Underground Bitcoin Exchange Busted And The 'Ebola' of Banking

It seems like every time bitcoin takes a step forward in shaking off its somewhat nefarious roots, someone pops up to ruin it.

In this case, there's actually two someones.  

The U.S. Justice Department announced earlier this week (July 21) that it had charged two Florida men, Anthony Murgio and Yuri Lebedev, for illegally operating an underground bitcoin exchange. The unlicensed online bitcoin exchange allegedly was used to help "tens of thousands of clients" misdirect roughly $2 million worth of the digital currency. 

The federal complaint alleges that Murgio and Lebedev aided cybercriminals in conducting illegal activity in connection with the illegally-ran bitcoin exchange 

Here's how the case went down, according to the Feds: 

The co-conspirators, as they are being referenced, have operated the exchange since at least late 2013. The service operated in violation of federal anti-money laundering laws and enabled their customers to exchange cash for bitcoins.

"In doing so, they knowingly exchanged cash for people whom they believed may be engaging in criminal activity. Murgio and his co-conspirators have also knowingly exchanged cash for bitcoins for victims of 'ransomware' attacks," the complaint reads. "In doing so, Murgio, and his co-conspirators knowingly enabled the criminals responsible for those attacks to receive the proceeds of their crimes, yet, in violation of federal anti-money laundering laws, Murgio never filed any suspicious activity reports regarding any of the transactions."

What this means is that Murgio and Lebedev are accused of enabling the transactions for hackers that would prey on people to pay ransom to gain access back to those devices. Those hackers allegedly received payments in bitcoin, which was converted into cash through the bitcoin exchange. 

While Murgio and Lebedev didn't conduct the crimes themselves, the Fed's complaint asserts that, by not notifying the authorities of the suspicious activity, they were guilty by association. And it didn't help that the bitcoin exchange they were running was unlicensed. 

But the plot doesn't stop there. The complaint alleges that Murgio and Lebedev attempted to hit the transaction activity by creating a company called the "Collectables Club" — a business that presented itself as an organization to collect sports memorabilia, etc. 

Meanwhile, while that fake organization operated as a front, the duo was sending thousands of dollars to banks in Cyprus, Hong Kong, and Eastern Europe. They also received hundreds of thousands of dollars from bank accounts in Cyprus and the British Virgin Islands.

Better than anything on cable these days.

 Bitcoin Tracker Week 83

The Good, The Bad — The Top Bitcoin Stories Of The Week

Bitcoin A No-Go For eBay Merchant

eBay has cracked down on one seller who tried to accept bitcoin as a form of payment. Reports indicated that Andy Shroder, a solar energy researcher and panel manufacturer, had listed that the cryptocurrency was a payment method he accepted. But eBay said no way.  

The auction site sent him an email stating that bitcoin does not  currency for two “key factors” – namely, security and ease of use. Shroder subsequently posted on Reddit that his merchant listing had been removed.

The email to him reads: “Please understand that you mentioned you accept ‘Bitcoin’ as a method of payment. Some online payment companies are fairly new and inexperienced and they do not provide sufficient fraud protection to members. When we review payment methods to determine whether they are allowed on eBay, two key factors that we consider are ‘Security and Safety’ and ‘Ease of use.’ Please do not offer this payment method.”

Is Bitcoin The "Ebola" Of Banking?

Comparing bitcoin to ebola might be a bit harsh, but that's what one bitcoin startup founder said the banking community has compared the digital currency to. 

"Bitcoin is synonymous with Ebola to the banking community - it has been tainted by scams and hacks," Frank Schuil, founder of Safello, a bitcoin startup.

But luckily for Safello, one major U.K. bank is willing to take a chance on the digital currency. Barclays has signed on as the first U.K. high street bank to explore bitcoin and the blockchain technology. The bank has reportedly signed a "proof of concept" with the bitcoin startup to explore the tech.

Bitcoin Price Settles Back Below $300

Well, the hype over bitcoin and the Greek Debt Crisis seems it may have come to an end. Bitcoin will likely have its day in the sun and jump back above $300 someday, but for now, it's settled back to the mid $270s. 

The trend for most of the year has been closer to the mid $200s. Only time will tell if the Greek crisis and all of the PR that went along with it for bitcoin will get more people to buy in. 

It’s likely to be a LOOOOOONG time before it sees its all-time high of $1,242.

NASDAQ Leads The Bitcoin Exchange Race

Reports had surfaced earlier in the year about how NASDAQ had shown interest in bitcoin's technology, and now it appears it is getting closer to showing its bitcoin cards. 

The stock market exchange said it's partnering with infrastructure provider Chain to determine how it can use the blockchain as part of a way to both issue and transfer shares of privately held companies.

Nasdaq Chief Executive Officer Bob Greifeld told Bloomberg that the blockchain will be “of fundamental importance to Wall Street," later noting that "the benefits to the industry are immense and cannot be ignored.”

“We also plan to announce further blockchain initiatives in the future,” Greifeld said. “The application of blockchain technology within Nasdaq’s private market aims to modernize, streamline and really secure cumbersome administrative functions."

What Will Be Bitcoin's "Killer App?"

What does bitcoin need next? A killer app, says Coinbase co-founder Fred Ehrsam. That's what might help push the currency toward the mainstream, educating the segment of the population who still doesn't know what a bitcoin is.

He suggests that a bitcoin app to end spam might just be the next big thing.

“In 10 years I think we are going to be sitting here and the Internet will look a lot prettier because bitcoin came into existence,” he said in an interview.

Yes, Another Bitcoin Ransom Scam

Another day, another bitcoin scam. This time, it's in the U.K., where a cybersecurity watchdog official has released warnings about scams that are being sent out appearing to be from government agencies.

These scams involve bitcoin ransomware attacks that are gaining access to user's computer files until a bitcoin ransom is paid out. The National Fraud Intelligence Bureau said that the hackers are sending emails that appear to be from the U.K. Home Office or the Ministry of Justice to gain access to those user's computers.

Where SMBs Are Embracing Bitcoin

If you travel to Argentina, you might find that some businesses are pretty bitcoin friendly. In fact, more small business owners have caught the bitcoin bug and are willing to test it out, one report suggests.

In an interview with The Financial Times, a local hotel owner in Buenos Aires shares her story about how she learned about bitcoin and decided to use the digital currency to avoid Argentina's strict regulations around capital.

Turns out, taking bitcoin has been a great business decision since she can make more money without having to deal with the exchange rates from foreign tourist payments. Capital controls in Argentina have been especially difficult on small businesses in the region, but bitcoin has been a way around that.

“I was suspicious at first,” Soledad Rodríguez Pons said in the interview. “But I took the risk, and it was well worth it.



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