Here we go again.
When the words “bitcoin ransom” and “malware attack” show up in headlines together, is anyone really surprised anymore? How about the words “FTC charges” and “bitcoin mining operation?”
Yep, here we go again.
So, let’s begin with the first one. If you googled “bitcoin” at all yesterday (Feb. 18), it was likely the first thing showing up in the search. The nuts and bolts of the story begin with Los Angeles, a hospital and $17,000 worth of bitcoin that was paid out to hackers who took down a computer system.
Which, of course, included vital medical records. So, if this sounds like it came straight from a Quentin Tarantino film, that theory wouldn’t be too far of a stretch. But nope, just another day in the news cycle, where hacking and bitcoin get tangled into one pretty big story.
So, how much was $17,000 worth of bitcoin? About 40 bitcoins, according to reports from the Hollywood Presbyterian Medical Center. The FBI is still investigating the incident, but the hospital explained it had no choice but to pay out the hackers.
What happened, as is the case in most of these hacks, is a group of hackers encrypted a computer network’s data, holding it hostage from doing anything. Once hacked, the hospital was sent a digital decryption key, which could then be used to unlock the data — but for a hefty price.
“The quickest and most efficient way to restore our systems and administrative functions was to pay the ransom and obtain the decryption key,” Allen Stefanek, CEO of the hospital, said in a statement. “In the best interest of restoring normal operations, we did this.”
What’s interesting about this case is that the hospital may have acted before law enforcement even stepped in. Sources cited in the Los Angeles Times indicated that the hospital took this into its own hands before alerting the proper authorities to advise on what to do.
But, apparently, in today’s breach-ridden world, that seems to be as common as paying a bill. At least, according to Adam Kujawa, head of malware intelligence for Malwarebytes, a California-based firm, who spoke with Fox News about the incident.
“Unfortunately, a lot of companies don’t tell anybody if they had fallen victim to ransomware and especially if they have paid the criminals,” Kujawa said, “but I know from the experiences I hear about from various industry professionals that it’s a pretty common practice to just hand over the cash.”
Or, in this case, hand over the bitcoin.
But the fun doesn’t stop there.
Bitcoin Mining Operator Settles With FTC
Bitcoin got its name tangled up with the FTC. Well, bitcoin miners, to be fair. But, [insert shocked face], this case has to do with deceiving thousands of consumers.
According to the FTC’s allegations, the bitcoin mining operation Butterfly Labs misled consumers about the “availability, profitability and newness of machines,” which would then be used to mine bitcoin. Apparently, this company made it sound like mining for bitcoin was like shooting fish in a barrel.
The FTC’s claims go on to say that the company “unfairly kept consumers’ upfront payments, despite failing to deliver the machines as promised.”
Talk about a snake oil salesman.
“Even in the fast-moving world of virtual currencies, like bitcoin, companies can’t deceive people about their products,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “These settlements will prevent the defendants from misleading consumers.”
The FTC’s complaint against the bitcoin mining company claims that the company charged consumers, only to deliver computers that were “practically useless or, in many cases, did not provide the computers at all.” The machines delivered were pre-used by the company, and, in some cases, consumers paid for machines without receiving any.
This week, the FTC announced a settlement with Butterfly Labs that entails prohibiting it from misrepresenting consumers about if a specific service can be used to generate bitcoin/virtual currency. The company can also no longer tell consumers when they will receive such a product or service and must inform them of the age of the product.
The settlement also had a monetary value associated with it (more than $38 million). The GM of the company was also named in the case and fined more than $135,000 but will have that fee waived once all cash obtained using bitcoin from the company’s machines are surrendered. But the FTC noted that that aspect was “suspended due to the defendants’ inability to pay.”
But all was not lost in the bitcoin world, this week. We swear.
Blythe Masters Blazes The Blockchain Trail
Blythe Masters, the ex-JPMorgan investment banker, is forging new partnerships for her blockchain startup, Digital Asset Holdings.
Just this week, it was announced that her company has new deals with new financial clients, including Accenture, PricewaterhouseCoopers and Broadridge, to bring blockchain tech to its consulting clients. The offerings are being pitched to the clients for the blockchain’s ability to conduct business faster and cheaper.
Accenture also announced its blockchain practice, which will be used to educate clients about how they can utilize the technology that powers bitcoin in their own financial deals. This marks another big step for blockchain and Digital Asset Holdings, which, not long ago, was struggling to pick up financing.
But now everyone wants a piece. Richard Lumb, CEO at Accenture’s financial services side, told Financial Times that investment banks are spending around $100 billion on technology, which means there’s plenty of room to test how the blockchain could be used to cut those costs down.
“When you look at an industry that is down on its knees in terms of profitability, the blockchain offers some really valuable answers,” he said. “There is a market forming around the blockchain, and we don’t want to be left behind in that race.”
Recently, Digital Asset Holdings announced it had raised $60 million from 15 major financial institutions, and now, the momentum appears to be continuing.
“[Blockchain] improves post-trade processing efficiency for banks and other financial institutions,” Masters said in an interview with FT. “Instead of building countless duplicative records, one master prime record can eliminate the need for reconciliation, which is a very costly process for financial institutions, while improving compliance, security and privacy.”
At least, there’s one bright spot in the world of bitcoin news.