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Friday, November 15, 2013

Bitcoins and drugs

Yesterday, top drug agents from the US, The Netherlands, New Zealand and Australia met in Cairns to discuss the latest state of play. They have uncovered a virtual supermarket of illegal drugs on the internet that arrive via the postman in discrete packaging from overseas.

Since the US shut down Silk Road a month ago, at least seven new online sites have sprung up known as "eBays of vice."  They sell marijuana (still the most sought after drug worldwide) cocaine, ecstacy and other illegal products, using Bitcoin digital currency.

Silk Road mastermind Ross Williams Ulbricht allegedly built a $1.2 billion empire in San Francisco before he was arrested and the new websites are quickly filling the hole left in the marketplace.

When Silk Road closed down, there were 26,000 Bitcoins, worth $3 million, sitting in users' accounts. "I am devastated that Silk Road is permanently down and what happens to the amount of Bitcoins I have in my wallet? Where the fuck did they go?" one user said. "They can't just take everyone's coins, can they?" another wanted to know.

A teenage Australian trading as TradeFortress says his Bitcoin website has been hacked and more than one million Australian dollars worth of bitcoins stolen.  They didn't belong to him, they were owned by the users of his website who trusted them to him. His clients gave them willingly, not knowing who he was, or what he stood for, they simply trusted him to do the right thing. He's now worried about his personal safety as his identity is about to be blown.  Because Bitcoins are not government-backed, there is nothing police can do and he's not even bothering to report the theft to police.

Computer criminals now know that stealing Bitcoins is easy. A Chinese Bitcoin exchange that held up to $US4 million in users' accounts has gone offline and everyone involved has disappeared. The company was launched in May 2013, with its domain registered on 9th May.

Once you are in possession of a Bitcoin, there is no way of telling where it came from, so it's attractive for all the wrong reasons.  In the past it's been used to buy drugs, guns and other illegal items, you could even hire a contract killer.

At today's rate, each Bitcoin is now worth around $400.  In January they were selling for just $30, a good indication of where the new e-currency is going.