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Alleged IOTA fake seed generator thief arrested a year later

Posted: 24 January 2019 1:20 pm
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There were a lot of thefts during the 2017 crypto boom. Investigations take time, but they do bear fruit.

At around about peak cryptocurrency hype there were a lot of people making money, some in unscrupulous ways. One of them was a 36 year old individual arrested in the UK on suspicion of fraud, theft and money laundering after the alleged theft of about €10 million (US$11.4 million) of the IOTA cryptocurrency.

That's probably €10 million in January prices, and much less now.



Online seed generators

It was a sophisticated ploy, in which the suspect compromised user wallets at the source rather than trying to break in later.

Basically they created a website that claimed to be an IOTA seed generator. These are essentially the private keys which are used to access funds. The problem is that the seeds it generated were predictably formulated and logged by the culprit so they could steal user funds later.

At the time it was known that at least $4 million was lost, but Europol is now saying at least €10 million from at least 85 victims since January. To convince people to use the seed generator, the culprit created a GitHub repository as a smokescreen, while the seed generator site itself used different code.

The incredible part

The entire investigation kicked off when people reported the thefts to German police, who then corresponded with their counterparts in the UK on a continent-wide investigation. The culprit might have been quite surprised when police knocked on his door a year later.

Cryptocurrency theft is still theft, and victims are still encouraged to report the thefts to police. And as cases like this show, they are willing to go to fairly great lengths to solve cases when the amounts of money involved are/were large enough.

It turns out that "code is law" and "not your keys, not your crypto" are not effective legal defenses.

The cryptocurrency boom naturally resulted in a lot of heists. Investigations take time and in the coming months and years there are likely to be many more arrests for crimes that took place during the crypto boom.

The chickens of 2017 (that would be a decent band name) are still coming home to roost.


Disclosure: At the time of writing the author holds ETH.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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