How to Launder $500 Million in Cryptocurrency

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rgMekanic

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Following up from Fridays theft of $500 Million in NEM coins, Bloomberg has posted an article about the hack. According to the article, Coincheck has not disclosed how their system was breached, aside from it wasn't an inside job. No one knows who owns the accounts that the coins were transferred to, but each has been labeled with an automated tracking tag that reads "coincheck_stolen_funds_do_not_accept_trades : owner_of_this_account_is_hacker." However the hacker can still use a service to trade the NEM coins to a more anoymized currency to launder them.

Coincheck has also released a press statement about compensation for the theft. The article states that they will "refund to NEM's holders in coins check wallet in Japanese yen." And adding that they will carry out repayment from their own funds.

The lesson for crypto-enthusiasts is that exchanges are prime targets for hackers and no place to store your coins. One alternative is to keep the assets in software wallets, which come in online, mobile and desktop varieties. Hardware wallets are dedicated devices that offer an additional layer of security. For the extra paranoid, there is always the analog option: printing out the private keys for your coins on paper.
 
If they can afford to repay account holders 500 million worth of coins in Japanese Yen, they are worth more money than anyone could have surmised.
 
I fail to understand something so somebody please explain it to me, if they could track the funds to the hackers account, and tag them as stolen why can't they reverse the transaction and put them back into the effected peoples accounts?
 
Lakados said:
I fail to understand something so somebody please explain it to me, if they could track the funds to the hackers account, and tag them as stolen why can't they reverse the transaction and put them back into the effected peoples accounts?
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You can't reverse deposits with cryptocurrency.
 
Lakados said:
I fail to understand something so somebody please explain it to me, if they could track the funds to the hackers account, and tag them as stolen why can't they reverse the transaction and put them back into the effected peoples accounts?
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Because blockchains build the next block off of the previously found block. To reverse the transaction, you'd have to recalculate the block that included the transaction for the stolen coins and every block after it nullifying every other confirmed transaction since the theft. Some of those transactions might be for goods sold, or for conversion to fiat. It would potentially be a bigger shit show than the theft itself trying to straighten where legitimate transactions were sending coins. For example it would open the door to rampant double spending since wallet balances suddenly had coins that had already been spent.
 
ryan_975 said:
Because blockchains build the next block off of the previously found block. To reverse the transaction, you'd have to recalculate the block that included the transaction for the stolen coins and every block after it nullifying every other confirmed transaction since the theft. Some of those transactions might be for goods sold, or for conversion to fiat. It would potentially be a bigger shit show than the theft itself trying to straighten where legitimate transactions were sending coins. For example it would open the door to rampant double spending since wallet balances suddenly had coins that had already been spent.
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Maybe my terminology is wrong, bank A knows the funds are stolen they have proof and have labeled the currency as such, Bank B is currently in possession of said stolen funds, if Bank A is able to show proof the funds are stolen in a satisfactory way to Bank B can bank B transfer the funds back to bank A so then bank A can transfer them back to the individual accounts they were stolen from?
 
Lakados said:
Maybe my terminology is wrong, bank A knows the funds are stolen they have proof and have labeled the currency as such, Bank B is currently in possession of said stolen funds, if Bank A is able to show proof the funds are stolen in a satisfactory way to Bank B can bank B transfer the funds back to bank A so then bank A can transfer them back to the individual accounts they were stolen from?
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IF the funds went to another "bank" that might work, if it went to a wallet that is like a bank getting robbed and that bank telling all the other banks around them not to take any bills with these serial numbers.
 
Lakados said:
Well that seems like a rather unfortunate over site.
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Not really I think. They are a digital item, if they are identified and "banned", then they are effectively useless in a way, they can't be traded. The owner was refunded their "value" which is reasonable given the circumstances, not much more could be done.

Now I will stray into what is for me, new territory that I am only now really learning. If I understand things correctly, those coins represent a hash which is a mathematical solution to an algorithmic problem and each is unique. Banning them might free them up to be "resolved" again so essentially, those coins can be re-mined ?

My understanding is that of any given cryptocurrency there can be only so many possible coins, there is a limit to how many can be mined in total. And the longer a currency is successfully mined, the more time it takes and the less profitable a currency is, because it gets harder to mine it and the mining is costly. Perhaps banning these stolen coins and conceivably re-mining them is good because it puts new coins back into circulation so to speak. It may not be a huge difference, but it might be a measurable difference and worth doing as it were.
 
Every day I'm reminded how complicated these transactions are and for what?
 
lcpiper said:
Not really I think. They are a digital item, if they are identified and "banned", then they are effectively useless in a way, they can't be traded. The owner was refunded their "value" which is reasonable given the circumstances, not much more could be done.

Now I will stray into what is for me, new territory that I am only now really learning. If I understand things correctly, those coins represent a hash which is a mathematical solution to an algorithmic problem and each is unique. Banning them might free them up to be "resolved" again so essentially, those coins can be re-mined ?

My understanding is that of any given cryptocurrency there can be only so many possible coins, there is a limit to how many can be mined in total. And the longer a currency is successfully mined, the more time it takes and the less profitable a currency is, because it gets harder to mine it and the mining is costly. Perhaps banning these stolen coins and conceivably re-mining them is good because it puts new coins back into circulation so to speak. It may not be a huge difference, but it might be a measurable difference and worth doing as it were.
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The coins themselves are absolutely nothing other than a line item in a transaction saying address ABC is receiving X number of coins from address DEF (or in the case of a block reward no one). There's no technical limit to how many coins can be created other than the algorithm that creates them. Bitcoin creates new coins through a periodically diminishing reward that'll eventually be zero, at which point no new Bitcoins will be created. But there could come a time when the community decides that the reward needs to be reinstated, and they can fork the block-chain to get it done.
 
rgMekanic said:
. Hardware wallets are dedicated devices that offer an additional layer of security. For the extra paranoid, there is always the analog option: printing out the private keys for your coins on paper.
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Or you could always use "real" money and use your computer to fold?
 
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