Hacked BitCoin Exchange Sued By Customers 361
judgecorp writes "Bitcoinica, an exchange for the BitCoin virtual currency, is being sued by former customers, after it was hacked. Thieves stole around $180,000 worth of BitCoins in two attacks. The site is now closed, and customers are suing to get their money back."
Re:Good luck with that! (Score:2, Interesting)
Gold stored in a bank is the only money you can count on. Virtual money isn't real (and isn't insured). Paper money is devalued through inflation of the supply. Gold is the way to go, though even that loses some value (-0.1%) over time as more of it is dug from the mines. Ditto diamonds.
Re:Bit-what? (Score:3, Interesting)
US dollars have no intrinsic value. They're worth something because everyone thinks they're worth something. More specifically, they're worth something because someone who has something I want is prepared to swap ("sell") that for US dollars.
Bitcoins are the same. Except there are millions of people who use US dollars, and legal/political institutions dedicated to making sure they work. There are only a relatively tiny number of people trading Bitcoins, and there's no legal/political backing.
The US $ is "Too Big To Fail". Bitcoins aren't.
Re:FDIC insured (Score:5, Interesting)
Re:LOL (Score:5, Interesting)
And good luck suing for untaxed, untraceable, and unregulated currency.
Generally speaking, even internet income or internet capital gains is supposed to be taxable for US citizens, so don't expect the Californian/US justice system to come running to help you if you give them any inkling that you purposefully invested in bitcoins to avoid giving them a piece of the action.
If I had been one of the victims, I would have sued the site directly in Singapore court. A small tax haven and tax shelter like Singapore is much more likely to want to encourage this type of industry and therefore encourage straight dealings in those types of transactions. Furthermore, it will be much easier to demand discovery and collect damages from a Singapore company in Singapore than trying to do the same remotely from a Superior Court in San Francisco.
Re:FDIC insured (Score:4, Interesting)
What you said rings true.
Bitcoin can't exist by itself - the world we live in, whether we like it or not, still runs on cash (fiat money) and at the places where bitcoins are converted into real cold-hard-cash that makes it traceable.
But that also opens up one new possibility, for some one to set up a untraceable (or not that easy to trace) bitcoin/cash exchange.
Personally I do not know if that could ever become a reality, tho.
Bitcoinica wasn't an exchange, it was a scam (Score:5, Interesting)
Ever heard of the term "bucket shop" [wikipedia.org]? That's exactly how Bitconica functioned. Sure you could sell, or sell on margin, your Bitcoins for imaginary US dollars, but you couldn't never withdraw or deposit anything but Bitcoins. What went on was people would use the margin given to them by Bitconica to speculate on the price of Bitcoin, then they'd conveniently lose their whole positions whenever the market went against them, which is quite easy to do if you happen to have everyones Bitcoins to manipulate the market with. This happened so often that a new term was invented for it: zhou tonged [reuters.com], named in honor of the 17 year old kid running the site. (seriously, 17!) Hell, even in the Bitcoin community lots of people were calling them out on this right from the start, for instance here [bitcointalk.org] is a post by one of the main devs, obviously concerned about all the other scams that of course have cropped up using bitcoin. Speaking of, wait'll you see the press when the pyramid scheme known as "Bitcoin Savings and Trust" fails, as it of course will given it pays out %3400 a year. [bitcointalk.org]
Personally I'd suggest you use your Bitcoins for something reputable, like buying pot, getting cash out of Argentina or donating to wikileaks. All this investment non-sense, as opposed to just using the currency for moving value around digitally, is getting out of hand.
Re:FDIC insured (Score:5, Interesting)
Also, many in the community think that Zhou Tong, the buy behind the site, was the one who stole the money in the first place. For instance, after the initial hack and after Bitcoinica shut down, a bunch of money was stored with a legit exchange, Mt Gox. Well those funds got conveniently hacked, and another exchange noticed Zhou Tong trying to transfer the same amount of cash, as well as the fact that an email address associated with the hack was in control of Zhou Tong himself. Source [bitcointalk.org]
Re:FDIC insured (Score:4, Interesting)
Re:Good luck with that! (Score:4, Interesting)
Why would you store your savings in ANY currency? Currency is meant to facilitate transactions... to make barter more efficient. It is not meant to store your savings in the long-term.
In other words, dumping the Federal Reserve Note buys you nothing. You can buy gold right now - why would you wait for the government to base money upon it? And anyway, the government ALREADY sells gold currency (and silver and platinum). American Eagle coins have been available since the 80s. Every time you save $1500 in fiat currency, you can trade it for a platinum American Eagle and stick it in a safe deposit box (or have it held for you).
the alchemists did succeed (Score:5, Interesting)
their gold lust started a snowballing chain of inquiring efforts that eventually led through the centuries to the accumulation of enough knowledge to do this:
http://en.wikipedia.org/wiki/Synthesis_of_precious_metals#Gold [wikipedia.org]
of course, it's not financially worth the effort. but we have realized the dreams of the alchemists
Re:LOL (Score:4, Interesting)