As cryptocurrencies rise in popularity and market cap, so does related crime. For the most part, it's sophisticated criminals doing some digital fraud by stealing private keys or personal information, posting fake phishing sites or ICOs, or even installing ransomware on unsuspecting computers – WannaCry, WannaMine, or even worms that use something like Coinhive to secretly mine in the background. But not all criminals are hackers and lately we've been witnessing a lot of actual in-person crime related to cryptocurrencies – from wallet thefts to actual kidnappings for ransom.
A few months ago, one of the leading blockchain experts and analysts of the UK-based Exmo exchange – Pavel Lerner – was kidnapped in Ukraine, Kiev, when he was intercepted on the road and thrown into a van. Three days later, he was released unharmed after the wallets of six kidnappers received the demanded funds – cryptocurrency in the value of $1 million USD. Who paid the ransom is not public information, but Exmo assures clients that Pavel had no access to customer funds and that no individual accounts were emptied for this. It is assumed the exchange itself paid for the release of its employee.
A 23 year old Youtuber from Mexico, German Loera, was recently arrested on suspicion of ringleading a group of kidnappers who obducted Thania Denisse. Thania is a lawyer with connections to the blockchain space. Ironically, Loera is a motivational self-help speaker. He likely demanded ransom in bitcoin due to the common misconception about bitcoin's anonimity.
UK's first crypto robbery happened last year when four masked gunmen barged into the house of a popular cryptocurrency trader and demanded the transfer of cryptocurrency at gunpoint.
Half way across the world in Russia a very public investor found himself to be the target of a group which entered his home, stealing his safe full of valuable documents and money in the range of half a million USD. In a separate instance, a Russian couple was robbed in Thailand for around 100,000 USD worth of cryptocurrencies. Because death threats were part of this crime, it took several days to report it to the police.
A month prior to that in Istanbul, a Turkish businessman was intercepted after bragging about his crypto riches on social media. He was forced to turn over private keys which contained 450 bitcoin worth 3 million USD at the time.
The Indian crypto trader Ashu Jain was kidnapped by six people last year and his family was asked for 20 bitcoin in ransom. We don't know if the ransom was paid, but Jain was released and the kidnappers have been arrested, led by Deepak who lost all his bitcoin months prior by being swindled by a fraudulent company, much in the spirit of modern ICOs. It seems this action was a way to make up for the losses, and he figured it would be untraceable because that was what he was (incorrectly) told when he complained about his own losses.
In Brazil, the wife of a Brazilian bitcoin businessman was kidnapped 50 meters from her home. The kidnappers sent a video recording of the wife pleading for ransom to her husband who then replied that the volume of bitcoin trading in Brazil is too small for him to get such an amount quickly. During these negotiations, the police managed to track the kidnappers down and resolve the situation, arresting the gang and rescuing the wife.
Dean Katz is a crypto trader from New York who was help up at gunpoint during an in-person crypto trade in Queens. The robber demanded 8500 USD in crypto so he could bet on the Super Bowl.
In Taiwan, in what was the country's first serious crypto crime, a group of men convinced the businessman Tai that they intend to buy 18 BTC from him and that the deal has to happen in person. Once the meeting took place, Tai and his friend were ambushed and beaten, with Tai being forced to transfer the BTC without payment. This was valued at 170,000 USD at the time. The attackers forced the friends to drink an entire bottle of alcoholic drink before letting them go, in order to create the illusion of a drunken brawl. They were later arrested. Taiwan's crypto crime was kickstarted by that event, and later Wong Yuk-Kwan was kidnapped – the president of Pearl Oriental Oil – who paid a whopping 1.68 million USD to prevent the kidnappers from gouging out his eyes and cutting his legs off. Before being released, he was kept in an abandoned house for 40 days, as per Cointelegraph.
Similarly, in Hong Kong, businessman Lee made a crypto trade deal – he would buy 5 BTC from sellers at a 5% discount for cash. The first meeting happened in a local Starbucks where Lee brought 57000 USD cash, but the perpetrators asked for another meeting later that night because they wanted to sell more BTC. The meeting was supposed to happen in a McDonald's, but as Lee got there with 180000 in cash, they called his phone and asked him to meet them at a nearby theater. On the way, he was ambushed and robbed of all cash and his phone. Moral of this story: if you're buying or selling in person, bring a strong, reliable friend along, make it happen in public places, and start with smaller transactions.
Last but not least, the less than clever Louis Meza decided to rob his business partner who bragged about being an early investor in Ethereum. After having met in a New York restaurant, Meza told the victim an Uber is waiting for him outside. As the victim got into the car, he was held up at gunpoint and forced to reveal the 24-word Ledger restoration phrase. He was also robbed of his house keys, phone, and wallet. He escaped the vehicle and Meza immediately moved out to grab the safe from the victim's apartment. Unfortunately for Meza, the apartment was under full surveillance by home cameras and he was recorded. Not only that, but he immediately transferred the 1.8 million USD worth of ether to a popular American exchange which – of course – has KYC and AML procedures in place, clearly linking Meza with the illicit ether. He was convicted not long after and is serving time for kidnapping, fraud, extortion, armed robbery and fraud. Perhaps he would have been harder to track had he transferred the ether to a private wallet.
The Ledger wallet is envisioned as a perfect and complete protection of your crypto assets, but it's definitely not resistant to owner kidnappings. For that, there's the Plausible Deniability mode which lets you define two or more separate PINs, each unlocking a separate set of wallets – some with pocket change, some with day trading amounts, some with long term savings. This makes it impossible for a robber to know whether or not you're giving them the right and most profitable PIN code.
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