Although it is true that Bitcoin is one of the most innovative inventions of the 21st century with potentials to revolutionize financial systems all around the world, it is also true that Bitcoin has unfortunately been linked to various scandalous incidents. This article highlights the top 3 Bitcoin scandals.
Silk Road and Ulbricht’s Life Sentence
Silk Road was an online marketplace platform which allowed users to trade goods and services for bitcoins. Unfortunately, the platform was made popular for trading illegal goods – illicit drugs and weapons, etc. – and Ross Ulbricht, the founder of the platform who went by the name ‘Dread Pirate Roberts’ was arrested and held responsible. It is believed that around US$200 million worth of anonymous drug sales were successfully conducted through the website. Ulbricht was found guilty of money laundering, computer hacking, and drug trafficking, which resulted in life imprisonment. A few months ago, a Second Circuit appellate court rejected his appeal to have a new trail, and Judges in a US court upheld the original sentence.
The Fall of Mt.Gox, Bitcoin Exchange
Bitcoin was sky-rocketing in its value and setting all-time-highs during late 2013 and early 2014 until one incident occurred. It was the hacking scandal of Mt.Gox, once the biggest Bitcoin exchange on the market. Throughout January and February of 2014, many Mt.Gox exchange users reported that they had troubles withdrawing their bitcoins from the exchange. In April, after four months of complete silence, Mark Karpeles, the CEO of Mt.Gox, filed for bankruptcy and admitted that they have lost more than 700,000 bitcoins. From the moment customers started accusing the exchange of losing money, back in January 2014, to the moment the exchange admitted it,  the value of Bitcoin decreased a great deal within a period of four months (January-April). Ever since, many have accused the CEO of embezzling funds; especially after he reportedly spent $48,000 on a new bed, back in 2015.
US Secret Service Agent Stealing bitcoins
FBI undercover agent, Shaun Bridges, and DEA undercover agent, Carl Force, who had been part of the Silk Road investigation, had been arrested for corruption and theft, among other things. Bridges pleaded guilty to stealingover $800,000 worth of bitcoin, while Force admitted stealing more than $700,000 in bitcoin, as well as extortion, money laundering and obstruction of justice. The two agents investigated the case as undercovers and using various aliases, approached the creator of the platform, Russ Ulbricht, who went by the name of ‘Dread Pirates Robert’. Aside from extorting hundreds of dollars’ worth of bitcoin from Ulbricht, the agents also siphoned bitcoin given to them by the government for use in the investigation into personal accounts. Just recently, Bridges, who was already given 71 months in prison, pleaded guilty to a second bitcoin heist.
There are a few more Bitcoin scandals, including the US$72 million hacking incident of Bitfinex exchange last year, and the arrest of Charlie Shrem, CEO of Bitcoin exchange BitInstant and a founding member of the Bitcoin Foundation, back in 2014, for supplying bitcoins to Silk Road users. Unfortunately, this will probably not be the end of such scandals as new incidents are bound to unfold with time. As an investor and a Bitcoin user, it is crucial that you stay up-to-date with news revolving around the currency. Do form a habit of visiting Bitcoin related news websites daily to stay informed.
Rupert Hackett is the co-founder of Bitcoin Australia, and has a wealth of experience with Bitcoin and Cryptocurrencies, including the world’s first Masters in Digital Currencies. He bought his first bitcoin in 2011, and in 2014 immersed himself in the crypto world with Bitcoin Australia and angel investor fund Dominet led by Domenic Carosa.
Quote: “I really think Bitcoin could change the world.”