Chinese Citizen Sentenced to 13 Years in Prison in Bitcoin (BTC) Extortion Case

  • A Chinese man had extorted over 2,000 bitcoins from a company in 2015.
  • The man has now been sentenced to 13 years in prison and ordered to pay a $7,200 fine.

A Chinese citizen who reportedly obtained 2,099 bitcoins (BTC) in 2015 (currently valued at $13.5 million) by blackmailing a company had sold them for only about $300,000.

The man had “cleverly” blackmailed a company and managed to extort a large amount of the pseudonymous cryptocurrency. After trading the bitcoins for cash, the Chinese citizen reportedly used the funds to make a down payment on an apartment, buy a brand new BMW, and deposited some of the money in his bank account.

Threatening To Expose Company's Illegal Business

According to court documents released on November 6th, the bitcoin extortion case involves the man blackmailing a company after he came across some evidence - which showed that the firm had conducted several illegal transactions.

The court papers have identified the accused as Du Bing, and prosecutors have said that Bing threatened Zheng (the company’s board secretary) by telling him that he would expose the firm’s illicit business activities.

Bing also managed to force the company to pay him 3 million Chinese yuan (appr. $432,000) in bitcoin. At the time, Zheng was able to purchase 2,101.209 bitcoins as the cryptocurrency was trading for only about $200 (in 2015).

After Bing received the bitcoins from Zheng, he immediately converted them to cash in order to buy various luxury items. Per court documents, Bing has been sentenced to 13 years in prison as he has been charged for blackmailing and extortion.

The accused has also been ordered to pay a fine of 50,000 CNY (appr. $7,200) and the items he purchased using the funds (obtained from extortion) have been confiscated by authorities.

Court Says Defendant Intentionally Used Bitcoin Due To Its Anonymous Nature

Bing’s attorney had argued that there were currently no (proper) laws in China for bitcoin-related transactions as it was a loosely regulated virtual commodity. There was also no proof that the accused had purchased his car and real estate using bitcoin, according to Bing’s defense lawyer.

However, the court said:

Although it is impossible to [determine] the source of bitcoins in Du’s hardware wallet, which is due to bitcoin’s anonymous nature …[there is sufficient evidence that Bing] chose bitcoin payment to cover up his criminal behavior.

As CryptoGlobe reported in October, a 21-year-old North London resident and computer analyst had hacked 319 million iCloud accounts. The cybercriminal, named Kerem Albayrak, had demanded that Apple Inc pay $150,000 in bitcoin in exchange for him not selling the compromised accounts.

However, Albayrak was tracked down by authorities, and he was charged with one count of blackmail and two counts of “unauthorized acts intending to hinder access to a computer.”

CZ Explains How Binance Dealt With Aftermath of $40 Million Theft

On Sunday (May 19), Changpeng Zhao (aka "CZ"), the Co-Founder and CEO of digital asset exchange Binance, told the crypto community what he and his team had been up to since the May 7 security breach that resulted in a theft of over 7,000 BTC from their Bitcoin hot wallet. 

What Happened on May 7?

According to CZ, the hackers involved in the security breach somehow managed to get control over a number of user accounts and structured large withdrawals from these accounts in such a way thay managed not to be detected/noticed by Binance's "pre-withdrawal risk management checks." Their "post-withdrawal risk monitoring system" only noticed something was wrong after the hackers had moved the stolen BTC off of the exchange via a single transaction, at which time it immediately suspended all "subsequent withdrawals." 

At first, the Binance team was not exactly sure what had happened, and so they decided that the safest course of action was for CZ to send out a tweet to say that the "withdrawal servers" were in "unscheduled maintenance mode" while the team was investigating the incident. 

Communication With the Crypto Community

Once the team had confirmed that the exchange had been hacked, information about the security incident was broadcast to the outside world via all of Binance's communication channels (such as Telegram, Twitter, and Medium). 

Since the team could not be sure which user accounts the hackers had access to, it was decided that it would be too risky to allow further withdrawals to be made until the team had the chance to make "significant changes" to the platform (to make it more secure). Binance's announcement on May 8 estimated that the exchange needed to do "a thorough security review" and estimated that this would take about "ONE WEEK," and that during this period, "deposits and withdrawals" would need to "REMAIN SUSPENDED."

By being fully transparent in their communication with Binance users, they were able to receive "tremendous support" from them.

CZ's Periscope AMA Session on May 8

Seeing CZ live put much of the Binance community "at ease." Unfortunately, because CZ had been up all night, he was not in an ideal mental state when he did the AMA. Just before the AMA, his team told him that a Bitcoin Core developer had suggested that it would be technically possible to roll back the single Bitcoin transaction carried out by the hackers by "hugely incentivizing the miners." CZ made the unfortunate mistake of mentioning this "reorg" idea (which he now realizes is a "taboo topic") during the AMA, for which he took a heavy beating (especially from hardcore Bitcoin maximalists) on Twitter (and elsewhere). 

CZ's Mental State Right After Being Told About the Bitcoin Theft

Although he was in a "F***, F***, F***” state" for around 10 seconds, a few moments later, he "began to come to terms with it," and a quick mental calculation told him that the theft of around 7000 BTC (equivalent of around $40 million at the time) could be fully covered by their SAFU fund. Meanwhile, his team had already gone into "War Mode", and their professionalism and support cheered up CZ. 

Support From the Crypto Community

Binance received support from many sources: people defending him and Binance on social media platforms, and helping to answer questions; the Binance Angels (who are all volunteers) "addressing questions" and "reassuring" users on "multiple communities"; analytics firms helping with the tracking of the stolen funds; exchanges and wallet services offering to help by blocking "any deposits associated with the hacker addresses"; and "numerous offers for help from law enforcement agencies around the world."

A Blessing in Disguise?

"Speaking with various team members, and as correctly analyzed by community members, such as Gautam Chhugani, this incident may actually be a good thing for us in the long run. Security is a never-ending practice. There are always more things to do in security, and we have implemented many of them in this last week and will continue to implement more in the future. Given this incident, Binance has actually become far more secure than before, not just in the affected areas, but as a whole."