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Attacks/Breaches

Bitcoin Thefts Surge, DDoS Hackers Take Millions

Cryptographic currency's massive rise in value leads to a corresponding increase in online heists by criminals seeking easy paydays.

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Say you've created a cryptographic currency called bitcoin that promises users relative anonymity and untraceable transactions. What could possibly go wrong? The answer, of course, is that these virtues also appeal to hackers, malware developers, and organized crime rings who wouldn't think twice about committing virtual bank robberies.

Earlier this month, for example, Bitcoin Internet Payment System (BIPS), a Denmark-based Bitcoin payment processor, suffered a denial-of-service (DDoS) attack. Unfortunately for users of the company's free online wallets for storing bitcoins, the DDoS attack was merely a smokescreen for a digital heist that quickly drained numerous wallets, netting the attackers a reported 1,295 bitcoins -- worth nearly $1 million -- and leaving wallet users with little chance that they'd ever see their money again.

"On November 15th BIPS was the target of a massive DDoS attack, which is now believed to have been the initial preparation for a subsequent attack on November 17th," Kris Henriksen, the CEO of BIPS, said via Reddit. "Regrettably, despite several layers of protection, the attack caused vulnerability to the system, which has then enabled the attacker/s to gain access and compromise several wallets."

BIPS has been conducting a digital forensic investigation and working with authorities to try to identify the perpetrators. It said that early results showed that the attack originated "from Russia and neighboring countries."

The BIPS heist followed two separate October attacks against Australia-based Inputs.io, in which attackers netted about $1.3 million in bitcoins after stealing all 4,100 bitcoins being held by the free e-wallet service.

[Criminals are taking shelter under bitcoins. See Dutch Banking Malware Gang Busted: Bitcoin's Role.]

The value of bitcoins continues to fluctuate wildly due to a bubble created by bitcoin speculators. In 2011, for example, the currency's value fell from $33 to just $1 per bitcoin before rising to more than $900 earlier this month on MtGox, the world's biggest bitcoin exchange. But that bubble burst the next day, when the value of bitcoins fell by half. As of early Wednesday, however, the currency's value had once again skyrocketed, trading at more than $980 on MtGox.

That rise in value has driven hackers to attack online wallet services that store bitcoins. "Each of these companies had been operating officially for only a few months, yet already had entrusted to them millions of dollars that are now in the hands of cybercrooks," Paul Ducklin, head of technology for Sophos in the Asia Pacific region, said Tuesday in a blog post.

Malware writers have also taken a keen interest in bitcoins, with some -- especially Russian gangs -- modifying their crimeware tools to identify and steal any bitcoins found on infected PCs. "There are numerous malware families today that either perform Bitcoin mining or directly steal the contents of victims' Bitcoin wallets, or both," according to a blog post from Robert Lipovsky, a researcher at security firm ESET.

(Source: zcopley)
(Source: zcopley)

Other malware attacks have started closer to home. Last week, for example, the New Jersey state attorney general's office announced that it had settled a complaint it filed against Commack, N.Y.-based online gaming company E-Sports, as well company co-founder Eric Thunberg and software engineer Sean Hunczak. According to the complaint, Hunczak designed malware that infected about 14,000 computers that subscribed to the company's service, and which mined their PCs for bitcoins, which the perpetrators then sold for about $3,500. Under the terms of the state's $1 million settlement agreement, the company will pay a fine of $325,000, but the rest will be vacated, providing the company complies with a 10-year compliance program.

But not all bitcoin heists have been executed via hack attacks or malware. For example, a China-based bitcoin exchange called GBL launched in May. Almost 1,000 people used the service to deposit bitcoins worth about $4.1 million. But the exchange was revealed to be an elaborate scam after whoever launched the site shut it down on October 26 and absconded with the funds.

Given the potential spoils from a successful online heist, it's not surprising that related attacks are becoming more common. "Please be advised that attacks are not isolated to us and if you are storing larger amounts of coins with any third party you may want to find alternative storage solutions as soon as possible, preferably cold storage if you do not need immediate access to those coins," said Henriksen.

Bitcoin users have echoed that suggestion. "One note of warning: don't trust any online wallet," read a comment on a recent Guardian feature. "The two biggest ones have already been robbed. Use your own wallet on your own computer and back it up on a USB stick."

"Remember, you don't have to keep your Bitcoins online with someone else: you can store your Bitcoins yourself, encrypted and offline," said Ducklin at Sophos.

Knowing your enemy is the first step in guarding against him. In this Dark Reading report, Integrating Vulnerability Management Into The Application Development Process, we examine the world of cybercriminals -- including their motives, resources and processes -- and recommend what enterprises should do to keep their data and computing systems safe in the face of an ever-growing and ever-more-sophisticated threat. (Free registration required.)

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Joe Stanganelli
50%
50%
Joe Stanganelli,
User Rank: Ninja
11/27/2013 | 9:50:38 PM
Re: Technical chops needed on both sides of currency
@cbabcock: Reminds me of a saying my dad has: "It's easy to make the money; the hard part is keeping it."

In Bitcoin's case, that seems to be literally true.
Joe Stanganelli
100%
0%
Joe Stanganelli,
User Rank: Ninja
11/27/2013 | 9:49:27 PM
Re: Virtual Highway Robbery
Actually, the US dollar isn't really backed by anything other than trust and faith.  (This is why some people want to return to a gold or silver standard.)  It's earned a lot more trust and faith than Bitcoin has, but the value of the US dollar can (and, sometimes, does) easily plummet.

I remember when we Americans used to joke about the value of Canadian dollars because they were worth so much less.  Now we are eating crow.
Joe Stanganelli
50%
50%
Joe Stanganelli,
User Rank: Ninja
11/27/2013 | 9:46:32 PM
Bitcoin Banking
It is absolutely ridiculous to me that people would entrust their wealth to these companies without any meaningful vetting, security, insurance, qualifications, etc..

I mean, I get that the whole movement behind Bitcoin is to have a decentralized anti-establishment monetary system, but this is the reason why other monetary systems are "establishment."

Until digital currency has a real, trustworthy, effective banking system, this is going to continue to happen, and Bitcoin and its brethren will continue to be fringe monies.
Brian.Dean
75%
25%
Brian.Dean,
User Rank: Apprentice
11/27/2013 | 5:23:29 PM
Re: Virtual Highway Robbery
Bitcoin is too small, it has $5 billion of bubble wealth however, and the dollar is backed by $15.5 trillion of real wealth, not mentioning all the foreign economies that treat the dollar as gold. If bitcoin ever gets $15+ trillion of wealth under its name, I guess we could call it primetime.
Shane M. O'Neill
100%
0%
Shane M. O'Neill,
User Rank: Apprentice
11/27/2013 | 4:43:24 PM
Re: Virtual Highway Robbery
Bitcoin's volatility and insecurity are big turn offs. I'll stick with the dollar. When, if ever, will bitcoin be ready for primetime?
Brian.Dean
100%
0%
Brian.Dean,
User Rank: Apprentice
11/27/2013 | 4:29:14 PM
Re: Virtual Highway Robbery
Agreed, governments or the population of the world should be controlling money. Bitcoin is not safe because its value is speculative, never mind organized crime getting to wallets, what happens if they reach the blockchain? And never mind personal computers needlessly solving algorithms to mint new money, what happens if a large Big data Cloud deployment decides to quit real business and gets into the mint business?

Some benefits are there in developing economies to rely on bitcoin, if bitcoin gains mass, bitcoin can be used to safeguard from inflation, having said that, first technology would have to be available throughout the economy.

Basically, I like the old paper form, at least that way I will be able to use it as fire fuel, or maybe we can go back to the barter system.
ChawChaw
50%
50%
ChawChaw,
User Rank: Apprentice
11/27/2013 | 4:05:55 PM
Bitcoin is bad
The author mentions MtGox as a source for the valuation of a Bitcoin, but fails to mention that in 2011 MtGox was hacked and Email addresses and un-encrypted passwords were posted on the net.

Bitcoins compete with the dollar. Why would any American want more competition in their lives?
cbabcock
50%
50%
cbabcock,
User Rank: Apprentice
11/27/2013 | 3:59:55 PM
Technical chops needed on both sides of currency
BitCoin had the technical chops to generate a credible currency. But BitCoin vaults and wallets haven't had the technical chops to store it safely. A rapid gain in value lead to too many  rapid and successful cyber assaults 
David F. Carr
100%
0%
David F. Carr,
User Rank: Strategist
11/27/2013 | 3:36:38 PM
Re: Virtual Highway Robbery
This is why I'm sticking with Monopoly money as my currency of choice.
Tom Murphy
100%
0%
Tom Murphy,
User Rank: Apprentice
11/27/2013 | 2:54:44 PM
Re: Virtual Highway Robbery
Off-the-wall ideas are the seeds of innovation, but Bitcoin is just the kind of project that really should die an early death for many, many reasons. I'll cite three: 1) crime. (Read the article. As Bitcoin grows, crime problems will grow exponentially.) 2) Valuation. Do you really want to accept a currency that might be worth $800 today and $3 tomorrow? You might as well accept Cabbage Patch Dolls as currency.  3) Government. We (and I'm speaking for almost the entire human race here) actually want governments to control currencies instead of some enterprise. It's one of the main reasons we HAVE governments.

I say: Render unto Caesar what is Caesar's, and that includes coin of the realm.
<<   <   Page 2 / 3   >   >>
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