Sensitive Critics of the Cryptocurrency Industry: Sam Bankman-Fried, the founder of tHeX, is a Pariah
Soon after, another larger-than-life crypto personality entered the chat. Changpeng Zhao, the CEO of the world’s biggest exchanger of tHecryptocurrencies, publicly announced that they would liquidate their FTX holdings. The plan to acquire FTX was abandoned shortly after, after a letter of intent was signed.
But as spooked investors pull funds from crypto, more pain could arrive. The investment banking firm thinks that the virtual currency could plunge to $13,000, a 22% decline from where it is now. Fok said the digital coin could drop below $10,000, a low it hasn’t plumbed since 2020.
In that climate, the “crypto winter” is poised to get even worse, especially as fears about the broader economic backdrop continue to erode the appetite for risky assets.
The episode has wreaked havoc in the industry, but will also embolden global regulators as they tighten the screws. Some of the biggest names in the business said they will welcome the scrutiny, if it helps restore faith in the industry.
Authorities’ “natural response is to borrow regulations from traditional banking systems … but crypto exchanges operate very, very differently from banks,” he said.
He said that they were being set back a few years. Regulators will scrutinize this industry very, very hard, which is probably a good thing.
FTX is a safe and easy way to get into crypts, David learns after seeing the ad. David said he didn’t think so. And I’m never wrong about this stuff — never.”
The company had said it would explore a FTX rescue, but then backtracked on that after it was clear FTX was beyond saving.
The Senate Banking Committee wants Sam Bankman-Fried, the founder of the failed virtual currency exchange FTX, to appear before them over questions surrounding his companies collapsing.
It’s unclear what charges await Bankman-Fried, the 30-year-old crypto celebrity who became a pariah overnight last month as his company suffered a liquidity crisis and filed for bankruptcy, leaving at least a million depositors unable to access their funds.
It may take months to disentangle the details of Bankman-Fried’s alleged fraud. He is accused of spending years defrauding people of huge sums of money and then using that money to bankroll his extravagant lifestyle, which includes illegal campaign contributions.
Samuel, who asked to be referred to only by first name to preserve his anonymity, says he lives somewhere in Southeast Asia and is currently between jobs, which means money is tight. He had a nest egg in his FTX account.
Samuel makes up majority of the XRP market, which is thought to have been depressed by an ongoing lawsuit between its issuer, Ripple Labs, and the US Securities and Exchange Commission. Samuel had been sitting tight in hopes that a favorable ruling might send the price of XRP skyward, as recent signs suggest the legal battle may be coming to a close. But now, with his tokens locked up in FTX, he won’t be able to reap the rewards for his patience. He says that he could see the finish line, but this latest drama had him hanging by the balls. “It’s just so much hardship.”
There are many FTX customers with stories like this one. One FTX trader who wanted to remain anonymous was in the US when they first heard of the problem at the exchange which meant it was not possible to immediately withdraw their funds. FTX traders were able to use a virtual private network to circumvent the restrictions but had to change their withdrawal password in order to keep their money out of their account. It was already too late.
The Financial Crimes Investigation Branch of FTX and the Collapse of a Global Corpora Company with Missing and Unavailable Funds
A large portion of that total has since disappeared, they said. One source put the missing amount at about $1.7 billion. The other person said there was a gap of between $1 billion and $2 billion.
The two people with knowledge of the finances for FTX said that Bankman-Fried held a meeting with executives in Nassau to figure out how much outside funding would be needed to cover the shortfall.
The back door gave Bankman- Fried the ability to execute commands that could alter the company’s financial records without being detected by other people. The set-up meant that the $10 billion in funds did not cause internal compliance or accounting red flags, they said.
“In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate if any criminal misconduct occurred,” the Royal Bahamas Police Force said in a statement.
The FTX said that it had turned over control of the company to John J. Ray III, who is best known for his work in the reorganization of Enron Corp.
A Fool or a Beast? Why Cryptocurrencies Shouldn’t Be Saviour in the Age of Crowdsourcing: The Case of FTX
Emily had previously worked at The Wall Street Journal as a writer and editor, and also worked for the US State Department as a policy advisor. She is the author of “Now I Know Who? My Comrades Are: Voices From the Internet Underground.” The opinions are of her own. Read more opinion at CNN.
The answer is no one, because crypto shouldn’t need a savior. It is supposed to be invisible and free from government influence. The rise and fall of Bankman-Fried shows the extent the industry has deviated from the ideal. Today’s crypto world is one of opaque entities run by larger-than-life personalities. FTX and its leader is an excellent example.
It wasn’t supposed to be this way. Bitcoin, the world’s first major cryptocurrency, came into the world on the heels of the 2008 financial crisis, which led to a deep disappointment in bankers and politicians. In light of the distrust in financial institutions, the basic idea was that this new system didn’t require you to trust anyone at all. Bitcoin transactions are recorded on a decentralized ledger known as a blockchain, which everyone can see and no bad actor should be able to fraudulently alter.
On the Cult of Personality: Bankman-Fried vs Alameda on Still and the Social Media Hate of FTX
The complaint alleges that in reality, Bankman- Fried orchestrated a years-long fraud to conceal from FTX’s investors (1) the undisclosed diversion of FTX customers’ funds to Alameda Research LLC, his privately-heldcrypto hedge fund; and (2) the undisclosed special treatment afforded to Alameda on
Still, Bankman-Fried wanted the world to think there was a strong separation between the two entities, the complaint says. His resignation as the CEO of Alameda was due to that.
The cult of personality problem isn’t just limited to this one area. We see it in social media as well, another supposedly leaderless and decentralized technology. Musk has become the richest man in the world and he’s the owner of a popular social networking site.
FTX has been hacked. The admin on FTX’s official Telegram channel instructed users to uninstall FTX’s apps and warning against using the platform’s websites due to the presence of kerning, as well as telling them to take their funds with them. FTX.com and FTX.us are currently down at this time of writing.
Ether is not doing well in Indonesia, and the financial crisis may be analogous to the 2008 financial crisis, according to Janczewski
“We’re definitely watching the movements of these funds,” says Chris Janczewski, the head of investigations at TRM Labs and a former special agent at the IRS’s criminal investigations division. This potential thief has millions of dollars. They entered a bank, took all of the cash, and then the dye packs went off. They’ve got all this money, but now everyone knows it’s connected to this bank robbery. What can you do with it?
According to Elliptic’s analysis, at least $220 million of funds stolen in the form of a variety of cryptocurrencies were quickly traded through decentralized exchanges—trading platforms that allow users to swap coins without giving identifying information—to convert them into the cryptocurrencies Ethereum and Dai. But cashing out those coins and the rest of the stolen loot will likely require trading it on a centralized exchange, which almost always requires users to hand over identifying information. The thieves may try to put the money through a “mixing” service that launders the coins by blending them with those of other users. But crypto-tracing blockchain analysts have proven they can often defeat those mixers—particularly when users are feeding very large sums into them. The US Treasury put pressure on Tornado Cash to cease operations in August, rendering it impervious to seizure on many exchanges.
Ether, the world’s second most valuable cryptocurrency, isn’t faring much better. The last week had seen it plunge over 20% and was trading at about $1,230 on Monday.
There is a “lot of risk,” said Changpeng Zhao, who runs Binance, the biggest crypto exchange. “We have seen in the past week things go crazy in the industry, so we do need some regulations, we do need to do this properly,” he added.
CZ, as he’s known, was speaking at a conference in Indonesia on Monday. He said last week that comparing the current turmoil to the 2008 global financial crisis is probably an accurate analogy.
Crypto News Breaking After a Coin Transaction with the FTX Founder: Kris Marszalek, CRYPTO and the Securities and Futures Commissions
The headquarters of FTX moved from Hong Kong to The Bahamas a year ago, with the former CEO saying it was a good spot for a framework for cryptocurrencies.
Miller said that FTX was looking into the movements in the wallets and related to the consolidation of the balances.
As scrutiny of bigger players increases, Singapore-based crypto.com admitted to sending more than $400 million in ether to the wrong account.
Three weeks ago Kris Marszalek made a transaction of 320,000 ETH from one of its offline, or “cold”, wallets to a corporate account at Gate.io.
“We have since strengthened our process and systems to better manage these internal transfers,” Marszalek tweeted Sunday. The platform’s native token has fallen over 20% in the last 24 hours, according to CoinDesk.
Marszalek said Monday that his firm has acted as a “responsible, regulated player since inception” and will soon “prove all the naysayers …wrong with our actions.”
Warren and Smith theorize that the banking system may have a better relationship with CRYPTO firms than previously thought. “Banks’ relationships with crypto firms raise questions about the safety and soundness of our banking system and highlight potential loopholes that crypto firms may try to exploit to gain further access.”
Regulators signaled this may be just the first of multiple charges to come. The SEC said there are ongoing investigations into “other securities law violations” and into other entities and individuals. The Commodity futures trading commission is also charging Bankman-Fried.
Swan Bitcoin: Dealing with the World’s First Twelfthaire via a “Talking to Sequoia Capital”
“I care because it’s retail investors who suffer the most, and because too many people still wrongly associate bitcoin with the scammy ‘crypto’ space,” said Cory Klippsten, CEO of Swan Bitcoin, who for months raised concerns about FTX’s business model. Klippsten is publicly enthusiastic about bitcoin but has long had deep skepticism about other parts of the crypto universe.
Sequoia Capital, which invested in Apple, Cisco, Google, Airbnb and YouTube, described their meeting with Bankman-Fried as likely “talking to the world’s first trillionaire.” Several of Sequoia’s partners became enthusiastic about Bankman-Fried following a Zoom meeting in 2021. Sequoia decided to invest in the company after several more meetings.
The 30-year-old Bankman- Fried, known as SBF, became a pariah overnight last month after his company filed for bankruptcy and left at least a million depositors unable to access their funds. The Royal Bahamas Police Force said in a statement Monday that he was arrested at his apartment complex shortly after 6 pm and was going to appear in a Nassau court Tuesday.
The Ontario Teachers’ Pension Fund said that not all investments in this early-stage asset class perform to expectations.
Bankman-Fried bought the assets of bankruptcryptocurrencies firm Voyager Digital for about $1 billion this summer and brought some relief to account holders, whose assets have been frozen since they failed. There is now question about that rescue.
His influence was already beginning to spread in political and popular culture. FTX bought prominent sports sponsorships with Formula Racing and the naming rights to an arena in Miami. He promised to donate $1 billion to the Democrats in this election, which he actually donated tens of millions of dollars, and he invited former Presidents like Clinton to speak at FTX conferences. Football star Tom Brady invested in FTX.
Herd mentality feeds on itself, not necessarily Paxos: Entangled Wall Street wizards in a Ponzi scheme before the Ponzi collapse
Bair, who chaired the Federal Deposit Insurance Corp, said that regulators and investors can distract them from what is really going on. It felt like he had been in that situation before.
Bair notes that 30-year-old Bankman- Fried was very skilled at using his connections to entice sophisticated investors and regulators into missing “red flags” hidden in plain sight.
Before his Ponzi scheme collapsed, he was a wizard on Wall Street. He served on Securities and Exchange Commission advisory panels and was the former chairman of theNasdaq Stock Market.
Dennis Kelleher said in a statement that FTX had a strategy of revolving door hires from the Commodities futures trading Commission and elsewhere to use their knowledge and access to move their agenda.
“You get this herd mentality where if all your peers and marquee names in venture capital are investing, you’ve got to, too. It adds credibility to Washington policymakers. It all feeds on itself,” said Bair, who sits on the board of directors at Paxos, a blockchain infrastructure company (Bair said she was speaking for herself, not Paxos).
Madoff offered investors marvelous returns that were remarkably consistent and an improbable track record that later proved to be made possible by an elaborate scheme that involved repaying existing clients with new client deposits.
The Second Amendment and the Bankruptcy Case in FTX: Witnesses to the Deception and Misuse of Client Funds
There’s still a ton we don’t know about the case. But the fact that prosecutors put together an eight-count, 14-page indictment just four weeks after FTX filed for bankruptcy suggests prosecutors may have an ace in the hole, and/or a preponderance of evidence against the company. The SDNY are aggressive but not sloppy and they do not indict without a solid case.
After his arrest, Rep. Maxine Waters, chairwoman of the committee, said Bankman-Fried would no longer give testimony as scheduled Tuesday. The hearing was set to start with testimony from the new CEO, John Ray III, who is tasked with shepherding the case through the Chapter 11 process.
In a letter to the president, the senators said that the misuse of client funds led to the failure of both entities and wiped out billions of dollars in debt.
“I still do not have access to much of my data — professional or personal. So there is a limit to what I will be able to say, and I won’t be as helpful as I’d like,” Bankman-Fried said in a tweet Friday. I will testify on the 13th as the committee still thinks it’s useful.
There are still many unanswered questions about how the client funds were mishandled, how the clients were barred from withdrawing their own money, and what you orchestrated a cover up for, according to Brown.
Separately, Sens. Elizabeth Warren of Massachusetts and Tina Smith of Minnesota, both Democrats, sent letters to three regulators – the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency – asking them to assess the traditional banking system’s exposure to turmoil in the crypto space, a largely unregulated, parallel financial system.
Waters replied that the information he has thus far is sufficient for testimony and that it was clear because of his role as CEO.
The Back Door of FTX: Why Did Mr. Bankman- Fried Get What He Wanted, When he Got There, and How He Left the Bahamas
Bankman- Fried was arrested in the Bahamas, where FTX was based. He was arraigned Tuesday, and a Bahamian judge denied his request for bail, saying that he posed a flight risk. (His extradition to the United States is in the works, but that process can take weeks.)
The Bahamian attorney general said police made the arrest after officials received “formal notification from the United States that it… has filed criminal charges against” Bankman-Fried, and they learned that the U.S. is “likely to request his extradition.”
If the charges are serious enough to lead to imprisonment of at least one year in the two countries, the United States can send the defendants back to their home country.
“I didn’t knowingly commit fraud,” he told the BBC over the weekend. I didn’t want this to happen. I was certainly not nearly as competent as I thought I was.”
“While I am disappointed that we will not be able to hear from Mr. Bankman-Fried tomorrow, we remain committed to getting to the bottom of what happened,” Waters said in a statement Monday night.
The collapse of FTX appears to be the result of a group of inexperienced individuals who failed to implement virtually any corporate controls, Ray said.
“There was no person who was chiefly in charge of positional risk of customers on FTX,” Bankman-Fried told DealBook. “And that feels pretty embarrassing in retrospect.”
Bankman- Fried has denied knowing about any such back door. He told Tiffany in an interview last month that he didn’t know how to code.
The Collapse of FTX: A Memories of a Prime Minister of the Bahamas and the Role of Government and Law Enforcement in the Corrections to the New York Times DealBook Summit
The US Attorney in New York said the arrest was made at the request of the government.
In a statement, the prime minister of the Bahamas stressed the country is cooperating with law enforcement and regulators in the United States, but its own “regulatory and criminal investigations into the collapse of FTX continue.”
Against the advice of his lawyers, Bankman-Fried has given a series of interviews since the collapse, but none have been particularly illuminating (with the exception of a Vox report that caught him off-guard). He has largely evaded straightforward questions, given tangential responses, and been generally inattentive—he played video games during at least one interview.
A notice of the hearing was posted by the committee at night and it included written testimony from the other witness, FTX’s CEO John Ray.
In that way, Bankman-Fried might be the same as his predecessors. Bankman- Fried is not only a new version of an old story, but also the beginning of a change in the industry with the necessary regulations and transparency needed to prevent other frauds and criminals from being able to operate.
Bankman- Fried said that he messed up during his virtual appearance at the New York Times DealBook Summit. “There are things I would do anything to do over.”
The US Attorney’s office and the Commodity futures trading commission (CFTC) will be filing charges against Alameda Research and FTX
Alameda isn’t just accused of using money sent to its own bank accounts. The FTX trading account could be used to make unlimited withdrawals, and the SEC claimed it could use digital assets as well.
The allegations are focused on his statements to investors, that FTX was a safe place to invest because of an automated risk engine that would sell off customers assets to make sure they met their required levels.
The US Attorney’s Office for the Southern District of New York along with the Commodity futures Trading Commission will be filing charges today against him, according to the announcement from the SEC.
Prior to his arrest, SBF had continued an ongoing post-bankruptcy-filing media tour of Twitter Spaces chats and Zoom calls, with at least two live appearances on Monday, and he was expected to appear remotely today to testify before the House Financial Services Committee. The hearing will begin at 10 am with testimony from the FTX CEO, John J. Ray III.
The arrest has caused some jubilation in the community, after the media gave him a free pass, and speculation that his political donations may earn him a free pass from US law enforcement.
The first indication that Bankman- Fried was about to get a lot of trouble came from a written preview of Ray’s testimony. Ray wrote that Bankman- Fried and his inner circle were of grossly inexperienced and unsophisticated, and that he never saw such an utter failure of corporate controls in his career.
It was a fraud according to the US government. The Commodity futures trading commission has a complaint that has some startling information and it has been lying to the public for quite some time. The complaint states that Bankman- Fried had Alameda Research and FTX as a common enterprise. The complaint is not criminal.
In a press conference today, US attorney Damian Williams characterized Alameda Research and FTX as “one of the biggest financial frauds in American history.”
Although Alameda CEO Caroline Ellison previously stated that she and Bankman-Fried keep the two companies “quite separate in terms of day-to-day operations,” the CFTC makes a pretty strong argument indicating that this, too, could be false.
Both teams shared office space, as well as other resources, according to the complaint.
Ray testified before the committee about what he could about the company he took over just four weeks ago. Ray was quick to point out that his experience with FTX wasn’t comparable to that of Enron.
FTX’s Jack Bankman-Fried and the Old Ponzi Schemes in the Era of Financial Swindle and Foreclosure
If he is convicted of all eight counts he could face a maximum of 115 years in prison according to federal sentencing guidelines.
Several lawyers not involved in the case have told me that the speed of Bankman-Fried’s arrest signals that former FTX employees may be aiding prosecutors.
The SEC’s former lawyer said that one or more of them had done so by rushing to become cooperator in exchange for more favorable treatment. He added: “The fact that only one person has been charged so far would seem to indicate this as well.”
As well as being a reporter, writer and investigative journalist, he is a writer and an author. He is the author of “American Kleptocracy: How the US Created the World’s Greatest Money Laundering Scheme in History,” and is at work on a book investigating foreign lobbying in Washington, DC. His opinions are his own, they are expressed in this article. Read more opinion at CNN.
Many of the kinds of cases, which are similar to traditional Ponzi schemes, are very old. They almost always pair a lack of regulation and oversight with promises of easy wealth schemes, all predicated on some kind of proprietary technology that seems to generate returns out of thin air.
The stock market crash of the late 1920s caused a number of bank runs that led to the Great Depression. And in 2008, faulty loans repackaged as unique financial products sparked the Great Recession, with regulators asleep at the wheel along the way — all of which not only crashed the economy, but led to a foreclosure crisis, whose reverberations are still being felt.