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Crypto horrors: Tales of lost Bitcoin wallets

From accidental deletions to enigmatic heists, lost Bitcoin tales emphasize the paramount importance of stringent security measures in the crypto world.
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4 months ago

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From accidental deletions to enigmatic heists, lost Bitcoin tales emphasize the paramount importance of stringent security measures in the crypto world.

In the shadowy corners of the digital world, where the glow of computer screens illuminates faces with eerie light, there exist tales of lost fortunes. These tales act as a terrifying reminder of the unpredictable nature and volatility present in the cryptocurrency markets and the need to adopt stringent security measures. 

1. James Howells and the lost 7,500 BTC

A British man named James Howells unintentionally threw away a hard drive in 2013 that contained 7,500 Bitcoin (BTC), currently valued at over $258 million. The hard disk is still buried; he can’t figure out where it is, even after making several desperate attempts to retrieve it from the landfill in New Port, Wales. Howell’s story serves as a reminder that digital gold could be turned into digital dust.

2. Stefan Thomas and the 7,002 BTC conundrum

San Francisco-based programmer Stefan Thomas (formerly the chief technology officer at Ripple) was plunged into a Kafkaesque nightmare after he lost the password to his digital wallet. Thomas was left with just two password attempts before the security system would encrypt his fortune forever, rendering them unusable and unreachable, with 7,002 BTC at stake.

The hard drive, named the Iron Key, boasts an impenetrable design engineered to withstand all types of attacks. Users are granted only ten wrong password attempts before the drive permanently locks out.

“I would just lay in bed and think about it,” Thomas told The New York Times. “Then I would go to the computer with some new strategy, and it wouldn’t work, and I would be desperate again.”

On Oct. 25, crypto recovery firm Unciphered extended an open letter, offering to unlock an IronKey hard drive owned by Thomas, which holds 7,002 BTC. Despite the offer, Thomas has not taken any action on this matter yet.

3. Mt. Gox’s mysterious 850,000 BTC vanishing act

Mt. Gox — the largest Bitcoin exchange in the world at the time — declared bankruptcy in 2014 after a hacker stole 850,000 BTC, estimated to be worth $450 million at the time. The catastrophic collapse, veiled in intrigue, sent shockwaves throughout the crypto community, making investors and enthusiasts fearful and hopeless.

The unexplained circumstances surrounding the loss further added mystery to the story of Mt. Gox’s collapse. For a very long time, it was unknown exactly how the Bitcoin was stolen and who was behind the hack. The incident sparked investigations, legal disputes and rampant speculation within the crypto community.

On Oct. 9, the United States Justice Department charged Russian nationals Alexey Bilyuchenko and Aleksandr Verner with laundering around 647,000 BTC from the Mt. Gox hack. Bilyuchenko is also charged with operating the illicit exchange BTC-e from 2011 to 2017.

Almost 10 years later, the victims of Mt. Gox are still waiting for compensation.

4. Gerald Cotten and the $215 million puzzle

In December 2018, Gerald Cotten, the CEO of QuadrigaCX, embarked on his honeymoon in India with his wife — a trip that would take a tragic turn. While in India, Cotten, who suffered from Crohn’s disease, faced complications from his illness and passed away, leaving the crypto world in shock.

Cotten was the only individual who held the keys to QuadrigaCX’s crypto vault, meaning he had sole access to millions of dollars worth of customer funds.

Unlike other cryptocurrency exchanges, Cotten had not set up a fail-safe mechanism to ensure the transfer of these assets to others in case of his demise. This meant that, when he died, users were left with their funds stranded in the exchange’s wallets.

The public remained unaware of Cotten’s death for 36 days until January 2019, when the news surfaced. Following Cotten’s death, QuadrigaCX filed for creditor protection, acknowledging the exchange’s dire financial situation, with debts totaling $215 million in cash and Bitcoin owed to its 115,000 investors. Investors, already concerned about their investments, were now faced with a grim reality: their funds might be irretrievably lost due to the lack of access to the exchange’s holdings.

As investigations unfolded, suspicions regarding the authenticity of Cotten’s death arose. However, the emerging truth was equally shocking: the Ontario Securities and Exchange Commission revealed that before his demise, Cotten had depleted most of the funds through fraudulent trades. This revelation shattered investor trust.

5. The enigmatic journey of the $1.06 billion Bitcoin heist

In 2018, the seventh-largest Bitcoin wallet at that time, containing a substantial 69,000 BTC, was unexpectedly discovered in a less explored corner of the internet.

The Bitcoin had been dormant since April 2013. The wallet’s origins were traced back to the shuttered Silk Road darknet market. The marketplace was closed in late 2013 due to illicit activities, and in 2015, its founder, Ross Ulbricht, received a double life sentence plus 40 years with no chance of parole.

Notably, the funds had remained inactive for years after their initial deposit. Then, for the first time in seven years, the billion-dollar worth of BTC witnessed movement in 2018 out of the Bitcoin address 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx.

According to Tom Robinson, chief scientist and co-founder at Elliptic, an encrypted file had been circulating on hacker forums since its discovery, purportedly containing the cryptographic keys required to seize the BTC at this address. If genuine, cracking the password on this file would have allowed the BTC to be moved.

Apart from this movement, 101 BTC were sent to BTC-e in 2015, a cryptocurrency exchange notorious for being favored by money launderers that was subsequently taken down by U.S. law enforcement in 2017.

According to Robinson, the transfer of the BTC could have been initiated by Ulbricht or a Silk Road vendor accessing their funds. However, the possibility of Ulbricht conducting a Bitcoin transaction from prison seemed unlikely. Alternatively, the encrypted wallet file might have been genuine, and the password could have been successfully cracked, enabling the BTC to be moved.

Upon deeper scrutiny of the Bitcoin address, the United States Attorney’s Office and Internal Revenue Service criminal investigation agents discovered its connection to Individual X (individual’s identity known to concerned authorities), who was found to have hacked funds from Silk Road. Subsequently, following the investigation into the hack, law enforcement confiscated several thousand Bitcoin on Nov. 3, 2020, valued at around $1.06 billion at that time.

6. The cryptocurrency conundrum of Brad Yasar

Brad Yasar, an entrepreneur residing in Los Angeles, has spent numerous hours trying to regain access to his wallets that contain thousands of Bitcoin he mined during the technology’s early days, now valued at hundreds of millions of dollars. Unfortunately, he lost the passwords long ago and has stored the hard drives in vacuum-sealed bags, keeping them out of sight.

“Through the years I would say I have spent hundreds of hours trying to get back into these wallets,” Yasar told The New York Times. “I don’t want to be reminded every day that what I have now is a fraction of what I could have that I lost,” he said.

7. Gabriel Abed’s 800 Bitcoin loss in a laptop mishap

In 2011, Gabriel Abed, founder and chairman of Abed Group and co-founder of Bitt, suffered a significant loss when a colleague accidentally reformatted his laptop. This laptop held the private keys to a Bitcoin wallet, resulting in the loss of approximately 800 Bitcoin.

“The risk of being my own bank comes with the reward of being able to freely access my money and be a citizen of the world — that is worth it,” Mr. Abed told The New York Times.

Mr. Abed said that the incident had discouraged him, stating that the transparent nature of Bitcoin granted him complete access to the digital financial realm for the very first time.

8. The unfortunate erasure of Davyd Arakhmia’s cryptocurrency fortune

Davyd Arakhmia, a Ukrainian politician, accidentally deleted an encrypted file from his hard drive containing 400 BTC, unknowingly discarding his private key. Before his political career, Arakhmia ran a business that accepted Bitcoin payments. In an attempt to create more storage space on his hard drive, he deleted the file along with a few movies.

Cryptocurrency security: The key to digital wealth protection

In the volatile cryptocurrency world, digital asset protection is critical. The tales of lost Bitcoin fortunes highlight how important it is to implement strong security measures. Safeguarding cryptocurrency holdings and ensuring private key accessibility should be top priorities for all investors.

Essentials include secured connections, frequent backups and a trustworthy, self-custodial wallet. Moreover, two-factor authentication provides an additional line of protection, while distributing assets among several wallets protects against losses. Also, it is equally important to remain vigilant against phishing efforts and keep up with the latest developments in security procedures.

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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11 hours ago

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March 9, 2024

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

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1 day ago

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March 8, 2024

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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

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March 8, 2024

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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