This document summarizes many of the major bitcoin exchange scandals and failures that have occurred, beginning with MtGox in 2010. It describes how MtGox halted withdrawals in 2014 and eventually filed for bankruptcy after reporting the loss of 850,000 bitcoins. Other exchange failures mentioned include Bitcoinica, Global Bitcoin Stock Exchange, BitFunder, and Neo & Bee. The document warns about common signs of fraud like high returns with little risk and unlicensed sellers. It also discusses ways to potentially avoid problems like using multisig wallets or exchanges that undergo audits and solvency reports like Bitstamp and Kraken.

1. Dejiny Podvodov v
Bitcoinovom Svete
MtGox? GLBSE? BitFunder? Btct.co? Neo&Bee?
/Matej Nemček @yangwao

2. Who I'm
Co-Founder of Hackerspace Progressbar
Senior Editor at Bitcoiner.sk
Maintainer of Slovak Bitcoin Forum Coinunity.sk
Frequent irc troll

3. What's Scam?
US carnival slang. Possibly from scamp (“swindler,
cheater”)
The word "scam" became common use among the US
"drug culture" in early 1980 after Operation ABSCAM,
an FBI sting operation directed at public officials,
became public.

4. What's Scam?
To trick or cheat someone out of their
posession(s). A ripoff.
The Internet is littered with scams such as pop-
up ads or email spam ads with "Get Rich
Quick/High-Paying Job/You Are A Winner"
messages.

5. Bitcoin
BTC/FIAT
exchanges

6. MtGox
(Magic: The Gathering Online
Exchange)
launched in July 2010
founded by Jed McCaleb
6/3/2011 Transfered to Mark Karpeles
70% of the world's bitcoin trades by April 2013

7. MtGox
controlled implosion since 2012
frequently delayed/refused/stoped withdrawals
19/7/2011 Mt.Gox auditor's computer compromised
(~$8,5M)
7/2/2014 withdrawals halted due to transaction
malleability

8. MtGox
28/2/2014 filled for bankcruptcy protection ($64M)
7/3/2014 Block 289321 200k BTC split up in much
smaller chunks (50B)
20/3/2014 reported 'lost' of 850,000 Bitcoins (~$473M)

9. Coinfloor
owner James McCarthy aka
Nefario
door closed to US clients

10. WeExchange
closed, with no formal announcement
operator Jon Montroll aka Ukyo
owner Graeme Tee
owner dissapreared
lot of technical issues

11. Cryptocoin
Exchanges
Another master piece of unlimited
lulz

12. Vircurex
ROR vulnerability
10/5/2013 lost 1454 BTC/ 225263 TRC / 2340 LTC (vps
hack)
24/3/2014 freezes withdrawals, claims lack of reserves

13. Just hacked..
Coinex.pw, Freshmarket.co.in, Poloniex.com,
Coinmarket.io,..

14. Bitcoin stock
exchanges

15. Bitcoinica
contract-for-difference (CFD) market
against the Bitcoin to USD
(BTC/USD) exchange rate
owner Zhou Tong (17yr)
launched 8/9/2011
3/2012 hackers stole 43554 BTC (~87M)
10 days after, hackers stole 18547 BTC (~90M)

16. GLBSE
Global Bitcoin Stock Exchange
shutdown on October 2012
owner James McCarthy aka
Nefario

17. BTC-TC
(Btct.co)
great concentration of scam assests
DMS.{MINING, SELLING,
PURCHASE}, LABGARDEN
owner Ethan Burnside

18. Bitfunder
Launched in December 2012
Held around $16m in assests
owner Jon Montroll aka Ukyo

19. Bitfunder
8/10/2013 banned people in the US
“All current BitFunder users who are located in
the United States or are determined to be United
States persons or entities will not be able to enter
into any new positions on the BitFunder website,
and, as of November 1, 2013, such users will also
not be allowed to sell positions on the BitFunder
website.”

20. Bitcoin Savings
and Trust
(BTCST)
owner Trendon T. Shavers
raised 700000 BTC (~$60M)

21. Havelock
Investments
bad personal experience (IPO)
previous owner Topace
1/11/2013 acquired by The Panama Fund
NEOBEEQ, previously NEOBEE

22. LMB Holdings
Neo & Bee
Easycoin
Neo Xchange
Well written IPO prospectus

23. Neo & Bee (LMB)
28/3/2014
HLI has been formally informed by the Pass-
Through Fund Manager of NEOBEE that
the compliance officer of Neo and Bee Ltd
has stated that due to an increase of
abnormal activity on the LMB share
platform, there may be a high possibility of
questionable trading activity. While Neo
and Bee Ltd investigate the issue further
they have strongly recommended that we
halt trading and transfers. HLI has halted
the NEOBEE fund and is awaiting further
instructions from the issuer.

24. Neo & Bee
(LMB)
Danny Brewster steps down as CEO
Danny Brewster (ex-CEO?) - claims lost of coins
(1420BTC) in BitFunder/WeExchange

25. Neo & Bee (LMB)
4/4/2014
The Fund will now be designated as NEOBEEQ
to reflect the uncertainty of the future of LMB
Holdings – NEO BEE Ltd.

26. Neo & Bee (LMB)
Danny claims he left Cyprus w/o clients money and for
bussines

27. Ponzi Scheme
over Bitcoin (in
stocks)
Investor.gov issued warning
(23/7/2013)

28. Common Red Flags of Fraud
High investment returns with little or no risk
Overly consistent returns
Unregistered investments
Unlicensed sellers
Secretive and/or complex strategies and fee structures
It comes through someone with a shared affinity

29. Is there way how to evade
Ponzi?

30. Mastercoin
Colored Coins
Ethereum

31. Mastercoin
protocol layer: Bitcoin
user-defined currencies
decentralized exchange
smart property
savings wallets/addresses

32. Ethereum
Sub-currencies
Financial derivatives
Identity and Reputation Systems
Decentralized File Storage
Decentralized Autonomus Organizations
Savings wallets
Smart multisignature escrow
P2P gambling
On-chain stock markets
On-chain decentralized marketplaces

33. How to evade problems of
FIAT exchanges?
Multisig

34. or pickup one with 'audit' (solvency
report)
Bitstamp.net
Kraken.com

35. Bitcointalk.org warning
quote
Moderators do not remove likely scams. You
must use your own brain: caveat emptor. Watch
out for Ponzi schemes. Do not invest more than
you can afford to lose.

36. Thanks for your attendance
Thanks to Security Session
Orgs