The Great Bitcoin Bank Robbery

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A young, anonymous Bitcoin banker in Australia reported the theft of over a million American dollars in the virtual currency. He is not taking the problem to the police.

A peer-to-peer currency not backed by any government, Bitcoins are in many ways more similar to cash than to the more common credit card and PayPal methods of exchanging money over the Internet. Once the coins are out of your hands, you can't get them back via a third party (such as a credit card company). You can't easily trace where your Bitcoins (BTCs) have been.

The alleged victim of the theft, who goes by the moniker TradeFortress within the Bitcoin community, runs a virtual bank for the currency called Inputs.io. In a terse announcement posted Thursday, he claims to have lost more than 4,100 Bitcoins--approximately 1.1 million American dollars--in separate attacks on October 23 and 26. "The attacker compromised the hosting account through compromising email accounts (some very old, and without phone numbers attached, so it was easy to reset). The attacker was able to bypass 2FA due to a flaw on the server host side."

Not surprisingly, especially when you consider the delay to reporting the hack, TradeFortress has fallen under a great deal of suspicion himself. "This is a good example of why you shouldn't trust online wallet services," wrote one commentator on Reddit. "Also, don't ever use anything that Tradefortress has made ever again."

The commentator, going by the handle colsatre, added "I don't know why people decided to trust someone who stays completely anonymous to begin with."

As you would expect, TradeFortress wants very much to remain anonymous for the time being. According to a report by Austria's ABC News outlet, TradeFortress "does not want to be identified because he is worried about his personal safety."

Adding fuel to the controversy, TradeFortress has no plans to report the theft to the police, who "don't have access to any more information than any user does when it comes to Bitcoin." He adds that, "Some say it gives them control of their money."

A spokesman for the Australian Federal Police told ABC that he knows of no previous investigation of Bitcoin theft. But if the theft were reported to them, they would investigate.

The anonymous nature of Bitcoins, however, will make them very difficult to trace, which is exactly why they're a tempting target for hackers; the money is already laundered when you get your hands on it.

Bitcoin thefts aren't new. In 2011, “allinvain” lost 25,000 BTC. At the time, that was worth about $500,000; today, it would be over $75 million. As the value of this virtual currency increases, thefts will continue to rise.

According to the ABC report, TradeFortress "is not much older than 18." After this experience, he's going to grow up very fast.

This story, "The Great Bitcoin Bank Robbery" was originally published by BrandPost.