Topic: 2013-10-22 WSJ: Bitcoin Poses a Challenge for Law Enforcement (Read 1848 times)
Horrible
A few inaccuracies ...
The reporters confuse how the private keys in a client's wallet can be protected with encryption and extend that concept to applying to Bitcoin transactions as well, which is incorrect. There is no encryption in the Bitcoin protocol.
The diagram accompanying the article had errors as well. In fact, its ratio of errors to things it got right might be in record territory.
The virtual currency is essentially encrypted computer code that is accepted as a form of payment among users,
The reporters confuse how the private keys in a client's wallet can be protected with encryption and extend that concept to applying to Bitcoin transactions as well, which is incorrect. There is no encryption in the Bitcoin protocol.
The diagram accompanying the article had errors as well. In fact, its ratio of errors to things it got right might be in record territory.
Quote
1.) Mr. A sends Mr. B an Internet address where payment is to be sent.
The use of "internet address" is ambiguous at best as that term is generally used to refer to an IP address. The Bitcoin protocol does not include IP address in any transactions.Quote
3.) Upon receiving the address, Mr. B sends a bitcoin attached with his wallet's private key, used to verify transactions.
It is difficult to describe in one sentence, for sure, but the error here is that no private key is attached.Quote
4.) The block chain confirms, processes, encrypts the transaction, posts it and deposits the payment in Mr. A's wallet.
Ummm ... ya. Bitcoin can be hard to describe, but that was painful to read. 
They shouldn't be persecuting these people to begin with. I hope Bitcoin makes it impossible for them to enforce unjust laws; no good has ever come from the prohibition of personal property; consequentialism at its worst: "He could use those drugs and then eat a puppy and stab a man, therefore we should charge him with a lesser crime so he does not commit the greater crime." Rather than try a man for his potential actions (fortune tellers would make the best law enforcers if this were feasible--what was that movie called?), we should judge a man for his actual actions, since his actions have a special property called "actual", and consequentially, cannot be "potential", due to being real, and not imaginary.
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The rise of Bitcoin, the little-regulated digital currency, is challenging law enforcement's ability to keep tabs on the criminal underworld.
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The virtual currency is essentially encrypted computer code that is accepted as a form of payment among users, with a fluctuating value set by a market and not by any country or central bank. For those reasons and more, it can be extremely difficult to trace—similar to paying with cash—and thus could be attractive to criminals. In a number of cases, the use of bitcoin has made it harder for police to track financial transactions or seize criminal profits, law-enforcement officials said.
"Law enforcement has to figure out a way to deal with it," said one senior law-enforcement official, who also acknowledged Bitcoin has legitimate uses. (Currency investors and some Web-services sites have adopted it, among others.)
Bits and Pieces
Mystery still surrounds Bitcoin. Its creator – or creators – has remained anonymous and specific details surrounding the history of the virtual currency remain fuzzy. Still, buzz is growing, despite recent wild swings in the currency's value. Here's a rough timeline of the Bitcoin evolution.
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Bitcoin is attracting attention as a wildly volatile, all-digital currency. How does it work? How are criminals taking advantage of it? How risky an investment is it? In this Bitcoin explainer, WSJ's Jason Bellini has "The Short Answer."
In April, the Drug Enforcement Administration, in the first-known federal bitcoin seizure, took 11.02 bitcoins—or nearly $2,200 at current rates—from a hospitality worker who lives in South Carolina, but they haven't charged him with a crime. Eric Daniel Hughes, who the DEA says was also known as Casey Jones, says the bitcoins didn't belong to him, his lawyer David Aylor said.
The Los Angeles office for the DEA, which made the seizure, hasn't made public what it contended Mr. Hughes was doing with the bitcoins, and says only that the seizure is part of a continuing investigation. (Mr. Hughes also faces state drug-possession charges following a June raid on his apartment. He has pleaded not guilty in that case, which his attorney says is unrelated to the bitcoin seizure.)
A larger case involving an online drug market that relied on the virtual currency, unsealed this month, has put Bitcoin under even more of a microscope. Federal agents shuttered the online market known as Silk Road, which has hundreds of thousands of participants, according to the criminal complaint. Despite seizing the website's servers, federal agents have been unable to access much of the alleged ringleader's encrypted bitcoin fortune. At current exchange rates, Silk Road took in more than $120 million in commission while the government has announced seizing $5.2 million worth of bitcoins.
A spokeswoman for the U.S. attorney's office in the Southern District of the New York, which is pursuing the case, declined to comment.
Joshua Dratel, defense lawyer for alleged Silk Road administrator Ross Ulbricht, said in an interview that the government will have to prove that bitcoins it seized from a Silk Road account were controlled by his client. "That is a hurdle that the government is going to have to address," Mr. Dratel said. Mr. Ulbricht remains in custody and denies all charges.
"Bitcoins seek to be virtually untraceable, leaving the buyers and sellers of drugs seemingly hidden from law enforcement," said DEA spokesman Lawrence Payne. "As for investigations, law enforcement is keeping up with every new method criminals are using to evade authorities."
Bitcoins also can be bought on online exchanges, similar to a stock market. The currency traded at a six-month high on an exchange this week. Late Tuesday afternoon, one bitcoin was trading at $197.55.
It remains unclear exactly how much of the overall $2.4 billion Bitcoin market could be tied to crime, and advocates say the majority of Bitcoin transactions don't involve illicit goods.
Backers say virtual currencies offer advantages for legitimate uses. There are no bank holidays or foreign-exchange rates. More businesses, including the dating website OKCupid, run by Rainbow Humor Inc., accept bitcoins. A unit of Baidu Inc., the Chinese search giant, said last week it will now accept bitcoins as payment for some services.
Bitcoin supporters say that following the breakup of Silk Road, consumers will stop associating the currency with illegal activity. "We can move on from that," said Brian Armstrong, CEO of Coinbase, a Bitcoin exchange service based in San Francisco. "Silk Road got shut down. The bad guys lost."
But Bitcoin appears to have maintained popularity in online drug deals. One Bitcoin e-commerce site selling drugs, guns and malicious software, Black Market Reloaded, has seen a surge in activity since the drug market closed. The self-described administrator of the site, who goes by the username "backopy" on the site's forum, said in a message to The Wall Street Journal that "a certain level of anonymity is achieved by middleman, like myself."
Law enforcement has had some successes tracking Bitcoin crime. For instance, it can be easy for law enforcement to track down inexperienced Bitcoin users, said Scott Dueweke, a senior associate at Booz Allen Hamilton who has advised U.S. agencies, including the DEA, on virtual currencies.
But, Mr. Dueweke added, "If you're sophisticated, which criminals are…then I think it is very anonymous."
You can read WSJ articles if you click through via Google, for some reason. Anyway, it's a very generic background-type article. A few quotes:
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“Law enforcement has to figure out a way to deal with it,” said one senior law-enforcement official, who also acknowledged Bitcoin has legitimate uses. (Currency investors and some Web-services sites have adopted it, among others.)
Quote
“Bitcoins seek to be virtually untraceable, leaving the buyers and sellers of drugs seemingly hidden from law enforcement,” said DEA spokesman Lawrence Payne. “As for investigations, law enforcement is keeping up with every new method criminals are using to evade authorities.”
Quote
But Bitcoin appears to have maintained popularity in online drug deals. One Bitcoin e-commerce site selling drugs, guns and malicious software, Black Market Reloaded, has seen a surge in activity since the drug market closed. The self-described administrator of the site, who goes by the username “backopy” on the site’s forum, said in a message to The Wall Street Journal that “a certain level of anonymity is achieved by middleman, like myself.”
Quote
Law enforcement has had some successes tracking Bitcoin crime. For instance, it can be easy for law enforcement to track down inexperienced Bitcoin users, said Scott Dueweke, a senior associate at Booz Allen Hamilton who has advised U.S. agencies, including the DEA, on virtual currencies.
But, Mr. Dueweke added, “If you’re sophisticated, which criminals are…then I think it is very anonymous.”
But, Mr. Dueweke added, “If you’re sophisticated, which criminals are…then I think it is very anonymous.”
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Yeah, I don't have a WSJ account as well. Maybe someone who has will be kind enough to repost?
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