All the Ways You Can Lose Your Bitcoin
(Bloomberg Businessweek) -- There are lots of opportunities for cryptocurrency to go missing—some inherent to buying internet money, some involving crime. Below, a few common ways of going virtually broke.
Not Really Your Fault
Pretty basic: Scammers hijack people’s mobile accounts by calling their carriers and impersonating them. The thieves get their victims’ numbers transferred to new devices and ultimately gain access to crypto accounts.
51 Percent Attack
This hasn’t happened yet, but it’s every crypto enthusiast’s greatest fear. If a nefarious syndicate were to gain control of more than half of the Bitcoin network’s computing power, it could tamper with the process of verifying transactions and potentially spend the same Bitcoins twice.
Everyone from local officials to large corporations has fallen victim to ransomware attacks, which often involve hackers holding computer files hostage until the victim pays a fee in crypto. In June 2017 a South Korean web provider paid hackers $1 million in Bitcoin. Although many payments aren’t publicized, it’s the largest ransomware demand known to have been paid.
Sorta Your Fault
It seems as if every week another cryptocurrency exchange says it’s been breached by hackers who’ve run off with customer funds. Investors can also lose money on exchanges because of technology glitches or account holds that freeze funds and prevent buying or selling during significant market movements.
Investors have poured billions of dollars into initial coin offerings, only to find their savings drained. In April two founders of an ICO promoted by boxer Floyd Mayweather were brought up on federal charges of raising more than $25 million for a planned digital currency without registering the offering. (Mayweather wasn’t accused of wrongdoing.)
Dozens of struggling businesses used the buzz around crypto to boost their stock market value in late 2017 and early 2018. (Long Island Iced Tea Corp. changed its name to Long Blockchain Corp., but it couldn’t raise the capital to mine crypto.) Traditional investors looking for exposure to the nascent industry bought in, but the gains didn’t last, and some companies got in trouble with regulators.
There were more than 4,000 victims of virtual-currency-related crimes worldwide in 2017, with losses of more than $58 million, according to the FBI, up from 392 victims and less than $2 million in 2014.
Totally Your Fault
There might be no worse self-inflicted crypto wound than buying Bitcoin low (say, in 2013) and trying to sell high (say, at the end of 2017), then realizing that you lost your private key. D’oh!
Fraudsters on social media have devised a new twist on an age-old con: If you send them one Ether coin, they’ll send you 100 back! Sound too good to be true? It is. Still, scammers have tried to fool people’s followers by making fake accounts (with real names and photos) to lure victims into thinking that they were being offered a great deal from a reputable source.
$225 million: Losses from Ether-related cybercrimes through August 2017
51 percent: Share of those losses from phishing attacks
Unlike credit card transactions, Bitcoin payments are irreversible. If you send digital tokens somewhere you didn’t mean to, you’re out of luck unless the other party agrees to return your funds.
©2018 Bloomberg L.P.