The recent news that Bitfinex has been ordered by the Royal Courts of Justice in the UK to seize ₿96 as part of a case against a ransomware hacker has illustrated exactly why countries around the world have been clamouring for greater controls on cryptocurrencies. Those who complain about the erosion of privacy in the sector need only look at this case to see why such controls are needed, even if the sweeping reforms catch the innocent as well as the guilty.
Million Dollar Ransom
The origins of the case lie in the hacking of an anonymous Canadian insurance firm on October 10-11. The company was hit with a dose of malware, BitPaymer to be exact, which infected 20 servers and 1,000 desktop computers, encrypting all their files and leading to a $1.2 million ransom demand.
Eventually the hackers reduced this to $960,000 in BTC, which the company paid through its insurers, although they were savvy enough to contact Chainalysis shortly afterwards to track the money. Chainalysis discovered that ₿9 (worth $72,000 at the time) had been liquidated to cash, but that the remaining 96 had been sent to Bitfinex – where increased regulation stipulates that KYC has to be completed for every account holder.
Because of this, Chainalysis were able to identify the account holder, who is named as one of the defendants, and who is now, presumably, a very worried man or woman. Admittedly, the two defendants are pretty stupid for sending the proceeds to a large, centralized exchange, but until 2017 or so this would have likely sailed through without a hitch. It is only in the past two or three years that thefts of this magnitude have resulted in justice being done, and stolen coins (hopefully) returning to their rightful owners.
Privacy Activists Have no Grounds for Complaint
While enhanced AML/KYC legislation such as AMLD5 has many crypto enthusiasts up in arms, cases like this are precisely why the regulations are needed. Without them, these criminals would have gotten away with extortion to the tune of nearly a million dollars, and there would have been no way to catch them.
There is a fine line between security and privacy, but while there are criminals using cryptocurrency for their illegal means, security will always win.