Breaking open the Mt. Gox case, part 1

So according to the following, Vinnik was aware of the origin of bitcoins that were sold on BTC-e:

> Some of the funds moved to BTC-e seem to have moved straight to internal storage rather than customer deposit addresses, hinting at a relationship between Vinnik and BTC-e.

and he was stupid enough to deposit them back to his account on MtGox:

> Moving coins back onto MtGox was what let us identify Vinnik, as the MtGox accounts he used could be linked to his online identity "WME" http://archive.is/6cFcY

All in all, there a strong suggestion that he participated in money laundering and was involved in the whole scheme.

I wonder, if BTC-e somehow artificially pumped the bitcoin valuation leveraging the huge amount of bitcoins they put hands on, same as what MtGox did.

Also, it looks like that Mark Karpeles wasn't involved in the whole scheme, and the hack was that simple thanks to the low or no security and engineering culture at MtGox:

> In September 2011, the MtGox hot wallet private keys were stolen, in a case of a simple copied wallet.dat file.

> the shared keypool of the wallet.dat file lead to address reuse, which confused MtGox's systems into mistakenly interpreting some of the thief's spending as deposits, crediting multiple user accounts with large sums of BTC and causing MtGox's numbers to go further out of balance by about 40,000 BTC. None of these users seem to have reported their "sudden luck".

This would have all been avoided if MtGox had transferred its coins to a new wallet after the 2011 breach. I guess they assumed that any attacker that got access to the private keys would have immediately emptied the wallet, and the fact that this hadn't happened proved that the private keys hadn't been compromised by the breach.

I have to admit, that is a reasonable assumption. This may show the limits of the usefulness of heuristics, and the importance of organizations like exchanges, that have very significant fiduciary duties, to undertake a systematic process after a security breach to eliminate all possible remaining vulnerabilities, no matter how unlikely and counterintuitive.

Never a dull moment in Bitcoin.

This is relatively easy to do since all bitcoin traffic is transparent and open for easy tracking. You can probably do this in gnuplot.

Anyone who has the blockchain downloaded can run their own analysis algorithms on it - it's already there for you to see.