Archive for Renata Yevseyeva

Despite Bitcoin Woes Retailers Still Offer Support


The price of bitcoin has been declining, dropping as low as $US173 last Wednesday, according to stats from CoinDesk.

At the time of publication, the volatile cryptocurrency was back up to about $US230.

With the price of bitcoin sinking, are the limited number of companies that were accepting bitcoin as a form of payment going to stop taking bitcoin? Three major companies that spoke to Business Insider say they plan to continue accepting bitcoin as a form of payment.

A spokesperson from Expedia, which began accepting the cryptocurrency as a form of payment over the summer, told Business Insider it will continue to accept bitcoin as a form of payment for hotels purchased on

“All bitcoin transactions are handled through the company’s partnership with Coinbase, a third-party bitcoin payment processor who handles the processing and transfer of actual bitcoin funds directly with Expedia’s customers,” the Expedia spokesperson said.

Likewise, Microsoft confirmed the company will continue to support bitcoin as an option for customers to add funds to their Microsoft accounts. Starting in December, Microsoft began allowing customers to use bitcoin to buy apps and games for Windows, Windows Phone, and Xbox.

A spokesperson for Overstock also confirmed that fluctuations in the price of bitcoin will not affect the company’s decision to accept bitcoin as a form of payment. Overstock started letting customers pay with bitcoin in January 2014, becoming the first major retailer to do so.

Mobile payments processor Braintree also announced Thursday it plans to open up bitcoin payments to thousands of its merchants, including Uber and Airbnb, through a partnership with third-party bitcoin payment processor Coinbase. Though the partnership was originally announced in September, “today’s update means that, effective immediately, ‘any merchant that uses Braintree for credit card payments [can now accept bitcoin payments],’” Pando reported.

Though retailers are sticking with bitcoin, low bitcoin prices forced cloud mining service to temporarily stop its operations. The service was no longer turning a profit because of how low bitcoin prices had dipped.


Winklevoss Twins to Boost Bitcoin with Exchange


Bitcoin, the virtual currency that was once the talk of the financial world, has been taking a beating over the last year with the price tumbling downward.

Now two of the biggest boosters of the virtual currency, Cameron and Tyler Winklevoss, are trying to firm up support by creating the first regulated Bitcoin exchange for American customers — what they are calling the Nasdaq of Bitcoin.

The brothers, who received $65 million in Facebook shares and cash in 2008 after jousting with its founder, Mark Zuckerberg, have hired engineers from top hedge funds, enlisted a bank and engaged regulators with the aim of opening their exchange — named Gemini, Latin for twins — in the coming months.

The exchange, which the twins have financed themselves, is a risky bet, given that the virtual currency industry has been a target of hackers and has faced existential questions about its legitimacy. But the brothers are betting that the currency will be able to rise again if it follows the same playbook as the more established financial industry.

“Right now we have to build the infrastructure,” Tyler Winklevoss said. “You have to walk before you run.”

Since being brought into existence in 2009, by a creator going by the name of Satoshi Nakamoto, Bitcoin has become a technology and financial industry phenomenon. Many major Bitcoin companies, however, were founded by people with little previous financial experience. Bitcoins themselves are stored on a decentralized database run by the currency’s users, and can be bought and sold by anybody.

The twins have a personal interest in seeing Bitcoin succeed. They amassed a small fortune of Bitcoins, starting in 2012, which has declined in value recently. They also have been working with regulators since 2013 to create the first exchange-traded fund holding Bitcoins, for which they are awaiting approval.

They are part of a broader group of wealthy investors and entrepreneurs who have been staking their reputation on the belief that the Bitcoin technology will rise to become more than just a speculative bubble, and will provide new ways of transferring and holding money.

This week, an American Bitcoin company, Coinbase, a kind of retail brokerage firm, announced a $75 million financing round — the biggest ever for a Bitcoin start-up — with backing from the New York Stock Exchange and the Spanish bank BBVA.

But exchanges, where traders can meet to buy and sell Bitcoins for dollars and euros, have proved to be the biggest vulnerability for Bitcoin.

The first major Bitcoin exchange, Mt. Gox in Japan, lost hundreds of millions of dollars and went bankrupt last year. Earlier this month, a security breach at another prominent exchange in Europe, Bitstamp, was the latest reminder of the risks, and helped push the price of a Bitcoin below $200 from a peak above $1,200 in late 2013.

The Winklevosses themselves were swept up in the scandals when the chief executive of a Bitcoin company they had invested in was arrested on charges related to money laundering in early 2014 — a result of activities that happened before they invested.

The twins say none of this has dented their faith in the promise of the technology — they say they continue to hold every Bitcoin they ever purchased — and underscores why a reliable, regulated exchange is needed.

“The A Team wasn’t there,” Tyler Winklevoss said. “There was a problem here and it needs to be solved.”

The Gemini staff is working at a few rows of desks in the Winklevoss Capital offices near Madison Square Park in Manhattan, which has dry-erase boards on the walls covered in math equations and strategic scribbles, and the requisite bean bag chair.

Their chief compliance officer, Michael Breu, was previously at the hedge fund giant Bridgewater Associates, where he was head of information security in the research department. At Gemini, Mr. Breu works closely with the chief security officer, Cem Paya, who previously held the same position at the apartment rental site Airbnb.

They and a staff of a dozen others have been creating Gemini’s security infrastructure and trading engine from scratch, and already have a test model of the exchange running. They are planning to be ready to open the exchange as soon as they win regulatory approval from New York state’s top financial regulator, Benjamin M. Lawsky, the superintendent of the state’s Department of Financial Services.

His office has been leading the effort to regulate virtual currencies in the United States, and is introducing what Mr. Lawsky has referred to as a BitLicense for virtual currency companies. He said recently that he hoped to approve the first companies early this year. A person briefed on the matter confirmed that the office was holding discussions on the Winklevoss effort.

The twins have brought on a leading law firm on financial regulations, Katten Muchin Rosenman, to help win regulatory approval.

Their close cooperation with regulators has also helped them win the thing that has proved the most elusive for Bitcoin companies — a bank account with an American bank. According to documents viewed by The New York Times, on condition that only their general outline be described in this article, the Winklevosses have an agreement with a bank chartered in New York to handle the dollars moving in and out of customer accounts.

Cooperation with regulators has divided the virtual currency world. Bitcoin was founded, in part, with the intention of creating a currency outside the control of governments. The twins have placed themselves firmly in the camp of those who believe that Bitcoin will survive only if it has regulatory oversight.

“Our philosophy is to ask for permission, not forgiveness,” Cameron Winklevoss said.

The biggest Bitcoin exchanges today are all overseas, in China, Hong Kong, London and Eastern Europe, which has not helped instill confidence in some American users.

Most of the exchanges were started at an earlier point in Bitcoin’s development when there was less focus on security and regulations. Bitcoins are particularly vulnerable to hackers because all that someone needs to spend the money in a Bitcoin account is the password, or private key.

The security experts hired by the Winklevoss twins have, like many Bitcoin companies, been focusing on ways to keep the private keys — a mix of letters and numbers — in multiple locations where they are offline and physically guarded.

For the actual trading software, the twins brought on a programmer from the hedge fund Two Sigma, who is building a system that can be used by both small investors and institutional firms that want direct access to the trading system.

The twins are also still moving forward with their exchange-traded fund, set to trade on the Nasdaq stock market under the ticker COIN when approved.

All of these ventures could amount to nothing if the recent decline in confidence continues.

The last major Bitcoin start-up the brothers backed, BitInstant, collapsed in the summer of 2013 before the founder was arrested. After seeing the mistakes made by others, the twins said they wanted to do things on their own.

“This time around we are betting on ourselves,” Tyler Winklevoss said.

Jessica Silver-Greenberg contributed reporting.


Prosecutors Hope Ross Ulbricht’s Computer Damns Him


If alleged Silk Road mastermind Ross Ulbricht had awoken on October 1, 2013 and decided to toss his laptop into the San Francisco Bay, he might still be a free man today.

But Ulbricht didn’t, and prosecutors in his New York trial seized on the contents of the computer Wednesday, painstakingly wading through screenshot after screenshot of highly incriminating chat logs, journal entries, and expense reports found on it. The material, which even included a citizenship application for the island nation of Dominica, spanned years and appeared to explicitly tie Ulbricht to the dark net marketplace.

Ulbricht was arrested on the afternoon of October 1 while sitting at his laptop in the science fiction section of a San Francisco public library. FBI computer scientist Thomas Kiernan testified Wednesday that a male-female FBI team pretended to have a domestic spat behind Ulbricht, causing their target to rise from his seat. At the time, Ulbricht was chatting online with an undercover Homeland Security investigator who was secretly working for the site’s administrator. Before arresting Ulbricht, the agents quickly grabbed his computer, leaving it open and unencrypted, and exposing what prosecutors allege was Ulbricht’s secret life as Silk Road’s head honcho, the Dread Pirate Roberts.

Among the thousands of pages of chat logs on the computer was one between a user called “sSh” and “myself” — a label auto-assigned in logs by the Pidgin chat client to a person prosecutors allege was Ulbricht.

“May I ask to whom I am speaking?” asked sSH. “A formality, of course.”

“dpr, and you are?” the local user replied, using an abbreviation for the Dread Pirate Roberts.

In January 2013, Ulbricht was allegedly chatting with a user called “scout.” The woman behind scout would later create the “cirrus” account that Homeland Security Agent Jared Der-Yeghiayan commandeered to infiltrate Silk Road. At the time, she was concerned about the possible legal repercussions of her involvement with the site. Ulbricht allegedly attempted to allay her fears.

“The way I got over it is by looking at the risk/reward,” they said. “Put yourself in the shoes of a prosecutor… there’s nothing on your laptop for them to use.”

Yet Ulbricht’s laptop apparently contained meticulous records, and even what appeared to be a backup copy of the entire Silk Road site.

In a journal entry from February 2012, Ulbricht allegedly wrote about conceiving Silk Road. “The idea was to create a website where people could buy anything anonymously, with no trail whatsoever that could lead back to them,” the entry read.

“Little by little, people signed up,” the author wrote. “Then it happened. My first order. I’ll never forget. The next couple of months I sold about 10lbs of shrooms through my site.”

In 2010, Ulbricht allegedly grew psychedelic mushrooms in a cabin in Bastrop, Texas — illicit merchandise that later became the first drugs advertised on the site soon after it launched in early 2011. That experience was outlined in an entry read aloud by prosecutor Timothy Howard.

By the time Silk Road was shut down the day after Ulbricht’s arrest, investigators say the site, which utilized the anonymizing Tor network, had handled some $1.2 billion in bitcoin transactions, the vast majority of which were drug sales.

Other journal entries found on the computer show the author speaking highly of a user called “Variety Jones,” describing the person as a “mentor” who helped resolve coding hiccups and security lapses.

Elsewhere, the diarist recounted recruiting and hiring Silk Road’s first staff members. A text file titled “interview_questions,” aimed at possible recruits asked, “How do you intend to launder your earnings?”

Ulbricht’s defense attorney Joshua Dratel has conceded that Ulbricht started Silk Road, but argues his client gave up soon after on the “economic experiment,” handing over the reins to others who later framed him. The horde of data culled from Ulbricht’s laptop appears to directly contradict that version of events. In addition to the chat logs and journal entries, expense reports and records of his net worth run without significant interruption from 2011 to the fall of 2013. One journal entry is dated the morning of his arrest.

Agent Kiernan, who kept Ulbricht’s computer open and active for several hours after the bust to avoid having it revert to a locked status, said a private PGP encryption key found on the Samsung laptop synced with a matching public key posted on the Silk Road by the Dread Pirate Roberts. The private key was stored in an aptly named “keys” folder.

Nicolas Christin, an assistant research professor at Carnegie Mellon University who focuses on the dark net, said that, though the evidence was damning, the PGP key — a data encryption tool that provides cryptographic privacy and authentication — might be the least of Ulbricht’s worries.

“The key could have been shared by several people,” Christin told VICE News. “In particular, it could have been passed on from one owner to its successor.”

The possibility that multiple users — and multiple people using the Dread Pirate Roberts handle — were in control of Silk Road at various times is central to the defense.

“I am curious to see how they will try to explain the diary away,” added Christin. “In theory, files could have been planted on the laptop by somebody else, but demonstrating this convincingly to the jury is going to be tough.”

Some of the chat logs took on a tragicomic air in light of the possible life sentence Ulbricht faces for charges that include conspiracy, narcotics trafficking, and money laundering.

In one, a Silk Road staff member calls attention to the situation of a recovering heroin addict who had won a vacation as part of a Silk Road marijuana-themed “420” giveaway. The employee, called “flush,” said he thought the trip might cause the user, who he had been personally counseling, to relapse.

“I should have thought more carefully about dropping 4k on an addict,” Ulbricht allegedly responded. “Maybe our next prize will be 3 months in rehab.”

Another Silk Road staffer worried about a user listing cyanide on the site. Ulbricht allegedly responded that “we want to air on the side of not restricting things,” and decided to allow it.

Also included the laptop’s labyrinth of folders were scanned images of identifying documents belonging to Silk Road staffers, something Ulbricht is said to have required before hiring them. Prosecutors showed the license of a man named Andrew Michael Jones — also known as Silk Road employee “Inigo” — who was busted for drug trafficking and will testify against Ulbricht.

The laptop revelations came a day after presiding Judge Katherine Forrest threw out key portions of testimony that described federal investigations into former Bitcoin kingpin and Mt. Gox owner Mark Karpeles. Last week, defense attorney Dratel positioned Karpeles as the person who set up Ulbricht and left him “holding the bag.”

Dratel objected to the introduction of nearly every screenshot Wednesday, but Forrest overruled him each time.

Kiernan, who will continue on the stand Thursday, has yet to be asked by prosecutors about journal entries said to show Ulbricht attempting to order assassinations.

It’s unclear how the defense will attempt to rebut Wednesday’s evidence. It’s rare for a prosecutor to be presented with a goldmine such as the journals and logs. In that respect, they may support Dratel’s claim that Ulbricht was simply too careless to be the famously secretive Dread Pirate Roberts.

One journal entry, however, pointed to a different reason for the record keeping.

“I imagine that someday I may have a story written about my life,” it said, “and it would be good to have a detailed account.”