Feds seized $311M in Bitcoin, then hacker stole it back
bloomberg.com
bloomberg.com
As opposed to what, "locally" swiping Bitcoin?
> ... Bitcoin stored on a computer device the government had already seized in another case
Yeah that's your problem Mr. Prosecutor, you have no idea where bitcoins are "stored" or what the device you have seized is. Which leads me to think you are not qualified to "seize" this type of assets.
It's 2022, Bitcoin has been working practically non-stop since 2009, and governments and the medias have been claiming that only criminals/terrorists use Bitcoin for almost as long... you would think people in his position would know what private keys are and how to secure Bitcoin funds they pretend to "seize".
It's simple, like all crypto newbies this prosecutor has just learned: Not your keys, not your coins.
This apllies if you have keys and you are not certain you are the only one to have them... anyone else with these keys can/will most likely claim them before you.
If you read the indictment [1], the word "remotely" never appears, and it's pretty clear the prosecutors understand how Bitcoin works.
If anyone's clueless here, it's Gary Harmon, who showed up at his brother's court hearing, learned that the government had not yet secured the Bitcoin that it legally had a right to, then almost immediately moved that Bitcoin to other wallets, and... just figured nobody would notice?
[1] https://www.scribd.com/document/521749057/USA-v-Gary-Harmon-...
You can’t “steal” your own property.
The government agents involved are all felons under 18 U.S. Code § 241. Conspiracy against rights - https://www.law.cornell.edu/uscode/text/18/241 and 18 U.S. Code § 242. Deprivation of rights under color of law - https://www.law.cornell.edu/uscode/text/18/242
The problem us our country is so corrupt you have forgotten we have a constitution and have probably never heard of the above two statutes.
If that was true detaining a person would be a much more serious violation than detaining your property.
Now I happen to believe that pretrial detention is almost never moral. However, it's pretty obviously not a federal crime for a judge to order someone accused of murder to be held in jail until their trial.
It doesn't seem to be a stretch that the feds "securely holding your property" does not cause injury when it interferes with your right to legal representation.
After all, posession is 9/10ths of the law. If the feds are holding it, its not really yours at that time.
But unfortunately you don't have a right under the constitution to the legal counsel of your choice, and interfering with your ability to pay the legal council you want isn't a federal crimes government agents could go to prison for.
(One of the many reasons why is that the Supreme Court decided a few decades ago that prosecutors have absolute immunity for anything they do on the job, even if they deliberately violated the law.)
Edit: If you're serious about this project you should read through Civil Rights Corp's cases.
You'll learn the most a clever, well-resourced team can push the existing rules in practice to hold governments accountable.
In my unexpert opinion a nonlayer can most efficiently get an impression of how an area of law sort of works by reading decisions from lower-court judges who dispense justice assembly-line style.
When you're reading a Supreme Court decision or a law it's incredibly easy to miss a procudure that makes any remedy inpractical.
For example, you might read through a whole process for deciding the merits of a complex argument a prisoner's civil rights were violated. But you'd be missing that prisoner's lawyers can only make an argument if that prisoner, without a lawyer, wrote the exact right words on a complaint form and handed it to a warden within (for example) two weeks of their rights being violated.
Get used to this search engine. And when you read about a case in the news, look it up. This (or a related resource) is usually how the reporter got their primary sources.
- Make laws so simple that a layman can understand them, thus removing the need for professional lawyers, and their exorbitant fees.
- Have prosecution be equally well funded as a defendant.
In good measure laws get complicated because simple laws get worked around and abused.
We see this in tech too. Email is a simple concept that's grown into a highly specialized territory because spammers will exploit everything they can, and the more holes you patch, the more complex the system becomes.
I can quote tax laws as counterexample. A rule like "you pay 2% of your revenue as a tax" is simple and pretty hard to abuse. A rule like "Take your revenue, subtract expenses (see this 250-page document for list of allowed expenses and the rules when then apply), and pay 20% of your remaining income as tax" gives a lot of room to interpretation and abuse.
Governments make laws complicated because that gives them power - it's pretty much impossible to live in a Western country right now and not break some laws on daily basis.
Well, for one such a policy would bankrupt many people and companies and be bad long term. Eg, anybody living month to month with effectively nothing to spare would end up slowly losing everything.
And of course companies would work around that by making things not be revenue. Eg, instead a company just paying you $X, now you get a whole bunch of "free benefits". You live in company-provided housing and eat company-provided food, which doesn't count as revenue.
So rather than earning $1000 and paying $200 rent, you now earn $800 and pay no rent. Government now can't tax that $200 because it's not revenue. You just live in a house provided as a free perk by your job.
Next step is that the government notices and doesn't like it, so now there's an extra tax if you live in company-provided housing until you end up paying roughly the same amount of tax as before.
It doesn't matter how you cut it, anything "simple" will be worked around, the government will try to counteract it, and we've come full circle again.
I agree with you that everyone breaks at least some law on a daily basis, but I disagree that tax laws are based on governments wanting more power. They're based on a very complicated and chaotic mix of the incentives we want in society and lobbying by those who already have money and influence.
In protocols at least the solution is to design one that assumes a very hostile network and is inherently built for it. None of the old first generation Internet protocols are like that.
All protocols should be designed with the assumption that you will face a well financed adversary at least as smart as you are who wants to destroy what you are building. All protocol work is security protocol work. "The Internet is a dark forest."
As fas as I understand it, they didn't seize Bitcoins. They seized the computer, and the computer is still in the government's hands.
If they really wanted to seize Bitcoins, they could transfer them to the Wallet they own. Given the fact that they left them where they were, means they didn't seize them, and they can't complain that a person moved them somewhere else.
Pretty ironic this appears just a couple words after "innocent until proven guilty."
This is borderline sovereign citizen nonsense. The prosecutors and government agents did nothing wrong here.
The US government can throw your ass in prison for the rest of your life so yes, it is their coins. This is the basis of all government power and in a lot of cases, like this, it's good
The government cannot do those things under the law, but only by violating the laws.
Problem is they have done it so much you think its not only legal, but moral!
Innocent until proven guilty.
It’s the process that leads to its use, and the purposes that differ.
https://en.wikipedia.org/wiki/Government_of_the_Islamic_Repu...
It’s not a democracy if the elected bodies all answer to unelected ones.
Like the supreme court?
Once you are free to do so then may I say no one promise heaven on earth. It is bad human and good in democracy. Sort it out. It is hard. But it is not the same as other sort it out for you.
If two party system with hard barriers for a new party to enter needing additional approval from board consisting of the existing parties is a democracy, then so is Iran with all their limitations. Maybe a lesser one than US, but not that different.
This is so disingenuous it may as well be outright fabrication.
How exactly is that disingenuous?
Why did they seize his coin? Did the person who seized it back actually break into something?
Principles are fine and dandy, but why are principals of innocent until proven guilty ok to be broken by “democratic societies”?
I mean it’s just an appeal to might makes right. My mob is bigger than your mob, so I take what k want.
It’s like we’ve lost the foundation to what the idea of a free country was.
Anyways Bitcoin is stupid still.
People are guilty by default on AML world and the burden of proof ALWAYS fall to the accused. This type of perversion of democratic values is loved and applauded by "well mannered and civilized" tech types whom are totes ok with de-risking strategies that are pretty much based on xenophobia. I'm yet to debate one of those oh-so-enlightened persons that didn't resorted to the "its your fault to have been born in the wrong place!" argument.
You know those people who love and pray to the altar of the almighty GDPR? They don't bat an eye to the fact that it doesn't apply to financial records.
They can and they do
Feel free to explain to your lawyer how you're digging your own hole even further
Then we're supposed to hear sob stories about people who thought it was "just a prank" and got in serious trouble because they didn't know when to stop?
For a lot of people, there is no amount of money they'd be willing to spend the rest of their life in captivity for - but for a great many with dependents I imagine there's probably a number at which you'd go "yeah, OK, I'll take that deal".
That being said, rotting in prison doesn't protect any of your stuff from seizure anyway so we're back to the parent's point again.
If the US government says that it has lawfully seized your bitcoin, then by law the US government owns the bitcoin, even if they don’t possess it. If you’re successfully keeping it from them, they can and will punish you for it. Again, as FormerBandmate said, that’s the basis of their power.
A state actor has identified funds on a offshore bank account that they do not have a controlling access to. They did seize a computer that has been used in the past to access that bank account.
The bank accounts owner (or an associate) removes funds from that bank account. The state actor acts as a petulant child and claims by seizing the computer, they also seized the bank account's content - and then proceeds to arrest the bank account owner (or their associate).
No judge in their right mind would let that fly.
I have no idea why crypto would be treated any different.
Lol. Lmao, even. Let's just suppose a completely different kind of human.
Idk you're suggesting the existence of a human that, while not impossible, must be vanishingly rare. Perhaps you don't really understand what torture means?
This is nothing new and is proven throughout history.
It's also perfectly understandable that you'll choose the well being of your child or significant other over some money.
Okay.
I guess there are people who drive off cliffs and whatnot, but somehow that feels like an honest mistake and not as funny to me.
I honestly have no idea why bitcoin is still the most valuable cryprocurrency when projects like Monero exist.
Because it simply can't be audited. What is the purpose of a public ledger if it is not auditable.
Don't get me wrong I love Monero, but the transparency of Bitcoin is desirable if you intend to enforce a fixed supply.
Also things like Taproot could give some privacy if they widely get used by wallets (by default for example).
On the other hand, if I steal $1,000 and make retail purchases over the course of twelve months less than $5 each, the monies would not be returned from the retailers to the victim of my theft. At that point it is up to the courts(civil and criminal) to force me to make amends to the original victim.
Your scenario is similar to the latter example for most of the end recipients. If an account with zero bitcoins receives a stolen bitcoin and sends it to one recipient, that recipient would certainly fall under the first scenario I put forth. As the transactions become more complex and diffuse, the latter scenario is more likely.
How exactly would you have handled this differently? They were well aware the account could be recovered via mnemonic, but they couldn't move the funds because they didn't have the PIN.
If they don't charge for another theft then it would be obvious that they don't believe enough in that they had it 'seized' and that what happened was a 'theft'.
on edit: I guess I need to go find it on archive.org to figure out if that has happened or not though.
There are more words in that sentence. Are there other examples where someone "remotely [swiped] Bitcoin stored on a computer device the government had already seized in another case?"
They seem to define "stored on service" in this case as "accessible only with access to device." It's an interesting case: is it harder to recover physical assets from a police storage locker than digital?
I feel like you missed the whole point the comment you replied to made. If the person who stored the cryptocoins on the physically seized computer had a copy of the private keys on another computer (COMPLETELY NORMAL) and the prosecutor never transferred the coins making the assumption that physically holding them was good enough, then that is an invaluable lesson they just learned.
As the previous comment says, if two people have access to the private keys for a wallet, whoever gets to it first is the real owner.
The prosecutor didn't make that assumption. The prosecutor was unable to move the bitcoin because the prosecutor didn't know the PIN.
Calling those "seized bitcoins" is definitely stretching the truth in my opinion. And the Government,ent/prosecution knew this - from the article:
"As a backup, Trezor hardware wallets can generate a “seed phrase,” a combination of as many as 24 words that can re-create those private keys on another device. In essence, anyone who knows the magic words and an additional PIN can take control of the Bitcoin. Unplugging the wallet device and physically locking it away is no protection. Brown warned that Larry could remotely take Bitcoin and that the government would be powerless to stop it. “Until we can secure them and transfer them to a government wallet, those are available for him or his family members to transfer,” he said in court. US District Judge Beryl Howell granted bail anyway."
Having said that, the brother was an idiot for ever thinking he'd get away with it. Unless he was going to torch his houde and fly to Belieze before the cops caught up with him, he was bound to get caught. As the article posts out:
"An informant told them Gary had asked his advice on Bitcoin gambling services, records show. The source believed Gary wanted to use them to mix Bitcoin he took from Larry. Gary is “not the sharpest tool in the shed and did not think through the consequences for his brother” before he moved the Bitcoin, the informant said."
Bitcoin is a bearer asset like no other. A house, cash, your gold stash, etc., when "seized", can be used by the state without consulting you once you are put in a hole (rightfully or not).
The state has to adapt to this kind of new asset. The closest that existed before was burying your tangible assets somewhere without anybody knowing about it. But this is just not feasible for many assets obviously, and still very cumbersome when you want to use them. With Bitcoin you just need to generate private keys offline properly to achieve the same purpose.
Like the informant said, Gary is not the sharpest tool in the box.
So, very worth the extra criminal charge if you've been thinking ahead.
You would think the failed track record of knowledgeable criminals like Gary and Ulbricht would convince the crypto-anarchist losers that their fantasies are implausible, but for some reason it never happens.
Seriously? The US does that?
I'm not a lawyer, but I'm pretty sure that's not how laws work. My son has a key to my car, but if he took it and ran off to seek his fortunes, that doesn't make it his car.
To directly answer your question, forever. Policing is sufficiently distributed and poor at retaining or integrating new knowledge that I am sure we will see these amateur-hour mistakes being made for as long as crypto exists in its current form.
Modern policing has not changed much since its inception with the Met Police and Robert Peel.
Good! Nothing to worry about then? Our coins are forever un-seizeable?
Robert Peel? Nuance please.
My coins are seizeable after all!
And being surprised that another person got access to the photos and sold the originals on the market to another buyer.
It didn’t require breaking into the police evidence locker to make copies.
The key difference here in this analogy is that with pictures the cloned digital assets might have some value but not securing the original keys is like not securing the copyright.
The wallets were simply protected by a passphrase and Larry couldn't be compelled to give the passphrase. The feds even told the judge they didn't have control of the funds and they could be moved to family/friends before it happened.
It sounds like Michael Scott declaring bankruptcy - the feds declared "I seize Bitcoin" but nothing happened.
Seizure is tied to possession, a legal concept [1]. Not control. Courts commonly authorize the seizure assets not yet under the government's physical control. (I agree the terminology is misleading.)
Point being, lawyers can pretend that information is property, but some things obey physical laws and other things don't.
(edit) Maybe I'm being unclear, but your link defines seizure as "removes property from an individual's possession" and none of these terms apply here.
Free information is difficult to control. We have to add things to it, like DRM, to make it compatible with the legal concepts of possession and ownership.
Crypto, however, is different. One can control it. Had the FBI been able to move the coins to their own wallet, they would have controlled them. Crypto is information re-structured in the image of our legal senses around property. It's the antithesis of free information. (That’s why two people can look at it and simultaneously see profoundly-pure meaning and infinitely-valid meaninglessness. Legal versus tangible. Possession without substance. Money.)
All that aside, ownership and control have a long history of separating. The traditional method of reconciliation was violence. The FBI "owned" those coins on "seizing" them and thus legally "possessed" them [1], even if they didn't "control" them.
Recording and seizing are different. If a court rules the you own a bank account, that doesn't technically prohibit the bank from charging it. Possession involves ownership or control [1].
Doesn't seem right.
But i would say that taking public keys doesn't fulfill the "removes property from an individual's possession" in the law.cornell.edu link. There is no way to 'remove property from an individual's possession" while "leaving property in an individual's possession" at the same time. And if you are have done the second one of those things then you have failed to do the first.
Rooms full of lawyers getting a legal definition wrong for centuries across multiple jurisdictions is more likely than you misunderstanding a technical term?
> no way to 'remove property from an individual's possession" while "leaving property in an individual's possession" at the same time
Yes, there is. Possession involves control or ownership [1]. One can own something without controlling it and vice versa.
But the title is the part that is so misleading that it's essentially inaccurate - you can't steal something back that was never taken away.
This would be like the feds "seizing" a car, and you drive it away before they actually come take possession of it. Hardly stealing it back, they simply never had it.
"Taken away" muddles legal possession and control. If someone takes control of your un-attended car, we call that stealing.
> would be like the feds "seizing" a car, and you drive it away before they actually come take possession of it. Hardly stealing it back
Legally, it is. Colloquially, that's silly phrasing. (Not disagreeing at all that the headline is silly. Hacker absconds with frozen coins would be clearer. Though we'd then have a page full of questions about what frozen coins are doing in transit.)
Having the keys is necessary but not sufficient. Namely, if other people have the same keys you don't really hold the bitcoins in any practical sense.
It's like ten people all holding a $1000 check drawn against a bank account with only $1000 in it. Whoever cashes the check first has the money, everyone else don't have anything.
Do you have any source on that?
I clicked on this link expecting to actually get some evidence.
You just wasted my time. Thank you not.
Wow, a picture taken with google glass is one of the things that got him
I'm saying that parallel construction is an explanation the government gives of how they found someone. But the government isn't saying they found him from this picture. They're saying they first found him, then subpoenaed his cloud account, then found this picture. Since this picture isn't an explanation of how they found him, it's not parallel construction.
Jokes aside, my guess is zero. Transmitting that much data would probably be a lot. Maybe you could take a picture every 30 minutes and hide it away with other data if you really wanted to, but Google Glass was so short lived I imagine they had bigger things to worry about.
In other words, he used his own private key to send a transaction. How is that "hacking"?
Scariest part of the article.
you store anything in a big-corp cloud, which you haven't personally encrypted, with keys that only you possess, then assume it's all backed up in fed repos (somewhat hyperbolic, especially for non-crims, but not far fetched by any means)
that's neither new, nor news (sadly)
I'm not claiming that this was the case here, I just don't think the government deserves the benefit of the doubt.
> Working with Chainalysis, a blockchain analytics company, the agents studied thousands of Helix transactions, subpoenaed emails, and ultimately found one involving a website that allows users to buy gift cards with Bitcoin. An email associated with Larry was used to open the account.
If you’ve got an email address associated with a Google account, it’s a plain old warrant.
it's a tub full of singles :_D
https://assets.bwbx.io/images/users/iqjWHBFdfxIU/izKncFTLeKf...
i've seen strippers leave the stage with more
Putting it in terms you might better understand: What the feds seized is equivalent to a foreign, chip-only banking card. They never seized the money behind it or the pin required to move that money.
You can still use Tornado cash. You can still withdraw from Tornado cash to new addresses. You can use those funds in those new addresses to buy and pump the price of the the smallcap tokens you already owned with your salary money. Decentralized exchanges that utilize liquidity pools remove the need for matching orders, liquidity pools are mixers on their own. It doesn't matter who you sell your pumped tokens to, you are just depositing them in the liquidity pool and getting the more liquid token back - USDC, Ether, etc.
A couple 8,000% gains later and you're just another crypto trader that got in early and believed.
- for the bitcoin transaction, you should do this from a machine or VM running Tor system wide.
- for the EVM transactions, you can do this from the Tor machine as well, but also consider running your own node because in EVMs the nodes do not know which node saw a transaction first. Whereas using a remote note such as Infura or Alchemy has lots of records. Most of the Ethereum stack is Javascript heavy so this undermines the desire to use Tor browsers and operating systems, but it doesn't really require Javascript, thats just what the communities built. It is tricky (but not impossible) to run an Ethereum node over Tor, as the default behavior is that the protocol cannot find the other nodes - but once it does it can download blocks just fine, so either tunnel or hardcode some nodes to connect to. But remote nodes over API connected via Tor may fit your use case well enough. Just things to be conscious of.)
the liquidity pool is the market
the capital will not be controlled and the government will have to find new tools to “promote a change of behavior” as they delightfully put it
anyway, I’m all for walking away from the dirty funds that are stuck with the illiquid token, but even bigger fun to be had if the other 75% of the market buys into your token just because the price rallies so hard, then your tornado cash funded addresses can cash out again and be ready for the next play.
Or even better, the token gets so popular that the token and/or liquidity pool shares can be staked in another legit protocol to borrow against or earn passive income.
Capital games, capital gains. Like most patient or dead capital, you can still use it to validate ideas and causes you care about. “Wow the TVL is so large, now I need to use it too” for example.
The idea of policing capital is gone, whether the documentary on this reality has come out or not.
funds accosted, dumped into Tornado cash, the end. thats the whole story.
we don't know what happens on the other side, we don't know when funds are taken out to the other side. that should have been what happened in this case. Gary should have looked like a lucky crypto speculator that paid tax on a long term capital gain. There were hundreds of thousands (maybe) of people with that tax profile that year. Wow so early in Sol Shiba Inu NFTs such gains.
The spice must flow. Would prefer the next person had the general knowledge.
(obviously replace bank+passcode with wallet seed or whatnot)
Because it really seems like the obvious thing would be to immediately move the bitcoin or whatever from the original elsewhere on the assumption that they'd be recouping the transaction cost?
ahahah Gary coming through with the oxymorons
Seizure is a legal term. A yacht registered in the Marshall Islands docked in Antigua can be announced seized even before it's physically secured. Stealing that yacht and claiming YOLO isn't a valid defense.
A bank account can be seized but that access is not a license. IP is irrelevant here.
Everyone has access to use every crypto wallet
- removal of property to prevent seizure (18 USC 2232)
- money laundering (18 USC 1956)
- obstruction of a criminal proceeding (18 USC 1512)
- lying to federal law enforcement agents
Also, the BTC were subject to forfeiture pending the resolution of the indictment against his brother.
Gary is accused of money laundering and other crimes, because of the money laundering and other crimes. Money laundering is a tacked on charge that requires discovering an illicit origin of the funds. Then subsequent actions, such as the laundering through additional mixers, depositing in BlockFi for collateral with clean funds loaned against the dirty ones, and using those clean funds, can all be criminalized.
I mean, would you call it stealing back if the Feds seize a real key to a vault, know there may be others out there and then leave the fault completely accessible only to act surprised when the vault is empty after some time?
Ownership of blockchain assets is defined by who has access to the private keys. It seems a bit ignorant to forget about this, much less write a piece ignoring this.
Nope, like everything else in the world, the "owner" of a thing is purely defined by who the government will go to bat for. If the court says your bank account is now owned by the feds, and you withdraw money from it, that's not your money.