Bitcoins are not, in practice, fungible - page 4.

Cosbycoin

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Quote from: CliffordM on December 30, 2011, 09:41:37 AM

Well it won't stop the bit coin network from transacting in those coins (and ultimately laundering them) unless there's a change in the software to create some sort of address blacklist. The worrying aspect is MtGox deciding to act as a policeman. If they are going to do that I think they should make it quite clear.

Agreed. Stolen coins are stolen coins. If someone was dumb enough to get them stolen then they should be stolen.

In slush's case I can understand it wasn't his fault so then those are coins Mt. Gox should be trying to protect from being exchanged.

Stephen Gornick

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Similar activity (Mt. Gox locking accounts and claiming bitcoins deposited were derived from stolen funds) allegedly occurring following the Linode hack (of wallets at Bitcoinica, Slush, Faucet / etc.):

Quote

Hi,

We have noticed you have deposited recently 7 BTC and have a reason to believe those coins may have come from the coins stolen from Bitcoinica (see the bitcointalk forum for more details).

MtGox Co. Ltd.

- https://bitcointalksearch.org/topic/m.780420

[Update: A related thread on an allegation that another exchange is the recipient of coins related to the theft:
- https://bitcointalksearch.org/topic/coinexchanger-is-a-scammer-stole-bitcoinicas-coins-lied-about-contact-info-67129
]

tvbcof

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The first time I remember Mt. Gox locking users for having 'stolen' coins, it became immediately obvious that they got the coins in question from Tradehill. I remember watching these coins move around in odd ways on Tradehill, and got some of them myself (or I should say, I bought BTC on dips caused by a large previous owner wanting badly to have cash instead of BTC.)

Whatever method Mt. Gox has for identifying stolen coins needs to be either refined or open-sourced for scrutiny by more competent persons as it is currently sub-standard and if probably only Mt. Gox with their near monopoly could get away with harassing their users on the basis of that quality of analysis.

Beyond that, I would have trouble classifying any BTC losses as 'thefts' on a philosophical basis. In the case of various services (e.g., MyBitcoin, B7, etc) people willingly gave their BTC to someone who turned out to be not reliable. In the case of allinvain, keeping that much value in a single wallet.dat on a Windows machine was at best unbelievably negligent, and there is always the possibility that the whole thing was staged. There is no reason why I as a holder of BTC should be penalized or even inconvenienced by the poor judgement of others.

gregwtmtno

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I think it's just like cash. If you show up at a bank with a ton of cash, you better believe they're going to ask questions. No reason Mt. Gox has to make it easier for people to move around stolen coins.

realnowhereman

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Mtgox can't do anything but "seize" them. There is no way to refuse to receive bitcoins and there is no way to be sure that the sending address is an appropriate return address, nor to identify the sender.

The only remaining options are to ignore tainted coins or to require a meatspace id in preparation for any potential legal investigation that appears in the future.

FreeMoney

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Strength in numbers

I don't believe that law enforcement contacted them and said hey keep an eye out for bitcoin transactions that had inputs from this or that address.

BubbleBoy

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Has this actually happened ? (the depositor forced to prove the "coins are not tainted", whatever that means)
From what I understand up to now in all cases where funds were frozen the customers could not be contacted by email. Until shown otherwise, we must assume that MtGox will be satisfied with a photo ID of the owner and a description of how they acquired the funds. Both of which are regularly requested by my bank.

They also stated they only act upon notification from a law enforcement agency, and depending on the local law returning stolen property to the lawful owner might be mandatory. So they might have no choice over confiscating the coins, other than compensate the alleged thief out of their own pocket.

DeathAndTaxes

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Gerald Davis

Quote from: BubbleBoy on January 04, 2012, 12:11:14 PM

Quote

Seizure of assets by a private entity without backing of the courts (due process) is generally considered unlawful.

They are not seizing the money, they force you to identify yourself in order to redeem them. There is nothing illegal in doing so, in fact most jurisdictions require financial entities to know their customers. If MtGox has reasons to believe the customer might be a criminal, then asking the customer to identify himself is unquestionably legal.

This is exactly what PayPal does on a regular basis with account limitations until you submit ID info. And they do it on a massive scale, there are much more limited accounts in PayPal's system than there are regular accounts in MtGox. It should not be surprising that Bitcoin processing sites start to look more and more like PayPal, they are shaped by the same real-world laws.

Um this isn't indentifying the person. I have no issue w/ know your customer compliance.

This is MtGox determining coins are tainted and seizing them until/unless the depositor can prove otherwise.

BubbleBoy

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Quote

Seizure of assets by a private entity without backing of the courts (due process) is generally considered unlawful.

They are not seizing the money, they force you to identify yourself in order to redeem them. There is nothing illegal in doing so, in fact most jurisdictions require financial entities to know their customers. If MtGox has reasons to believe the customer might be a criminal, then asking the customer to identify himself is unquestionably legal.

This is exactly what PayPal does on a regular basis with account limitations until you submit ID info. And they do it on a massive scale, there are much more limited accounts in PayPal's system than there are regular accounts in MtGox. It should not be surprising that Bitcoin processing sites start to look more and more like PayPal, they are shaped by the same real-world laws.

DeathAndTaxes

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Gerald Davis

Quote from: CoinSpeculator on January 04, 2012, 07:10:59 AM

Quote from: DeathAndTaxes on December 31, 2011, 11:37:18 AM

Quote from: TTBit on December 31, 2011, 09:46:18 AM

What is at issue here?

A) "Bad business decision by MtGox" - ok, I can agree, but haven't heard both sides of the story.

B) "MtGox can't do that." - They can do whatever they want with their business (not including defrauding people). MtGox owes the community nothing.

Both. MtGox is asserting itself as a Police entity. They have no lawful Police powers. Seizing funds that don't belong to you is also known as STEALING.

Here is an example. I offer to sell you a GPU for 50 BTC. You send me the 50 BTC. Based on my secret and internal "D&T database of bad coins" (trademarked and patent pending) I determine those coins were stolen. I keep your 50 BTC.

Would you say "Sure D&T can do that. He can run his business however he wants".

Police work is the responsibility of the Police. If MtGox is complying w/ a warrant or court order that is one thing. If MtGox has suddenly appointed themselves the Bitcoin Police that is UNLAWFUL. I expect eventually if they do this on a large enough sum someone will file suit.

If MtGox doesn't want to do business w/ self determined "bad coins" they could simply reverse the transaction and inform the depositor.

This is such a fundamentally absurd post. Market's police themselves without the state. If that involves shunning transactions with those known to trade in stolen goods, they absolutely have that right. MtGox has no obligation to comply with any warrant, court order, or any authority whatsoever because all "lawful authority" is unjustly acquired. If MtGox gets a reputation for stealing coins under dubious circumstances then people will shun them and the market will police itself by putting MtGox out of business. MtGox absolutely has the right to police themselves and you can go somewhere else to funnel your stolen coins into dollars.

There is a difference between REJECTING a transaction and simply SEIZING the money.

i.e.
"Sorry we can't accept this deposit of 1000 BTC because they have been flagged by our internal database. They have been refunded to the sending address. For more information click here"

vs

"Sorry your deposit includes funds that our secret database has determined (at our sole discretion) are tainted. We have seized the funds until you prove to use they are legit. If you can't prove to use they are legit we will keep them."

Seizure of assets by a private entity without backing of the courts (due process) is generally considered unlawful. Just because Mt. Gox can get away with it doesn't make it right and certainly doesn't make it something we should advocate.

ovidiusoft

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MtGox can do whatever they want, legal, illegal, moral, immoral, and they answer for it legally or business-wise. I wouldn't do business with someone if I believe it might get me in trouble (whatever that "trouble" might be), either. They probably considered it's more risky for their business (remember they are, but Bitcoin standards, huge) to allow the trading of those coins. What's the problem?

Whether they will lose business because of it, remains to be seen. As long as we have choices of exchangers, I don't worry. What they should do, is to write an easy to read and understand TOS so customers know what are the security procedures (maybe they do have something like this, I only checked the front page, it's not there), how they do their checks, and so on.

Let me be the devil's advocate: a risk-adverse customer (let's ignore for a moment the fact that Bitcoin is not for the risk-adverse people

) might consider a great advantage that someone is taking care they won't buy stolen coins. Who are we to decide that is not a reasonable thing to do?

CoinSpeculator

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Quote from: DeathAndTaxes on December 31, 2011, 11:37:18 AM

Quote from: TTBit on December 31, 2011, 09:46:18 AM

What is at issue here?

A) "Bad business decision by MtGox" - ok, I can agree, but haven't heard both sides of the story.

B) "MtGox can't do that." - They can do whatever they want with their business (not including defrauding people). MtGox owes the community nothing.

Both. MtGox is asserting itself as a Police entity. They have no lawful Police powers. Seizing funds that don't belong to you is also known as STEALING.

Here is an example. I offer to sell you a GPU for 50 BTC. You send me the 50 BTC. Based on my secret and internal "D&T database of bad coins" (trademarked and patent pending) I determine those coins were stolen. I keep your 50 BTC.

Would you say "Sure D&T can do that. He can run his business however he wants".

Police work is the responsibility of the Police. If MtGox is complying w/ a warrant or court order that is one thing. If MtGox has suddenly appointed themselves the Bitcoin Police that is UNLAWFUL. I expect eventually if they do this on a large enough sum someone will file suit.

If MtGox doesn't want to do business w/ self determined "bad coins" they could simply reverse the transaction and inform the depositor.

This is such a fundamentally absurd post. Market's police themselves without the state. If that involves shunning transactions with those known to trade in stolen goods, they absolutely have that right. MtGox has no obligation to comply with any warrant, court order, or any authority whatsoever because all "lawful authority" is unjustly acquired. If MtGox gets a reputation for stealing coins under dubious circumstances then people will shun them and the market will police itself by putting MtGox out of business. MtGox absolutely has the right to police themselves and you can go somewhere else to funnel your stolen coins into dollars.

wareen

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Revolutionizing Brokerage of Personal Data

Quote from: BubbleBoy on January 04, 2012, 05:54:20 AM

http://en.wikipedia.org/wiki/Contaminated_currency

Wow, I never thought of banknotes as a health hazard - one more argument for Bitcoins

FreeMoney

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Strength in numbers

They're within their rights like I have the right to sell dogshit soup. It's super bad to act like you accept bitcoin when you only accept some bitcoins. And the method for telling which ones they accept is opaque, and they aren't simply going to return them or it would be fairly pointless. It would be like a paper dollar merchant not just declining dollars they deemed suspicious, but keeping them and not delivering product.

Maybe someone from this site wants to tell us if customers have an expectation of being paid only in coins that were never involved in a crime. Likely the risk runs one way only. Lose coins if they are deemed tainted by Gox, no recourse if Gox gives you tainted coins.

Is there a procedure for reporting crimes? Are crimes of all sizes given consideration? Someone didn't send me product, this counts right? How about my cousin grabbing my instawallet funds?

Really, promise to give it up and then actually give it up.

BubbleBoy

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Coins are not fungible, that's a given. MtGox has full rights to chose it's customers. Don't start with that liberal bullshit about non-discrimination. Bars frequently reject customers that score positive for cocaine on their hands (they have very sensitive scanners). It's not a stretch to imagine they could reject drug-tainted money:
http://en.wikipedia.org/wiki/Contaminated_currency

So MtGox if fully within it's rights to reject or confiscate "stolen" coins, as long as it makes it perfectly clear in their TOS. Of course, it's a stupid stunt that will only harm innocent bystanders. The fact that MtGox can get away with this is a testament to the flaky nature of the bitcoin economy, which is basically composed of miners and speculators all centered around a single site, MtGox.

reg

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any kind of tracing- marking as tainted or Bitcoin FBI involvement is an anathema to me. All such talk debases the core principal of Bitcoin and should in my opinion be avoided. each BTC I recieve is the same as any other its value is determined by me and one other (the exchange partner ) agreed probably by current exchange rate. I do not need to know where it came from or where it is going. It is my private intelectual property to do with as I please without interference or control by any other third party. There is no legal system attatched to this as BTC do not exist in reality. It is not money. each BTC is a string of random numbers in cyberspace. nothing more and would dissapear if cyberspace was for some reason not accessable. (ie no internet) The solution to theft is in my opinion only feasable by ensuring widespread and easier protection and storage of wallet.dat files. If only I as origionator and operator of a wallet can have access to its contents there is no theft!. regards reg.

julz

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Quote from: DeathAndTaxes on January 03, 2012, 05:34:32 PM

Quote from: gregwtmtno on January 03, 2012, 05:13:35 PM

I think it's a good idea to do this kind of tracing of stolen coins. Theoretically, if people know that if they buy stolen coins they might not be able to resell them, they might not buy them in the first place. As a result, thieves will have a tougher time unloading stolen coins.

I have some coins to sell you.

Are they stolen or are they legit? Please let me know how you verify.

The only person getting stuck w/ tainted coins is victims.

Worst case scenario is it simply makes Bitcoins less valuable for theives (i.e. less than face value) as they will want to unload them quickly before being considered tainted (and thus once again only screw over the person who unkowingly buys them.

Even if there was a global universal database of tainted coins (a pipe dream if I ever heard one) here is a timeline.

1) I steal 10,000 coins.
2) Knowing time is of the essence I unload them before the victim even discovers they have been stolen. The more I discount them the quicker I can sell them.
3) Victim reports coins as stolen.
4) Some central authority (Mt Gox Police Dept??) verifies the claim of stolen coins and within hours? days? weeks? updated the global registry of stolen coins.

Not my problem I already have unloaded them to some suckers who see the value of their coins becomes worthless.

Now how many victims have to see their coins become worthless before people start saying "Fuck Bitcoin your coins can become worthless at any point in time"? What do you think that will do to the overall value of Bitcoin as a mechanism for exchange?

This is a strawman of how any government tainting system would ever operate.
The coins in the innocent party's hands wouldn't automatically become worthless.

The coins would, upon entering one of the government audited merchants/exchanges be either taxed heavily, or placed in temporary escrow.
The point being - that the affected person could then provide information as to where the tainted coins came from in order to get their funds back, thus getting the regulators a step closer to the thief.

I'm not saying I would really like such a system - but I think that's a far more likely scenario as to how it would operate, and I do see something like this as an inevitability if people start using bitcoin as the preferred tool for serious crimes such as kidnapping and for 'financing of terrorism'.

FreeMoney

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Strength in numbers

Quote from: DeathAndTaxes on January 03, 2012, 05:34:32 PM

Quote from: gregwtmtno on January 03, 2012, 05:13:35 PM

I think it's a good idea to do this kind of tracing of stolen coins. Theoretically, if people know that if they buy stolen coins they might not be able to resell them, they might not buy them in the first place. As a result, thieves will have a tougher time unloading stolen coins.

I have some coins to sell you.

Are they stolen or are they legit? Please let me know how you verify.

The only person getting stuck w/ tainted coins is victims.

Worst case scenario is it simply makes Bitcoins less valuable for theives (i.e. less than face value) as they will want to unload them quickly before being considered tainted (and thus once again only screw over the person who unkowingly buys them.

Even if there was a global universal database of tainted coins (a pipe dream if I ever heard one) here is a timeline.

1) I steal 10,000 coins.
2) Knowing time is of the essence I unload them before the victim even discovers they have been stolen. The more I discount them the quicker I can sell them.
3) Victim reports coins as stolen.
4) Some central authority (Mt Gox Police Dept??) verifies the claim of stolen coins and within hours? days? weeks? updated the global registry of stolen coins.

Not my problem I already have unloaded them to some suckers who see the value of their coins becomes worthless.

Now how many victims have to see their coins become worthless before people start saying "Fuck Bitcoin your coins can become worthless at any point in time"? What do you think that will do to the overall value of Bitcoin as a mechanism for exchange?

More like how many times does MtGox have to get screwed by taking coins that don't get marked tainted until later before they go out of business.

DeathAndTaxes

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Gerald Davis

Quote from: gregwtmtno on January 03, 2012, 05:13:35 PM

I think it's a good idea to do this kind of tracing of stolen coins. Theoretically, if people know that if they buy stolen coins they might not be able to resell them, they might not buy them in the first place. As a result, thieves will have a tougher time unloading stolen coins.

I have some coins to sell you.

Are they stolen or are they legit? Please let me know how you verify.

The only person getting stuck w/ tainted coins is victims.

Worst case scenario is it simply makes Bitcoins less valuable for theives (i.e. less than face value) as they will want to unload them quickly before being considered tainted (and thus once again only screw over the person who unkowingly buys them.

Even if there was a global universal database of tainted coins (a pipe dream if I ever heard one) here is a timeline.

1) I steal 10,000 coins.
2) Knowing time is of the essence I unload them before the victim even discovers they have been stolen. The more I discount them the quicker I can sell them.
3) Victim reports coins as stolen.
4) Some central authority (Mt Gox Police Dept??) verifies the claim of stolen coins and within hours? days? weeks? updated the global registry of stolen coins.

Not my problem I already have unloaded them to some suckers who see the value of their coins becomes worthless.

Now how many victims have to see their coins become worthless before people start saying "Fuck Bitcoin your coins can become worthless at any point in time"? What do you think that will do to the overall value of Bitcoin as a mechanism for exchange?

Littleshop

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Quote from: gregwtmtno on January 03, 2012, 05:13:35 PM

I think it's a good idea to do this kind of tracing of stolen coins. Theoretically, if people know that if they buy stolen coins they might not be able to resell them, they might not buy them in the first place. As a result, thieves will have a tougher time unloading stolen coins.

We really have no way of knowing which coins are stolen in the first place. Someone could buy something with coin, then say they were stolen after the goods were delivered. It would almost always be one persons word against another. Even in high profile cases it would be very hard to tell what is really going on.

Topic: Bitcoins are not, in practice, fungible - page 4. (Read 9555 times)