Speaker 1: The Coin Bureau Podcast is a production of I Heart Radio.
Speaker 1: Whatever the perception of bitcoin in in in the wake
Speaker 1: of these In the wake of these cases, what's important
Speaker 1: to remember is that bitcoin itself was never hacked or compromised.
Speaker 1: Welcome everyone to the Coin Bureau Podcast. My name is
Speaker 1: Guy and I'm here with my very good friend Mike Moog.
Speaker 1: Welcome back, Mike. How are you. I'm very well, Thanks
Speaker 1: so just I just want to update listeners slightly the
Speaker 1: last couple of episodes that we did on bitcoin. This
Speaker 1: is this is our third episode on bitcoin that we're
Speaker 1: doing today. We've talked, We've looked back at some of
Speaker 1: the people who helped make bitcoin what it was, some
Speaker 1: of the things they had in common, and basically bitcoin's
Speaker 1: early days from Satoshi putting it out there and the
Speaker 1: slow growth of the network, slowly people getting to know
Speaker 1: about it, improving it, all this sort of stuff. It's
Speaker 1: now time to look at bitcoin out in the wild,
Speaker 1: and in this episode we're going to focus on two
Speaker 1: of the most notorious projects that have ever been associated
Speaker 1: with bitcoin. Yes, okay, we are going to look at
Speaker 1: Mount Cox and the Silk Road. I know about one
Speaker 1: of them. You do Okay, I think I know which
Speaker 1: one will come back to that. So yes, so these
Speaker 1: are two of These are two projects that still cast
Speaker 1: a pretty long shadow over bitcoin, I think. But before
Speaker 1: we start talking about them, let's just quickly consider how
Speaker 1: do I get my hands on some bitcoins. Let's put
Speaker 1: ourselves back and this time sort of around two thousand
Speaker 1: and eleven or so it was, yeah, two thousand eleven,
Speaker 1: mid two thousand and eleven. Today, if we want to
Speaker 1: get our hands on some BTC or any other cryptocurrency,
Speaker 1: it's easy, isn't it fairly easier? Yeah, We've got likes
Speaker 1: of I mean, there are hundreds of exchanges, things like
Speaker 1: coin base, Binance, all these sorts of things. Coin bas
Speaker 1: especially very user friendly. It's pretty easy for the average
Speaker 1: person to get their hands on some crypto. We've also
Speaker 1: got things like bitcoin a t m S. You can
Speaker 1: actually go and buy it on the street they sted about. Yeah,
Speaker 1: because I remember there was in London there was a
Speaker 1: couple and down bit Old Street where you would literally
Speaker 1: feed in cash and then you can still do that.
Speaker 1: There don't seem to be quite as many as there were.
Speaker 1: That not a money laundering sort of issue. I don't
Speaker 1: think so, but there have been concerns raised about that,
Speaker 1: and I mean I suppose, yeah, it would be one way.
Speaker 1: If you had a large amount of cash and you
Speaker 1: wanted to get rid of it and convert it, then yeah,
Speaker 1: a bitcoin a t M would be quite useful for that.
Speaker 1: I think a lot of them Now you have to
Speaker 1: provide idea that's probably the I don't think you did
Speaker 1: before it was quite simply just feeding feeding in nuts
Speaker 1: and making cash basically digital. There are bitcoin a t
Speaker 1: M s deal I think worldwide the number is growing,
Speaker 1: but here in London you've also got peer to peer
Speaker 1: bitcoin services as well, things like local bitcoins where you
Speaker 1: can go on on the site find someone in your
Speaker 1: area who is willing to sell you bitcoins and you
Speaker 1: can actually go and meet up with them and you
Speaker 1: give them some cash and they will transfer. Yeah, we
Speaker 1: possibly go wrong with them meet me here with some cash.
Speaker 1: It's it can be a little dodgy. You have to
Speaker 1: be very careful with things like local bitcoins, but it is.
Speaker 1: It does still work and it's quite popular in certain
Speaker 1: parts of the world. Can emertionally where there's yea less
Speaker 1: in maybe where it's not legal. Yeah, Philippines, Yeah or
Speaker 1: yeah or slight leg in Philippines or am I thinking
Speaker 1: of Indonesia. I'm not sure. I mean, these places are
Speaker 1: sort of they're always kind of talking about whether they're
Speaker 1: going to ban crypto or crypto payments. Turkey is one
Speaker 1: that Turkey recently banned crypto payments, and I think in
Speaker 1: I think in Turkey local bitcoins is quite popular, I
Speaker 1: remember rightly. So. In short, it's it's easy now to
Speaker 1: get your hands on Krypto, but back in the early
Speaker 1: days of bitcoin, it wasn't always so. So if you
Speaker 1: weren't a particularly techie person, for example, then your your
Speaker 1: options were limited because these these techi people knew how
Speaker 1: to mine on their laptops, whereas the average person really didn't.
Speaker 1: It was it's quite a complicated process for those for
Speaker 1: those unfamiliar, and of course most people hadn't even heard
Speaker 1: of bitcoin anyway, So I mean, there were very few
Speaker 1: ways that you could actually get your hands on some BTC.
Speaker 1: You could visit Gavin Andreason's Bitcoin Force it. Do you
Speaker 1: remember that from the last episode. That was probably the
Speaker 1: easiest way of doing it. Yeah, fill out the capture
Speaker 1: five free BTC. Thank you very much. You might also
Speaker 1: remember from the last episode Marty Malmi that the Finnished
Speaker 1: Chap became the first person to receive US dollars in
Speaker 1: exchange for BTC and he sent a bitcoin for a
Speaker 1: music called New Liberty Standard. He sent him just over
Speaker 1: five thousand, etc. And received five dollars and two cents
Speaker 1: back via PayPal. Now, what New Liberty Standard was trying
Speaker 1: to do, He was trying to set up a site
Speaker 1: where people could actually buy bitcoins rather than having to
Speaker 1: mind them. Basically the first ever exchange, and that's exactly
Speaker 1: what this user did. And the exchange was called New
Speaker 1: Liberty Standards and you sent money via PayPal and a
Speaker 1: little later on BTC would turn up in your wallet.
Speaker 1: So yeah, this was this was a big moment because
Speaker 1: it's it enabled people to enable people to buy BTC.
Speaker 1: Fuy project. Yeah, and it's it's quite interesting the way
Speaker 1: that whoever ran New Liberty Standard, the way they calculated
Speaker 1: the price of bitcoins, you paid roughly what it cost
Speaker 1: to mind each coin. So the way New Liberty Standard
Speaker 1: did this was they basically calculated it from their electricity
Speaker 1: bill and came up with a very rough figure of
Speaker 1: how much each each bitcoin cost of mine, and I
Speaker 1: think I've got it here. I think the price was
Speaker 1: calculated at about zero point zero zero seven six four
Speaker 1: cents back in October two thousand and nine, meaning you
Speaker 1: could buy over bitcoin for a dollar. Yeah, let's not
Speaker 1: let's not dwell on that new Liberty Standard itself. It
Speaker 1: didn't last long. It's shut down shortly after opening. And
Speaker 1: this coincided with the fact that in late two thousand
Speaker 1: and nine, early two thousand and ten, Bitcoin had kind
Speaker 1: of stalled a bit it had run out of steam.
Speaker 1: It wasn't the network that the sort of adoption, the
Speaker 1: excitement that had gradually built up after its launch had
Speaker 1: kind of plateaued out a bit, so nothing in particular
Speaker 1: was really happening. So yeah, new Liberty Standard. I didn't
Speaker 1: think it became really worth their while to do it
Speaker 1: because no one was that interested in buying bitcoins. What
Speaker 1: this did do, though, was leave a gap in the
Speaker 1: market for these non techi people to be able to
Speaker 1: pick up bitcoins. And again, Marty, he ran in exchange,
Speaker 1: but it was slow and it was basically a real
Speaker 1: fat I think it was really it was quite um.
Speaker 1: He he had other things going on, and as we'll see,
Speaker 1: running a bitcoin exchange is a stressful job, stressful and
Speaker 1: time consuming. And a couple of weeks ago, I had
Speaker 1: a chat with a couple of friends of mine. I'm
Speaker 1: not going to reveal their identities, so we'll just call
Speaker 1: them Alison Bob, and they were talking. They were in
Speaker 1: bitcoin around this time, they were really early adopters, and
Speaker 1: we were talking about this kind of period, and they
Speaker 1: said that one of the only ways that you could
Speaker 1: get your hands on bitcoins was via basically peer to
Speaker 1: peer transactions, and you set these up over Internet relay chat,
Speaker 1: which was you know, text based chat system. It's it's
Speaker 1: I think it's still around, but it's not really used
Speaker 1: these days. I mean obviously things like what's happened to
Speaker 1: tell Agram of kind of Yeah, basically an internet based
Speaker 1: chat system, and you would you would work out a
Speaker 1: deal with another Internet relay chat user and you basically
Speaker 1: had to trust them. So yeah, I'd be talking to
Speaker 1: you over over I r C and I go, okay, um,
Speaker 1: can I've got some I've got some bitcoins for sale.
Speaker 1: Do you want them? We'd agree a price, and then
Speaker 1: one or the other would have to make the first move,
Speaker 1: so I would either have to send you the bitcoins,
Speaker 1: or you'd send me the dollars or send a little
Speaker 1: bit offend a little bit. Yeah I suppose, Yeah, you
Speaker 1: could have done it like that. But basically there was
Speaker 1: trust involved, and as we've seen, trust is Bitcoin was
Speaker 1: designed to be trust less. So there was this kind
Speaker 1: of hole in the whole system in that you are
Speaker 1: you basically had to trust someone that you'd met on
Speaker 1: the internet, which is not ideal. Mind you a seat,
Speaker 1: mind you talking to Alison Bob. They said that generally
Speaker 1: they didn't really have any problems with that, and again,
Speaker 1: I think this is problem. I think when when you're
Speaker 1: talking when it's when it's worth a dollar, yeah, it's
Speaker 1: not people are not really looking to swindle you out
Speaker 1: of five bucks. Yeah, I don't think there were huge
Speaker 1: amounts of money changing hands, and yeah, you're you're absolutely right,
Speaker 1: it's what why go to the effort of swindling someone
Speaker 1: out of a few bucks? Yeah? Um, they said that
Speaker 1: it generally went fine, It wasn't really a problem. And
Speaker 1: I think this is partly because the community itself was
Speaker 1: still quite small. I think it's one of these things.
Speaker 1: It's it's it's a community of believers and they're much
Speaker 1: more likely to be straight with each other. It's only
Speaker 1: when these things get bigger that the kind of bad
Speaker 1: actors come into play. So there was a gap in
Speaker 1: the market for people wanting to get their hands on bitcoins.
Speaker 1: So this is when a chap called Jed macleb turns up. Now,
Speaker 1: Jed mcleb is a really interesting chap. Do you remember
Speaker 1: last time I mentioned that there was a post on
Speaker 1: the sort of geek website slashed. Yeah, and that was
Speaker 1: in July, and that got a lot of interest in
Speaker 1: bitcoin going. A lot of people read that post, heard
Speaker 1: about bitcoin for the first time, and started digging into it.
Speaker 1: And one of these people was Jed macleb, who was,
Speaker 1: believe it or not, a software developer. One of them, again,
Speaker 1: a programmer from He was originally from Arkansas. Funnily enough, though,
Speaker 1: jedmcleb is really Jed or Jeb Jed j E D
Speaker 1: j E D. Yeah. Funnily enough, he's not really your
Speaker 1: typical computer geek. He's got a very sort of I'll
Speaker 1: believe that when I see it. He's actually got a
Speaker 1: very laid back, sort of surfer dude vibe. So Jed
Speaker 1: had dabbled in quite a few projects. He dropped out
Speaker 1: of college and he'd sort of tinkered around various things.
Speaker 1: One of his first success essays was a file sharing
Speaker 1: program that was kind of similar to Napster. It took
Speaker 1: its inspiration from Napster. It was called the Donkey. I
Speaker 1: do remember that, do you? I do remember Donkey? I
Speaker 1: don't know. I don't, but I remember because you sort
Speaker 1: of you're more attuned to that word that that Douy
Speaker 1: wanted to ask you about that. Whether you remember the
Speaker 1: donkey definitely brings a bell. Yeah, So it was. Yeah,
Speaker 1: the Donkey was was quite successful and it made it
Speaker 1: made Jed a fair bit of money. Unfortunately, you won't
Speaker 1: be surprised to hear that kind of attracted the attention
Speaker 1: of the powers that be. The Recording Industry Association America
Speaker 1: basically sued him and him and his partner who had
Speaker 1: set it up with and forced them to shut it down,
Speaker 1: which is probably the least surprising bit of news you'll
Speaker 1: ever hear. So he did have form with kind of
Speaker 1: finding a gap in the market, developing technology to to
Speaker 1: exploit it. But while the likes of How Finny Remember him,
Speaker 1: Marty Laslow and Gavin All guys from the last episode. Now,
Speaker 1: these guys that we talked about before, they were really
Speaker 1: tech focused, and obviously Jed being a software developer, he
Speaker 1: had a kind of tech focus as well, but he
Speaker 1: was more entrepreneurial. That's where his that that was kind
Speaker 1: of more the direction that he leaned in. And this
Speaker 1: is I think really important because up until now these
Speaker 1: we've had these guys who are just focused on improving,
Speaker 1: just on on on working on the project, and then
Speaker 1: Jed mchaeleb comes along. And I'm not saying this to
Speaker 1: you know, I'm not saying this as a negative, but
Speaker 1: I think his interest was definitely more of like, how
Speaker 1: can I you know, how can I not just contribute
Speaker 1: to the project, but how can I exploit it? You know,
Speaker 1: how can I benefit from How can I benefit? Benefit
Speaker 1: is a better word than exploit, isn't it. So yeah,
Speaker 1: I don't think he was purely out to make money,
Speaker 1: but he certainly succeeded in doing that. So another project
Speaker 1: that he started, as we're going to see, Jed is
Speaker 1: a kind of he he flits from project to project.
Speaker 1: He's got quite a few, He's got quite a few
Speaker 1: scalps if you like. So something else that he'd started,
Speaker 1: kind of half started, if you like, was a site
Speaker 1: where players of a game called Magic the Gathering could
Speaker 1: trade cards used in the game. Okay, now have you
Speaker 1: heard of Magic the Gathering. Yes, it's it's it's basically
Speaker 1: kind of a dungeon and Dragon sort of very software developer,
Speaker 1: sort of the kind of things developers do. Maybe not
Speaker 1: your Arkansas Arkansas arkansaw arks surfer dude, software developer. Maybe
Speaker 1: you're traditional. Yeah, well, I mean he was obviously, I
Speaker 1: think he must have made a fan gathering Magic the Gathering.
Speaker 1: It's fantasy roleplay, which really tells. When I read that,
Speaker 1: I was that's all I need to know. I don't
Speaker 1: need to I don't need to dig into that, and
Speaker 1: that's not that's not really for me. But obviously it's
Speaker 1: actually it's very popular. That's still very popular, I think. Yes,
Speaker 1: So Jed had Jed had put together this website where
Speaker 1: you could trade Magic the Gathering cards online, and he
Speaker 1: basically lost interest from what I can see, so he
Speaker 1: shut it down after just a few months, but he
Speaker 1: kept it dormant. He kept hold of the domain, the
Speaker 1: domain name and all that sort of stuff, and so
Speaker 1: when he but when he saw the slash dot post.
Speaker 1: He really loved the sound of bitcoin, and he tried
Speaker 1: to buy somebody found, as we've seen that it was
Speaker 1: quite difficult to do so. So he had the idea, Hey,
Speaker 1: I'm an entrepreneurial guy. I've got some soft software skills,
Speaker 1: I've got some coding skills. I'm going to create an
Speaker 1: exchange where you can do it. He spotted the gap
Speaker 1: in the market and went to Philip and he basically,
Speaker 1: from what I've read, he basically sort of got this
Speaker 1: exchange up and running. He built it, if you like,
Speaker 1: pretty much the night. So he locked away it locked
Speaker 1: himself away in his in his study and built this
Speaker 1: thing overnight. And he needed a domain name, and he
Speaker 1: realized he remembered that he had at this kind of
Speaker 1: dormant domain for Magic the Gathering Cards. So he just thought,
Speaker 1: use that waste not whatnot. So the domain name was
Speaker 1: empty g o X dot com okay, and that stood
Speaker 1: for Magic the Gathering Online Exchange. So and that's so
Speaker 1: he stuck with that, and that has since come to
Speaker 1: be known as Mount Cox. Now apparently you're supposed to
Speaker 1: pronounce it empty Cox, but no one ever does know
Speaker 1: it's been mount Cox. Is there a word for that
Speaker 1: when when things just become pronounced in the way that
Speaker 1: you know, probably, but I've known that can be order.
Speaker 1: You can get on Google will and find that out
Speaker 1: in the meantime. Yeah, So we had so mount Gox.
Speaker 1: That's that's where this rather strange name came from. And
Speaker 1: it worked like this. Basically, customers signed up for an
Speaker 1: account with mount Cox and they deposited money straight into
Speaker 1: Jed's PayPal account. Yes, he then held this money on
Speaker 1: their behalf. They were able to trade on the exchange
Speaker 1: using the funds that he that he was holding for them,
Speaker 1: and the way the exchange made his money made its
Speaker 1: money obviously, was to take a small percentage cut of
Speaker 1: each transaction. And it quickly became really popular because interest
Speaker 1: in bitcoin was starting to pick up, especially in the
Speaker 1: wake of this slash Dot post. More people, including obviously Jed,
Speaker 1: had cottoned on to bitcoin, so they were trying to
Speaker 1: get their hands on some here. He was basically in
Speaker 1: the right place at the right time, and we also
Speaker 1: had more people mining it as well after the slash
Speaker 1: Dot post, so it was it was picking up Bitcoin
Speaker 1: was picking up momentum, picking up steam, so this was
Speaker 1: a great way for people mining it to earn a
Speaker 1: bit of money rather than just sitting on it, and
Speaker 1: a great way for people who wanted to get involved
Speaker 1: to purchase some without having to go to the trouble
Speaker 1: of figuring out how to mind it exactly exactly. You
Speaker 1: didn't need to be a techie person in order finally,
Speaker 1: in order to try and to try and actually buy some.
Speaker 1: So this was this was a big This was a
Speaker 1: big step forward. It was, and it made it made
Speaker 1: the whole thing easier. This also, the fact that there
Speaker 1: were more people mining it made the difficulty level of
Speaker 1: mining go up, meaning that bitcoins became harder to get
Speaker 1: hold of. So this exchange was you know, really well timed.
Speaker 1: And as we've seen before, of course bitcoin pizza guy
Speaker 1: laslow hany X had figured out how to mind it
Speaker 1: with his GPU rather than his CPUs, so the bar
Speaker 1: for mining was raised again. So there really was a
Speaker 1: pretty dire need for a site for them. We have
Speaker 1: quite a influence on the price of it. Yeah, well, yeah,
Speaker 1: I mean it's the way these the way these exchanges
Speaker 1: work is that you know, it's it's what's demanded. But
Speaker 1: surely you can if you are the big exchange and
Speaker 1: you've got okay, cool, well this is what it's costing now.
Speaker 1: I guess you in the early stages, you'd be able
Speaker 1: to influence the market quite quite significantly, I guess. So
Speaker 1: I'm not quite sure how that would have worked, whether
Speaker 1: whether Jed or you know, whoever is running any whatever
Speaker 1: exchange could go. Do you know what I'm gonna I'm
Speaker 1: gonna bump the price up. You know it's going to
Speaker 1: be it's going to be a dollar and ten cents
Speaker 1: here rather than the dollar and nine cents or something
Speaker 1: somewhere else. I suppose, because if you're bumping up there,
Speaker 1: then you're having to pay, unless you're sitting on a
Speaker 1: load then and then it's easier. Yeah, I mean, I
Speaker 1: think you want to try, and you want to try
Speaker 1: and track the price, the general price fairly accurately. I
Speaker 1: suppose you're just making your your cut on it's the
Speaker 1: more people using, the more money you're making as well. Yeah, yeah,
Speaker 1: I'm not sure it's particularly in your interest to offer
Speaker 1: a lower or a higher price. I mean, I suppose
Speaker 1: a lower price means that you that you do get
Speaker 1: more people business. But it's a slippery slope. I think,
Speaker 1: I think you you the market kind of decides. So
Speaker 1: Mount Cox, apparently, according to Alison Bob these friends I
Speaker 1: spoke to, Mount Cox was apparently a big improvement on
Speaker 1: previous exchanges that were there was less downtime because I
Speaker 1: think because Jed was actually able to automate parts of it.
Speaker 1: I think beforehand, whoever been running it was kind of
Speaker 1: dealing with all aspects of it. So Jed got the
Speaker 1: tech working better. So it was also quicker and plus
Speaker 1: apparently it had a much better user interface. It was
Speaker 1: just generally easier to use, which obviously helped it gain popularity.
Speaker 1: And it did so very quickly, and it was pretty
Speaker 1: soon the biggest bitcoin business going. Well yeah, and it was,
Speaker 1: I mean, reading about it, it seems it seems this
Speaker 1: happened almost overnight, it really really quickly. Now this became
Speaker 1: for Jed a bit of a problem because the more
Speaker 1: successful something gets, the more admin you have to deal with.
Speaker 1: And I'm sure you've found this in in any in
Speaker 1: all lines of work you've been involved with. You know,
Speaker 1: success does come at a price. It's more money, more problems. Yeah,
Speaker 1: to quote quote that the greatest, the greatest philosopher of
Speaker 1: the twentieth century. Yeah, the more money you get, the
Speaker 1: more hassle life becomes. So yeah, as I said before,
Speaker 1: he was living on on the beach in Costa Rica.
Speaker 1: He was wanting to surf. Him and his partner had
Speaker 1: a new baby. He basically was just trying to get
Speaker 1: a nice life and had set up this exchange, you know,
Speaker 1: to fund that, and I think it was it was
Speaker 1: beginning to take over his life a bit. It was
Speaker 1: just constantly issues to deal with. And there were also
Speaker 1: security issues as well, because the site, as you can imagine,
Speaker 1: was becoming a magnet for hackers and it had quite
Speaker 1: quite a few bitcoin got stolen. And I think with
Speaker 1: a business like this, with I mean cryptocurrency exchanges today
Speaker 1: spend millions upon millions of dollars on security. It's probably
Speaker 1: I think their biggest outgoing really because yeah, you've got
Speaker 1: these huge that they are the places to try and
Speaker 1: hack it. It's it's like a great big bank fold
Speaker 1: in a way. If you can get inside, then you
Speaker 1: can help yourself. And I mean I must say I
Speaker 1: know nothing about programming at all, nothing about writing code
Speaker 1: or what it must be to to try and keep
Speaker 1: a website whatever it's doing safe from attack and all
Speaker 1: that sort of stuff, but I can only imagine it's
Speaker 1: really time consuming and really stressful, especially as more people
Speaker 1: are trying to hack. And of course, remember he's holding
Speaker 1: other people's money, so the responsibility is going up and up.
Speaker 1: So Jed, as you can imagine, this whole thing was
Speaker 1: causing him a lot of anxiety, and what he really
Speaker 1: wanted to do was offload the exchange on to someone else.
Speaker 1: He'd tried it, got it, it had been successful, and
Speaker 1: now it was just too much of a hassle. So
Speaker 1: at this point in the story, another character enters, and
Speaker 1: this guy is something else. This is a guy called
Speaker 1: Mark Carpellis. Mark Carpellis is a fascinating character, and he
Speaker 1: has got to be one of the most controversial figures
Speaker 1: in the whole story of bitcoin up to now. And
Speaker 1: that's is your live Still he is alive? Yeah, he
Speaker 1: is alive much longer well, I think, so, okay, not
Speaker 1: that I would hope. So I don't think you can
Speaker 1: wish any You wouldn't want to wish any harm on
Speaker 1: the chapel, though I'm sure there are people that do,
Speaker 1: as we'll find out. So at the time, Mark Carpellis
Speaker 1: was a twenty four year old French computer programmer, another
Speaker 1: one of those this story is stuffed with who was
Speaker 1: into mudgically gathering but also surfed. I don't think what
Speaker 1: is about surfing, like they all seem to surf if
Speaker 1: they're vague. Yes, that's right. Health he served, Yeah, and
Speaker 1: Jed mcleb I not. I don't think the others did
Speaker 1: as far as I know, just served the internet. Just yeah,
Speaker 1: they just surved, Yeah, exactly. Um No, I don't think
Speaker 1: Mark Carpelli served. Not in France, not in France, and
Speaker 1: not in Japan, which is where he was living. So yes,
Speaker 1: Mark was this twenty four year old computer programmer and
Speaker 1: he'd been living in Japan for about a year when
Speaker 1: he met Jed online, and he had this thing for
Speaker 1: Japanese culture. He'd gone over there and just sort of
Speaker 1: fallen in love with Japan. He loved it, so he
Speaker 1: up sticks and moved there. Now, before we say anything
Speaker 1: else about Mark, he's clearly a very smart guy. He
Speaker 1: understood bitcoin as as soon as he discovered it. He
Speaker 1: saw its potential, He got it um and he started.
Speaker 1: He liked it so much he was he had a business.
Speaker 1: It was a web hosting business I think it was,
Speaker 1: and he pretty quickly started accepting it as a form
Speaker 1: of payment. So he he was he had the vision,
Speaker 1: he understood it, but he was very socially awkward, one
Speaker 1: of these guys who's basically happiest sat as a computer.
Speaker 1: There are suggestions that he maybe suffers from Asperger syndrome
Speaker 1: or something like that. He's certainly the sort of person
Speaker 1: who finds human contact a bit of a struggle and
Speaker 1: watching watching documentaries and stuff about him, people described him
Speaker 1: as kind of strange and not like most people. This
Speaker 1: is former colleagues speaking, so not a people person, which
Speaker 1: is not all that surprising for a computer programmer. Computer
Speaker 1: programming is not really a people business, you could argue. Nevertheless,
Speaker 1: a fascinating character. He was very overweight, obsessed with Japanese
Speaker 1: culture and also cats. Wow, this is taking a lot
Speaker 1: of boxes. He owned this web posting business in Japan.
Speaker 1: It was called Tapan Limited, and that was it was
Speaker 1: named after his cat, Mark and Jed met online. Mark
Speaker 1: gave Jed a hand with some Mount Cox related stuff.
Speaker 1: He lent him his expertise, and this planted a seed
Speaker 1: in Jed's mind. So Jed and Mark became quite close
Speaker 1: and kind of Jed relied on him a bit. Mount
Speaker 1: Cox became more and more of a pain to run,
Speaker 1: so Jed decided to offer the site to Mark, basically
Speaker 1: take it off his hands, on very favorable terms. And
Speaker 1: again this perhaps should have been a red flag. So
Speaker 1: basically Mark was offered percent of the company in exchange
Speaker 1: for of the company's revenues for six months. Now, when
Speaker 1: you consider that this is the biggest bitcoin business going,
Speaker 1: that pretty much the only place that most people are
Speaker 1: using to buy bitcoins, that is a head of a
Speaker 1: good yeah. Yeah, And it's, as I say, probably the
Speaker 1: sort of deal that should have set alarm bells ring.
Speaker 1: What we're going to find out very quickly is that
Speaker 1: Mark isn't really much of a businessman, so it's perhaps
Speaker 1: not surprising that that got that that didn't show up
Speaker 1: on his radar. Anyhow, the deal was apparently set up.
Speaker 1: There were no lawyers involved. It was all pretty amateur.
Speaker 1: I think they basically drew up their own contracts and
Speaker 1: sent them to each other to sign, and that was it.
Speaker 1: Mounts wasn't It wasn't making all that much money. I mean,
Speaker 1: it was, it was popular, it was gaining traction, but
Speaker 1: the cut of each transaction that it was taking as
Speaker 1: a fee, I should say, it wasn't huge. So we're
Speaker 1: not talking, you know, we're not talking making money hand
Speaker 1: over fist, but it was certainly it was certainly gaining
Speaker 1: in popularity. However, by the time Mark assumed control of
Speaker 1: Mount Goox, he moved it's HQ to Tokyo, which is
Speaker 1: obviously where he was based, this had begun to change.
Speaker 1: So Mount Cox was starting to get more and more
Speaker 1: popular around the time that Mark took it over. And
Speaker 1: there was a reason for this, and this reason was
Speaker 1: the emergence of another business that relied on bitcoin to
Speaker 1: make its money. Should we take a break, should we
Speaker 1: leave them hanging? Yeah? Welcome back everyone to part two
Speaker 1: of our third episode about bitcoin. It's time to talk
Speaker 1: about the second notorious bitcoin business that sprung up around
Speaker 1: this time. Okay, let's lead into it a bit. So
Speaker 1: if bitcoin was ever going to catch on properly, it
Speaker 1: was there was going to have to be a real
Speaker 1: world use case for it was going to have to
Speaker 1: be something you could buy. You need to be able
Speaker 1: to buy something with it to use it. Unfortunately, or unfortunately,
Speaker 1: I mean it depends who you ask them. This one,
Speaker 1: such a use case appeared around this time and its
Speaker 1: name was the Silk Road. Silk Road, Yeah, I think
Speaker 1: I think it's probably fair to was that most people
Speaker 1: have heard of this in some the first one not
Speaker 1: to the original road. Yeah, so the original silk Road, Yes,
Speaker 1: that was the That was the trading routes from China,
Speaker 1: wasn't it. This? This is this obviously took its inspiration
Speaker 1: from that, but is very very different. The best way
Speaker 1: to describe Silk Road is as an eBay for illegal
Speaker 1: stuff and leave feedback and leave feedback. Yeah, that was
Speaker 1: a big part of how it functioned. We'll we'll get
Speaker 1: to that. So, yeah, it was basically a dark net marketplace. Now,
Speaker 1: the darknet, we don't want to go too deep into this,
Speaker 1: but the dark net is kind of a sub layer
Speaker 1: of the Internet that you can only access through a
Speaker 1: special browser called tour tour and that makes you completely anonymous,
Speaker 1: So you can interact with these darknet websites and nobody
Speaker 1: can track you. You You you can, you know you can.
Speaker 1: You don't leave any sort of footprint. Um, and yeah,
Speaker 1: the dark net is a fascinating subject. It's huge, apparently
Speaker 1: absolutely massive, all sorts of all sorts of crazy illegal
Speaker 1: edgy stuff going on there. So Silk Road was a
Speaker 1: dark net marketplace where users were able to buy mostly
Speaker 1: illegal drugs. It did also offer other stuff, so you can, yeah,
Speaker 1: you could get you could get weapons, you got and
Speaker 1: credit card details. Yeah, you could also get forged passports
Speaker 1: and other I D documents. You could get hacking tutorials,
Speaker 1: all that sort of stuff hit men as well, apparently,
Speaker 1: although you could, Although you could buy all sorts of
Speaker 1: stuff there. Drugs made up the vast majority of its business.
Speaker 1: And I mean, we've got up here, and I'll leave
Speaker 1: a link to this in the show notes, but we've
Speaker 1: got here a picture of Silk Road's kind of landing page,
Speaker 1: if you like. So up in the top left corner,
Speaker 1: there's the there's the logo, which is a man on
Speaker 1: a camel, all in green, and it says Silk Road
Speaker 1: Anonymous market. And then you've got a little menu down
Speaker 1: the side, and you've got drugs as as a heading,
Speaker 1: and then you've got a whole You've got all these subheadings.
Speaker 1: Let's have a look Cannabis, disassociatives, ecstasy, opioids, other I
Speaker 1: wonder what other is precursors, prescription stimulants, psychedelics, all this
Speaker 1: sort of and then you've got other headings apparel, art,
Speaker 1: what's that, biotic materials, books, all sorts of stuff. Now,
Speaker 1: what was really important about silk Crowd was if you're
Speaker 1: buying or selling drugs or anything else illegal over the internet,
Speaker 1: even on the dark Web, you don't want to use
Speaker 1: your real identity, and you don't want to pay using
Speaker 1: a bank account or credit card or PayPal account or
Speaker 1: whatever it is that's in your name. That I mean,
Speaker 1: you don't need to You don't need to be an
Speaker 1: expert on privacy or internet security to know to know that.
Speaker 1: So the person who created the Silk Road, who will
Speaker 1: talk about later, they realized that b coin was the
Speaker 1: form of payment to use, and yeah, anonymity was absolutely
Speaker 1: key for silk Rode. And it should be pointed out
Speaker 1: here that bitcoin is not actually wholly anonymous. I think
Speaker 1: we may have touched on this before. It's pseudonymous. So
Speaker 1: if the authorities really want to trace you through bitcoin,
Speaker 1: they can, and to nowadays they're a lot better at it,
Speaker 1: But it wasn't It wasn't completely anonymous back then, so
Speaker 1: but it was it was certainly it was certainly a
Speaker 1: much better option than using cash. Yeah, well you couldn't
Speaker 1: really use cash, could you cash. Yeah, it was a
Speaker 1: lot better option than using traditional ways of buying things
Speaker 1: on the internet. Um, and yeah, the advantages here are clear.
Speaker 1: You can Bitcoin could be sent peer to peer, buy
Speaker 1: it to seller without anyone in between to stop it
Speaker 1: from happening, and there was relative privacy on it. And
Speaker 1: so silk Road made use of these kind of this
Speaker 1: kind of nexus of new emerging technology. It had it
Speaker 1: had the dark net and it had Bitcoin, and it
Speaker 1: couldn't have it couldn't have functioned without both. Yeah, So yeah,
Speaker 1: it was. It was a very clever invention. So yeah,
Speaker 1: silk Rode, it made it took advantage of this kind
Speaker 1: of meeting of to to new technologies. Yeah, this this
Speaker 1: meeting of the dark net and and and everything that
Speaker 1: it allowed you to do and also bitcoin, and it
Speaker 1: was I mean, you can see the advantages, I think,
Speaker 1: whatever your stance on on drugs is. And obviously it
Speaker 1: was set up with fairly sort of libertarian ideals around drugs.
Speaker 1: So the advantages of silk Rode I think are pretty
Speaker 1: clear regardless of your stance on drugs in general and
Speaker 1: drug laws. It's much better to buy your drugs if
Speaker 1: you're going to if you're going to buy them, it's
Speaker 1: much better than buying from the comfort of your own
Speaker 1: home and have them sent to you in the mail,
Speaker 1: rather than meeting a dodgy man down a dodgy to
Speaker 1: buy some dodgy substance. Exactly. Yeah, it was. It was
Speaker 1: a much better option and of course much better for
Speaker 1: both sides of the bargain. Much better for the buyer
Speaker 1: and much better for the seller because they didn't have
Speaker 1: to go out and pound the streets and risk arrest
Speaker 1: and all that sort of stuff. They could they could
Speaker 1: mail things out from the comfort of their own home
Speaker 1: as well. And as you touched on, yeah, it had
Speaker 1: a review system so people could be people could They
Speaker 1: couldn't be sure that what they were getting was was
Speaker 1: what they were paying for, but yeah, it's sort of
Speaker 1: built up trust and that if a dealer had lots
Speaker 1: of bad reviews, then you just wouldn't use them. Yeah.
Speaker 1: I mean it's similar to how eBay works, or especially
Speaker 1: more eBay than Amazon, because you know, it was more
Speaker 1: more focused on the review was down to oka called
Speaker 1: discrete packaging, timely coms, all of this sort of stuff,
Speaker 1: which is more important than when you're buying a substantial
Speaker 1: amount of drugs then when you're buying you know, some
Speaker 1: replacement by threes for your remote or something. So these
Speaker 1: are the things that were important to people. Um, the
Speaker 1: type of packaging that came in air sealed all of
Speaker 1: this sort of stuff so that those pescial authorities wouldn't
Speaker 1: catch on. Yeah. Yeah, and it's fascinating reading about it. Actually,
Speaker 1: because the US authorities, as we'll see, they began and
Speaker 1: authorities everywhere began to become much more aware of what
Speaker 1: was going on. And yeah, they started sort of trying
Speaker 1: to trying to intercept these drug packages and stuff, and
Speaker 1: you know, they turned out and they were really baffled
Speaker 1: at the start because they would occasionally, you know, the
Speaker 1: sniffer dogs would occasionally come through the male depot at
Speaker 1: various US airports or something and they'd sniff something out
Speaker 1: and they'd find that they kept finding lots of individual
Speaker 1: packages of maybe one or two ecstasy pills or something
Speaker 1: like that, or are small packet of cocaine or something
Speaker 1: which they've never really seen before. And it took them,
Speaker 1: it took them a while to realize what was going on,
Speaker 1: but as you can imagine, when they did it was
Speaker 1: it was fairly alarming because this was an entirely new
Speaker 1: way of doing things. So Silk Rode was set up
Speaker 1: by another entrepreneurial figure very different from Jed Micaleb who
Speaker 1: later adopted the handle of Dreadpirate Roberts. Do you remember
Speaker 1: do you remember the movie is that Captain m No,
Speaker 1: I don't know, the Cabean No, the Princess, the Princess Bride,
Speaker 1: Princess Bride. Yeah, it's that quite weird, quirky kind of
Speaker 1: kids movie from the eighties, Okay, and the dread Pirate
Speaker 1: Roberts from The Princess Bride. He was this, yeah, mysterious figure.
Speaker 1: And and the thing that with it was that they
Speaker 1: handled the mantle of the Dreadpirate Roberts sort of passed
Speaker 1: from from one person to the next, so it sort
Speaker 1: of seemed as though he was immortal. Actually it was
Speaker 1: just one you know, when the original when one dread
Speaker 1: Pirate Roberts got fed up and wanted to retire from
Speaker 1: being a dread pirate, he would pass it on to
Speaker 1: the next person who had just assumed the Mantle and
Speaker 1: carry on. So the myths sort of perpetuated itself. Anyway,
Speaker 1: silk Road appeared in February two thousand and eleven, and
Speaker 1: a bit like Mount Cox took off pretty quickly. Yes,
Speaker 1: and here's a fascinating quote from Mark carpellis again the
Speaker 1: guy who was running Mount Cox by this point, and
Speaker 1: this is from a ten interview, and he says, as
Speaker 1: far as I know, a third to half of transactions
Speaker 1: on Mount Cox were linked to silk Road. Wow. Yeah,
Speaker 1: that's that's a lot of transaction. But I suppose that's
Speaker 1: kind of you know what the earlier doopters of of
Speaker 1: most things on the Internet is normally not stuff that's
Speaker 1: too above board. Yes, the porn is a pioneer of
Speaker 1: most technologies, and and I suppose poison drugs is the
Speaker 1: pioneer of of of of this technology. It's an extraordinary statistic, that,
Speaker 1: isn't it. All this bitcoin was taking off, becoming more popular,
Speaker 1: but really people were using it to buy drugs and
Speaker 1: other naughty stuff. And bear in mind, of course that
Speaker 1: by July eleven, so just a few months after silk
Speaker 1: Road launched, eighty percent of bitcoin trading was being done
Speaker 1: through mountgocks. So basically, at this time bitcoin was being
Speaker 1: used mostly to buy illegal stuff, and because there weren't
Speaker 1: any really any other use cases, there weren't there weren't
Speaker 1: other businesses excepting there weren't many other businesses accepting it
Speaker 1: for any other products or services. So it's all about drugs.
Speaker 1: And this again, this is something that bitcoin I think has.
Speaker 1: It's still kind of trying to shake that image I
Speaker 1: think in a lot of people. But I mean, look,
Speaker 1: you talk about the eighties, sure dollar was used, A
Speaker 1: large chunk of dollar was used to buy drugs. Absolutely
Speaker 1: doesn't mean that it's a you should get rid of
Speaker 1: the dollar. Well quite yeah. And this is this is
Speaker 1: an argument that that that comes up a lot when
Speaker 1: people talk about, oh we should get rid of bitcoin
Speaker 1: and cryptocurrency because it facilitates money laundering or facilitates people
Speaker 1: buying drugs and doing illegal stuff. It's like, well, what
Speaker 1: did you think they were using before you banned cash?
Speaker 1: You know, it doesn't make any sense. But as you
Speaker 1: can imagine, these businesses were attracting both Mount Cox and
Speaker 1: Silk Road were attracting a lot of press attention, and
Speaker 1: of course the price of bitcoin started to go up. Well,
Speaker 1: now shall we take a quick break before we talk
Speaker 1: about how it all went wrong. We have this situation
Speaker 1: where we've got these two bitcoin focused businesses, Mount Cox
Speaker 1: Exchange and Silk Road the drugs exchange supermarket. Yeah, both
Speaker 1: of these businesses are picking up loads of traction. Mount
Speaker 1: coxes is by far the biggest bitcoin exchange and Silk
Speaker 1: Road is where most of the bitcoin is being spent.
Speaker 1: And so as we've hinted at, let's go back to
Speaker 1: Mount Cox firstly, let's talk about how it all started
Speaker 1: to unravel at Mount Cox. As I've mentioned, Mark Carpellis
Speaker 1: wasn't really all that suited to running a business like
Speaker 1: Mount Cox. He wasn't a people person, as I've said,
Speaker 1: And here's from that same eighteen interview I quoted earlier.
Speaker 1: He says humans are much harder to manage than servers,
Speaker 1: which gives you an idea of you know, he was
Speaker 1: bad at interacting with staff. He really was the wrong
Speaker 1: man in the wrong job, and this would have catastrophic
Speaker 1: consequen pens. When Jed had Jed Mcalab had sold Mountgox
Speaker 1: to Mark, there had already been some security issues. Now
Speaker 1: this is this is to this is to mitigate Mark
Speaker 1: a little bit. This is to you cut him a
Speaker 1: little bit of slack. There were security issues early on,
Speaker 1: with all these instances of hacking, various various breaches. And
Speaker 1: when it it appears that thousands of bitcoins were missing
Speaker 1: from the exchange when Mark took it over in March
Speaker 1: of eleven. Okay, this this sort of came. This has
Speaker 1: come to light in subsequent years. Now, these weren't really
Speaker 1: worth much at the time. It thousands of bitcoins sounds
Speaker 1: like a lot, but as the price of BTC wasn't
Speaker 1: really that high at the time it was it was
Speaker 1: a few thousand dollars, so it wasn't ideal, but it wasn't. Yeah,
Speaker 1: but as the price of bitcoin started to go up,
Speaker 1: this these missing bitcoins, this this shortfall became more of
Speaker 1: a problem. And now Jed claims that Mark knew about
Speaker 1: this when he took it on. He said, Look, I
Speaker 1: was completely open about this. I said that these bitcoins
Speaker 1: have been lost. He knew the risks, he knew what
Speaker 1: had happened. Mark, perhaps unsurprisingly, claims otherwise. And this is
Speaker 1: this is one of those burns of contention that will
Speaker 1: you know, will never really know the answer to but
Speaker 1: whatever the case, Mount Cox after Mark took it over,
Speaker 1: quickly became notoriously unreliable. And again speaking to Alice and
Speaker 1: Bob about this, that was one of the things that
Speaker 1: they that they said, it became withdrawals became really slow.
Speaker 1: If you wanted to get your money out, you sometimes
Speaker 1: had to wait days, weeks or even months at customer
Speaker 1: service was bad or non existent, and obviously there were
Speaker 1: hacks going on all the time. And you can imagine
Speaker 1: how I said, well, I said to them both. I said,
Speaker 1: to both Alis and Bob, this must have been really
Speaker 1: stressful for you if if you've put money into this
Speaker 1: exchange and you're trying to get it out and you're
Speaker 1: waiting weeks at a time. And they said, well, yeah,
Speaker 1: I mean, as you can imagine, it's not it's not ideal.
Speaker 1: And actually both of them have got emails from Mark
Speaker 1: Carpellis himself. They showed me some screenshots of them, and
Speaker 1: he would often personally respond to these customer queries, which,
Speaker 1: again for someone who's the kind of CEO, the managing
Speaker 1: director of this business, you sort of think you shouldn't
Speaker 1: be doing. You shouldn't be handling customer support. You have
Speaker 1: more important things to do. And this is just another
Speaker 1: example of how completely unsuited Mark was to running this exchange,
Speaker 1: to doing this job. And Mount Cox it simply grew
Speaker 1: too fast. It had about around three thousand users in
Speaker 1: March eleven, and three months later it had sixty plus.
Speaker 1: It's absolutely exponential growth, hockey stick growth, as they say.
Speaker 1: But security was far too slack, and Mark was plea
Speaker 1: just slow to hire people to help him with everything
Speaker 1: that needed to be done. Like I said, he was
Speaker 1: managing things like customer support, doing a hundred and one
Speaker 1: other different jobs which he should have just delegated. This
Speaker 1: is the fire festival of of crypto exchanges. Yes, promising
Speaker 1: a lot, delivering very little. Is someone going to jail? Yeah,
Speaker 1: not to give too much away, people are going to go. Yes,
Speaker 1: Mark was. Mark was not good at prioritizing or he
Speaker 1: just wasn't very professional a lot of the time. And
Speaker 1: there's an extraordinary story from from twenty eleven that there's
Speaker 1: been a big security breach at Mount Cox. I mean,
Speaker 1: this happened quite a lot, but there was a particularly
Speaker 1: serious one and two Americans, a guy called Roger Vere
Speaker 1: who has since become known as bitcoin Jesus. He was.
Speaker 1: He was a real early bitcoin evangelist. He and he
Speaker 1: I think he got the name because he would give
Speaker 1: giveaway bitcoin in order to try and you know, to
Speaker 1: teach people about it. I'm sure we'll talk about him
Speaker 1: at another point in another episode. So Roger Vere and
Speaker 1: his friend Jesse Powell, who now runs the Crack and
Speaker 1: Cryptocurrency exchange. Um, he's an interesting chap as well. But
Speaker 1: they heard they're being a breach. Roger was actually living
Speaker 1: in Tokyo at the time, very near where mount Gox
Speaker 1: was headquartered. So Roger got in touch with Mark and said, look,
Speaker 1: let me help. Let me come and help. So they
Speaker 1: turned up him and him and Jesse. Roger turned up.
Speaker 1: Jesse turned up a few days later to basically help
Speaker 1: sort the mess out, and they started they weren't really coders,
Speaker 1: but they kind of dug into the customer support stuff
Speaker 1: and you know, basically gave their time and effort to
Speaker 1: try and help sort this situation out. And it was
Speaker 1: there was a real backlog of work. And then one
Speaker 1: Friday evening as they were sort of packing up to
Speaker 1: go and they said to Mark Ole, we'll see you tomorrow.
Speaker 1: What time Mark's like tomorrow's the weekend. Can't possibly and
Speaker 1: they were like yes, but yeah, and this was this
Speaker 1: was just him. And I mean, I recommend you if
Speaker 1: you watch a video, if you watch Mark Carpelli's on video,
Speaker 1: you can you can sort of see he's got a
Speaker 1: very low energy vibe. He's very sort of slow and
Speaker 1: kind of stolid, and he seems almost laid back to
Speaker 1: the you know, to the point of lying down. So again,
Speaker 1: it can't be stressed enough. Just how unsuited he had
Speaker 1: just read like the four hour work week or something.
Speaker 1: I think so, I think so. Yeah. He just couldn't prioritize.
Speaker 1: He couldn't. He just couldn't run this bloody business. Not
Speaker 1: everything I should say was his fault, though. As bitcoin
Speaker 1: became more visible and Silk Road started causing all this
Speaker 1: negative publicity, it basically became harder and harder for Mount
Speaker 1: Cox to access banking services. Now, this is not thing
Speaker 1: to do with Mark, and there wasn't. There was only
Speaker 1: so much that he was able to do. And obviously,
Speaker 1: if you're running a cryptocurrency exchange where people are looking
Speaker 1: to buy bitcoin with cash with you know, with fear money,
Speaker 1: you got to have some sort of banking relationship, because
Speaker 1: otherwise there's no there's no other way of getting money
Speaker 1: to the exchange. And yes, so these banks were getting
Speaker 1: increasingly nervous about bitcoin and they they sort of started
Speaker 1: cutting off their services to Mount Cox, which, as you
Speaker 1: can imagine, made things very, very difficult. Now, there was
Speaker 1: so much going wrong at Mount Cox there isn't time
Speaker 1: to go into all the details here, but the major
Speaker 1: issue we believe began actually in late eleven when a
Speaker 1: hack up began draining bitcoin out of the exchange is
Speaker 1: hot wallet. Have you heard that phrase before? Hot wallet? Yes, yeah,
Speaker 1: I've heard of a cold wallet. Okay, Well, a hot
Speaker 1: wallet basically is a is a crypto wallet that's connected
Speaker 1: to the Internet. And all exchanges have hot wallets because
Speaker 1: they need to have they need to have cryptocurrency on
Speaker 1: hand for for daily trading purposes. So every crypto exchange
Speaker 1: will keep a certain amount of crypto in a hot
Speaker 1: wallet connected to the Internet so people can buy and
Speaker 1: sell it and traded and what have you. However, for
Speaker 1: safety's sake, it is best to store funds in a
Speaker 1: cold wallet. Now, a cold wallet, as you might have guessed,
Speaker 1: is not connected to the internet exactly exactly. It can
Speaker 1: take many forms. It can be It can be a
Speaker 1: sort of hardware device, a bit like a flash drive,
Speaker 1: which we call a hardware wallet. You can even have
Speaker 1: paper wallets where yeah, where basically the private keys are
Speaker 1: are written down or printed out on a piece of
Speaker 1: paper and that's held in in a secure location, secure
Speaker 1: place so no one can hack it. But basically the
Speaker 1: mount Cox hot wallets, Mount Cox did keep an amount
Speaker 1: of bitcoin in cold store bridge offline, but what they
Speaker 1: didn't notice was that someone had started to drain the
Speaker 1: hot wallet. Okay, so this is something, this is something
Speaker 1: to remember. Slowly, slowly, yeah, exactly. Over over the course
Speaker 1: of several years, the hacker was able to slowly drain
Speaker 1: coins out of mount Cox's hot wallet, and they just
Speaker 1: never picked up on it. And this is again, I
Speaker 1: mean this again. You can sort of slightly lay the
Speaker 1: blame at mark Store here, because this is something that
Speaker 1: they should have become aware of, but they weren't. Anyhow,
Speaker 1: things basically came to a head in February. By this point,
Speaker 1: users had been very wary of mount Cox for a
Speaker 1: long time. It's reputation was was really pretty bad, and
Speaker 1: it was so bad in fact, that the price of
Speaker 1: bitcoin was a hundred dollars higher on mounts than on
Speaker 1: any other exchanges. Yeah, it's reputation gotten so bad that
Speaker 1: that it was more expensive to buy a bitcoin there.
Speaker 1: People were just becoming less and less willing to use it.
Speaker 1: That said, it was still there was still a lot
Speaker 1: of volume going through it, but people realized that this
Speaker 1: this came at a price, and people were very wary
Speaker 1: of it. Indeed, as I've said before, it was notoriously
Speaker 1: difficult to get your feat deposits out of Mount Cox
Speaker 1: and really the only way to get funds out in
Speaker 1: any sort of timely manner was to transfer your bitcoin
Speaker 1: to somewhere else. Yeah, exactly, so this is what a
Speaker 1: lot of people do did. But again talking to Alison
Speaker 1: Bob as well, they they recognized this for a while,
Speaker 1: but towards the end, even withdrawing bitcoin became difficult. So
Speaker 1: February seven, Mount Gox suspended all withdrawals. No one really
Speaker 1: knew why, and Mark did something very naughty at this point,
Speaker 1: he blamed the problem on the bitcoin code itself. Sacrilege. Yeah, absolutely,
Speaker 1: absolutely real, a really bad thing to do. Now, there
Speaker 1: was an issue known as transaction malleability, and I'm going
Speaker 1: to read marks a press release that Mark put out
Speaker 1: at the time in order to explain what transact what
Speaker 1: we mean by transaction malleability, So he said in the
Speaker 1: mount Cox press release, a bug in the bitcoin software
Speaker 1: makes it possible for someone to use the bitcoin network
Speaker 1: to alter transaction details to make it seem like a
Speaker 1: sending of bitcoins to a bitcoin wallet did not occur,
Speaker 1: when in fact it did occur. Since the transaction appears
Speaker 1: as if it has not proceeded correctly, the bitcoins maybe resent.
Speaker 1: Mount Cox is working with the bitcoin cord development team
Speaker 1: and others to mitigate this issue. Now does that Does
Speaker 1: that all make sense? Okay? Good? I I I sort
Speaker 1: of looked for ways to look for ways to explain
Speaker 1: this transaction malleability thing, but I think that present issue.
Speaker 1: It was an issue. Yeah, it was something that others
Speaker 1: had noticed with the bitcoin code, but yeah, it was
Speaker 1: known about and it was pretty easily dealt with, and
Speaker 1: all the other exchanges had developed a way to to
Speaker 1: work around it. So it was an issue, but it
Speaker 1: wasn't a big issue, and it was something that was
Speaker 1: that was known about, and again mount Cox should have
Speaker 1: known about it. Mark should have known about it. So
Speaker 1: not only was he blaming bitcoin itself for a problem
Speaker 1: that he should have known about and mitigated much earlier,
Speaker 1: but he was The press release itself tanked the price
Speaker 1: of bitcoin because regular users who didn't know about this
Speaker 1: little quirk in the bitcoin code believed that Bitcoin itself
Speaker 1: was broken. Now, if this had been true, that would
Speaker 1: have been a major issue. I mean that could have
Speaker 1: that could have been under the project yeah terminal for Bitcoin.
Speaker 1: So yeah, Mark did a Mark did a really bad
Speaker 1: thing here, and lots of I think Gavin Andrewson among others,
Speaker 1: sort of jumped on this and we're like, no, no, no, no, no, no, no,
Speaker 1: this isn't This isn't a problem with bitcoin. It's a
Speaker 1: problem with Mount Cox. You need to fix it. And unfortunately,
Speaker 1: as February war on, February war on, things only got worse.
Speaker 1: You got to the point where you had angry customers
Speaker 1: protesting outside the Mount Cox HQ in Tokyo with signs
Speaker 1: saying like Mount Cox whereas our money, which is never
Speaker 1: a good sign when people start turning up at the office.
Speaker 1: February the company Twitter went offline again, not a good sign.
Speaker 1: The following day, on, the trading was suspended and the
Speaker 1: website went offline. By this point there were rumors of
Speaker 1: missing bitcoins, and then on the twenty February, a few
Speaker 1: days later, Mount Cox filed for bankruptcy protection basically the game,
Speaker 1: basically admitting that the game was up. Now, what it
Speaker 1: emerged happened was and hold onto your seat for this.
Speaker 1: It emerged that mount Cox had lost eight hundred and
Speaker 1: fifty thousand bitcoins. Yeah, worth around five million dollars at
Speaker 1: the time. I mean, it's worth a heck of a
Speaker 1: lot more now, but a substantial amount at the time.
Speaker 1: In fact, it was about seven percent of all the
Speaker 1: bitcoin in circulation. It was an absolute disaster. Seven hundred
Speaker 1: three course of a million of these. This was February
Speaker 1: two tho. So most of these belonged to customers that
Speaker 1: were lost, but the exchange itself lost a hundred thousand
Speaker 1: of its own. They yeah, they were like, we've we've
Speaker 1: lost your money. Now imagine the bank saying we we're
Speaker 1: terribly sorry. Really, is the world west days a bit
Speaker 1: where yeah, yeah, this was I mean, and you can
Speaker 1: imagine the sort of reaction from I mean people people
Speaker 1: within the krypto, the bitcoin and crypto community and from
Speaker 1: without as well, is you you've lost them? What we
Speaker 1: can find them? Yeah? I think that was I think
Speaker 1: that was the responseilt because it's told sort of traceable.
Speaker 1: Do we know where a lot of these have gone? Well?
Speaker 1: We did? Yeah, we have an idea. We have an idea.
Speaker 1: I'll get to that in a minute. The story gets
Speaker 1: even weird as because, as you can imagine, all hell
Speaker 1: broke loose and people's worst fears. Did Mark start working weekends?
Speaker 1: I think perhaps he might have done. I don't know
Speaker 1: by this point. I think another weird thing that I
Speaker 1: that I read about was around this time, like they knew,
Speaker 1: they knew before they had to announce you before that
Speaker 1: the thing really fell apart in late February. They knew
Speaker 1: they were problems, and Mark apparently, rather than focus on
Speaker 1: the job that he needed to, you know, getting these
Speaker 1: problems sorted, apparently, he was busy setting up like a
Speaker 1: bitcoin cafe on the ground floor of the building where
Speaker 1: it had its officers. That was his priority, at cafe
Speaker 1: where where you could buy everything with bitcoin, And he
Speaker 1: was sort of spending hours a day kind of footling
Speaker 1: around that, you know, trying to get that set up. Meanwhile,
Speaker 1: a few stories up in the mount Box offices, people
Speaker 1: have people considering jumping. Five million dollars are basically missing.
Speaker 1: So again, just utterly, utterly useless for this particular for
Speaker 1: this particular job. Did the cafeer world or Funnily enough, No,
Speaker 1: I don't think. I didn't think it ever. I was
Speaker 1: just wondering. I mean, like, you know, I mean that
Speaker 1: could have been not, you know, not everything was a
Speaker 1: loss that's gone on to become one of the most
Speaker 1: popular cafes in that part of Japan. I mean that
Speaker 1: would be a nice little turning over hundreds of pounds
Speaker 1: a month, that would be a nice little yeah. And
Speaker 1: I hope it's not everything went terrible for Mark. You'd
Speaker 1: hope you know, his cupcake businesses. Yes, that would have
Speaker 1: been a nice lending to the story if although MOUNTX
Speaker 1: had collapsed, the cafe went from strength to strength and
Speaker 1: Mark is still happily and there's nowt I've been taken
Speaker 1: over by Bretta or whatever the Japanese quent is. There's
Speaker 1: an added twist to this story. After these eight hundred
Speaker 1: and fifty thousand bit coins, seven percent of all in circulation,
Speaker 1: had gone missing, a few days later the exchange. Are
Speaker 1: you serious? It had? Guy? So we just it was
Speaker 1: it was in the till of the cafe. We're just like, yeah,
Speaker 1: underneath the draw. Yeah, sometimes they just get stuck behind
Speaker 1: the thing. It's yeah, you've always got a check there.
Speaker 1: But we've we've, we've it's all right. Well, what they'd
Speaker 1: actually what it actually happened was and it had found
Speaker 1: two hundred thousand of them, which is obviously a start.
Speaker 1: It's still leaves it still leaves a fairly substantial number outstanding.
Speaker 1: But yeah, this was this was what you know, and
Speaker 1: and as you can imagine, people like, okay, so you
Speaker 1: lost them and now you found some of them? What that?
Speaker 1: Can I have them back? Yes? What the hell is
Speaker 1: going on? So this must do wonders for your your
Speaker 1: public image? Yeah, yeah, this had I mean, this was
Speaker 1: this was disastrous for bitcoin. It was terrible for yeah,
Speaker 1: as you can imagine. But basically the upshot of this
Speaker 1: story is that a lot of people lost a lot
Speaker 1: of money. Yeah, a lot of people lost a lot
Speaker 1: of money. Many unfortunately had their life savings and their
Speaker 1: kids college funds and things like that. I mean, there
Speaker 1: are some pretty tragic stories, um, which yeah, I mean,
Speaker 1: don't put your life savings into into anything, really into
Speaker 1: into one single thing. But you know, these were these
Speaker 1: were people who clearly believed in bitcoin, clearly believed in
Speaker 1: its potential. And yeah, I mean that's the that's the
Speaker 1: real upshot to this story is that it had a
Speaker 1: it had a pretty unhappy ending. So Mark was eventually
Speaker 1: arrested in August and charged with embezzlement, so they believed
Speaker 1: that he had something to do with it. But many
Speaker 1: people believed that he was somehow responsible, that he had
Speaker 1: stolen the bitcoin or at least been involved in some way,
Speaker 1: and he was eventually found guilty in March twenty nineteen.
Speaker 1: This this, this went on and on and on. He
Speaker 1: was found guilty of falsifying data and he was given
Speaker 1: a thirty month suspended sentence. Yeah, he was basically he'd
Speaker 1: served a lot of prison time by I think. I
Speaker 1: think the way in Japan is, you know, you're you're
Speaker 1: basically kind of held in prison until until they find
Speaker 1: you innocent. And Mark was, Yeah, he he'd served his
Speaker 1: time by that point, so he was able he was
Speaker 1: able to walk for walk free. Who was running the cafe?
Speaker 1: I don't know that the cat I think to ban. Yeah. Um, now,
Speaker 1: a lot of people, Yeah, a lot of people think
Speaker 1: that that Mark was involved somehow, And I have to say,
Speaker 1: not only was he was he found he was only
Speaker 1: found guilty of falsifying data. They didn't the authorities didn't
Speaker 1: believe that he was responsible at all. And actually from
Speaker 1: watching and listening to interviews with him, he just doesn't
Speaker 1: come across as the sort of person who could do that.
Speaker 1: So it is fairly unlikely that Mark was involved in
Speaker 1: any crime. And if you watch interviews with him, if
Speaker 1: you listen to if you listen to him talking, you
Speaker 1: can you can see that I think he just he's
Speaker 1: not He's not the criminal type, as I've said, He's
Speaker 1: this very kind of low energy, just you know, laid
Speaker 1: back kind of guy. So yeah, but it was, as
Speaker 1: you can imagine, a pretty it was a terrible time
Speaker 1: for for all involved. I do have I must say
Speaker 1: to be controversial here, I do have a bit of
Speaker 1: sympathy for Mark because it must have been the most
Speaker 1: stressful experience. You're running a cafe is yeah, tricky. I
Speaker 1: mean all those people demanding, demanding complicated coffees and things
Speaker 1: like that, and I want to I want my keys
Speaker 1: like this, having debate those cupcakes. You know what, I've
Speaker 1: been in situations before where things are going wrong and
Speaker 1: it is very easy to just bury your head in
Speaker 1: something else. Requsted like mostly for me, it's around exam
Speaker 1: time when I was at university, and I would never
Speaker 1: have a tidy room. It was revised for this exam,
Speaker 1: or sort out my record collection and sort of make
Speaker 1: up my room, and you'd always go, you know what,
Speaker 1: I haven't vacuumed in a while. Once I finished this vacuuming,
Speaker 1: then I'll concentrate on the five million dollars that I've
Speaker 1: got miss First things first, First things first, Yeah, on
Speaker 1: the weekend. I mean, well, I'll pick this up Monday.
Speaker 1: It can wait. Yea. Now, yeah, I'm I'm the same.
Speaker 1: I can't think that. I mean, exams were kind of
Speaker 1: similar for me, and but also I think, yeah, I
Speaker 1: think most most of us have been in that sort
Speaker 1: of situation at some point. I would also like to say,
Speaker 1: if my kids college fund was was in that situation,
Speaker 1: I probably wouldn't be quite so empathetic. Yes, I think
Speaker 1: that's fair enough. You know, I empathize because I've got
Speaker 1: no skin in the game and I've been in situations
Speaker 1: in my life, not quite at this extent, where you
Speaker 1: know you've got something pressing or you've you've messed up,
Speaker 1: and it's like, okay, I'll just divert my interest into
Speaker 1: something else to sort of, you know, not think about it.
Speaker 1: It's difficult to I think it's difficult to to empathize, perhaps,
Speaker 1: but you know you can. No, I can't empathize, but
Speaker 1: I can't. But I also can empathize with the people
Speaker 1: who are the real victims here. Yeah, that's true. But
Speaker 1: I can imagine. I can imagine that sort of situation,
Speaker 1: can't you? Like this is I could go and I
Speaker 1: could go and have a nice time just sort of
Speaker 1: getting my little cafe sorted. Or I could go and
Speaker 1: address this black hole into which people's money is disappearing.
Speaker 1: I can. I can't forgive it, but I can understand
Speaker 1: it in a way I think he might. I think
Speaker 1: it just must have all got on top of this. Yeah,
Speaker 1: it just becomes overwhelming. So yeah, it's it's hard. I
Speaker 1: doubt everyone can have sympathy for Mark. But do you
Speaker 1: think the cost of rican guys saw this coming was
Speaker 1: just like I am out of this. Jed mcayleb I
Speaker 1: don't think he can have seen this sort this catastrophe coming,
Speaker 1: but I think yeah, I mean I think he was
Speaker 1: experiencing that stress and he took the opportunity to go,
Speaker 1: do you know what, I don't need this. I don't
Speaker 1: need this. I'm going to pass it on. Funnily enough,
Speaker 1: Jed mcaleb has gone on to other things. He went
Speaker 1: on to co found a Ripple, Yeah, which Ripple is
Speaker 1: having its own sort of legal problems at the Securities
Speaker 1: and Exchange Commission. Okay, well, good luck with that, um.
Speaker 1: And he actually left Ripple and went on to found Stella,
Speaker 1: which is a kind of rival to Ripple. So he's
Speaker 1: bounced a bounce between a lot of projects and made
Speaker 1: a lot of money on that. Look good for him.
Speaker 1: I wish I had so. Just as a little coda
Speaker 1: to the whole Mount Gox story, a Russian man named
Speaker 1: Alexander Vinnick is believed to be largely responsible. Okay, yeah,
Speaker 1: so he ran a rival crypto exchange called btc E,
Speaker 1: which is thought to have received at least some of
Speaker 1: the stolen Mount Gox bitcoins. Now, to briefly talk about Alexandervinick,
Speaker 1: he is basically, I think the technoll term is an
Speaker 1: all around baddie, a massive bad guy bad guy. Yeah,
Speaker 1: there were Russian back in the eighties, weren't they They
Speaker 1: were Russian, and Alexander Vinick himself as Russian. So yeah,
Speaker 1: He's currently serving five years in France for money laundering.
Speaker 1: He's also thought to be involved in hacking, ransomware, identity theft,
Speaker 1: and drug trafficking. That the whole Lencher Lader. He's a
Speaker 1: bad guy. The Russian and American authorities are waiting to
Speaker 1: have their chunk of him as well, So I think
Speaker 1: he's I think he's staring down the barrel of maybe
Speaker 1: the rest of his life in prison. I think there
Speaker 1: were almost certainly others involved with Finnick, but he seems
Speaker 1: to have been the focus of taken most of the
Speaker 1: form um. So Mount Gox's creditors may eventually get compensated,
Speaker 1: which is a bit of good news. In the last
Speaker 1: thing that happened really was in October one, compensation plan
Speaker 1: was agreed. As we record this, no payouts have yet
Speaker 1: been made, but it looks like the Mount Gox saga
Speaker 1: may be kind of drawing to its clothes, and these
Speaker 1: guys may get some maybe all their bitcoins back, but
Speaker 1: actual bitcoins and the same what they're worth today. Well, yeah,
Speaker 1: I mean because they'll be getting because they'll be getting
Speaker 1: if they get the number of bitcoins that they lost,
Speaker 1: then yeah, they'll be able to they'll be able to
Speaker 1: sell them a today's prices. I'm not quite sure how
Speaker 1: it's all been worked out, whether that would be quite
Speaker 1: you know, forced hoddling. Yeah, yeah, they I mean, they
Speaker 1: could end up being grateful for it, I guess. But yeah,
Speaker 1: I mean, you can buy the college now. So just
Speaker 1: to round off with Mount Cox, it was obviously terrible
Speaker 1: pr for bitcoin. It's still casts a shadow over it,
Speaker 1: I think. I think a lot of people, a lot
Speaker 1: of people's perception of bitcoin, and obviously their experiences with
Speaker 1: it are colored by by by what happened with Mount Cox.
Speaker 1: Many people mistakenly saw the whole Mount Cox thing as
Speaker 1: a weakness of bitcoin. Now this is not the case.
Speaker 1: Bitcoin itself has never been hacked, and it was you know,
Speaker 1: it wasn't no flaw of bitcoin. What it did show,
Speaker 1: the whole thing was the danger of trusting centralized entities,
Speaker 1: which ironic was the point of bitcoin. So in a
Speaker 1: weird way, in a weird and horrible and traumatizing way.
Speaker 1: Mount Cox kind of made Bitcoin's point, and you know,
Speaker 1: it's it's about taking it's about taking ownership of your
Speaker 1: own assets. Do not trust the middlemen. People. Find out
Speaker 1: what exchanges are the most reputable. We do have some.
Speaker 1: We do have quite a few videos on our YouTube
Speaker 1: channel where we talk about we talk about various exchanges
Speaker 1: and we compare them and things like that. I mean, yeah,
Speaker 1: that's a good that's a good question, because there are
Speaker 1: still dodgy exchanges out there. Some of them are Some
Speaker 1: of them are dodgy because the people running them are
Speaker 1: dodgy and a badly intention and others are dodgy because
Speaker 1: their security is lacks. Yeah. Um, basically, if if an
Speaker 1: exchange has very low trading volumes or suspicious amounts, you know,
Speaker 1: suspicious trading volumes or risks or lists a lot of
Speaker 1: very dodgy all coins and things like that, then you
Speaker 1: need to be careful. But yeah, there's there. You can
Speaker 1: quite easily google the sort of top top tier exchanges,
Speaker 1: things like Finance, FTX, coin Base, cou Coin, things like this.
Speaker 1: You know they're they're well run, their regulated exchanges and
Speaker 1: they've got much. They've got very very strong security. But
Speaker 1: exchange hacks was something that have Almost every exchange out
Speaker 1: there has been hacked at some point um. But yeah,
Speaker 1: the Mount Cox was by far. Is there a Quantus
Speaker 1: airline to know how you remember the film Rainman and
Speaker 1: would only get onto Quantus because the only airline that
Speaker 1: has never crashed? Oh yeah, is there uh an exchange
Speaker 1: like that so that they've never been hacked or crashed? Even?
Speaker 1: Is there an exchange that's never been hacked as far
Speaker 1: as I know, I mean, I think there's a slightly
Speaker 1: newer exchange called f t X, which has only been
Speaker 1: going a couple of years as far as I know,
Speaker 1: that hasn't suffered any breaches. But I mean coin based
Speaker 1: in its early days had problems. Finance has had problems.
Speaker 1: They're the two biggest in the world at the moment.
Speaker 1: And yeah, I mean, but exchanges have have lots of
Speaker 1: security procedures in place now and they also have insurance
Speaker 1: and compensation schemes and stuff, so they're a heck of
Speaker 1: a lot safer than they were. But I mean, this
Speaker 1: is you know, the lessons of Mount Cos I think
Speaker 1: have been learned. But yeah, that the exchanges are still
Speaker 1: are still tricky because keeping your coins on exchange, it's centralized,
Speaker 1: it's it's keeping them in one place, and it does
Speaker 1: make them it does make them more vulnerable. So we've
Speaker 1: talked about the collapse of Mount Cox. Let's quickly round
Speaker 1: up this episode by talking about the end of the
Speaker 1: Silk Road. Just as Mount Gox came crashing down, so
Speaker 1: too did Silk Road, though in slightly different circumstances. So
Speaker 1: they'd obviously, like Mount Gox, Silk Road had become a
Speaker 1: runaway success, attracted obviously lots of attention, both from press
Speaker 1: and the authorities and from hackers and and other other
Speaker 1: ne'er do wells. Mainstream attention came to it in June
Speaker 1: eleven through an article in Gorka, which I think is
Speaker 1: now defunct thanks to Hulk Hogan. Next to Hulk Hogan
Speaker 1: and Peter Teal. Yeah, that's a strange story. Anyhow, the
Speaker 1: mastermind behind the Silk Road turned out to be one
Speaker 1: Ross Albrecht, who was from Austin, Texas. Young guy from Austin, Texas.
Speaker 1: He had strong libertarian views which he honed when he
Speaker 1: was in college. So again, the libertarianism just features so
Speaker 1: many times in the Bitcoin story. He believed in yeah,
Speaker 1: low state intervention. He believed that that people had people
Speaker 1: should make their own choices when it came to when
Speaker 1: it came to things like drugs. So, after graduating from
Speaker 1: Penn State in two thousand and nine, he had a
Speaker 1: master's in science and engineering, he was kind of at
Speaker 1: a bit of a loss with what to do with
Speaker 1: his life, and he was very idealistic. He wanted to
Speaker 1: have an impact on the world. Um So these kind
Speaker 1: of views, these combined with his kind of libertarian views,
Speaker 1: inspired him to set up silk Road. So Ross had
Speaker 1: some coding skills, he wasn't a professional coder by any means.
Speaker 1: He had to get others to help him out as
Speaker 1: as the site got bigger. But I think the code
Speaker 1: that he originally built for silk Road was pretty was
Speaker 1: kind of full of holes and stuff, so he was
Speaker 1: sort of constantly having to patch it and fight fires
Speaker 1: and things. But some silk Road picked up traction very quickly,
Speaker 1: like mount Gox did. It had nearly one million user
Speaker 1: accounts by the time it was shut down. Now a
Speaker 1: lot of users would have had multiple accounts, but the
Speaker 1: authorities reckoned it had hundreds of thousands of unions, and
Speaker 1: by some estimates it did close to a billion dollars
Speaker 1: in sales over its lifetime, which obviously earned Russell Britt
Speaker 1: a lot of money. But he wasn't a really very
Speaker 1: material person. He was happy just living out of a
Speaker 1: rucksack and he kind of traveled around the States and
Speaker 1: Australia and Southeast Asia, and he would just run Silk
Speaker 1: Road from his from his laptop, which was obviously heavily encrypted.
Speaker 1: But as with Mark running Mount Cox, as as Mark
Speaker 1: Carpoli's found, as Jed michaelab before him found, running this
Speaker 1: sort of site became a massive pain in the pain
Speaker 1: in the backside, and he was constantly having to attend
Speaker 1: to attend to issues to repel these hacking attempts, deal
Speaker 1: with dealing with complaints again, but had the kind of
Speaker 1: added pressure of he had to do it without getting caught. Yeah,
Speaker 1: it's not just okay, cool, where's my money from? You know,
Speaker 1: Bill in Arkansas, it's where's my money from? Jose in Jose,
Speaker 1: Jose with lots of guns. Yeah, yeah, and obviously dealing
Speaker 1: with some dealing with some pretty pretty and also avoiding
Speaker 1: the authorities as well. Yeah, yeah, and that's the thing.
Speaker 1: And again, as Mark Car police must have found, it
Speaker 1: must have been so stressful. You know, they're not only
Speaker 1: trying to run this business, but also knowing that if
Speaker 1: you got caught, that was it's It's not it's not
Speaker 1: a thirty month suspended. Its no, not by any means.
Speaker 1: As we'll see. So all the while US agents from
Speaker 1: US law enforcement were on his tail, it was picking
Speaker 1: up a lot of traction and and and as it
Speaker 1: went on, you know, I think the Department of Homeland
Speaker 1: Security got involved. I think it's for a Netflix documentary
Speaker 1: on this. Yeah, it's it's a fascinating story. And there's
Speaker 1: a great book called American Kingpin by a guy called
Speaker 1: Nick Bilton, which tells the whole story in detail, very
Speaker 1: very readable. I do recommend that I'll leave a link
Speaker 1: to that in the in the show notes. Uh so, yeah,
Speaker 1: it's um. I think the d e A, the FBI,
Speaker 1: Homeland Security, all the three letter agencies were getting involved
Speaker 1: as as as as it went along, and they managed
Speaker 1: to infiltrate the site's forums, and some d e A
Speaker 1: agents managed to establish contract contact with Ross who's still
Speaker 1: using this dreadpirate Roberts or DPR pseudonym. Now to cut
Speaker 1: a long story short, Ross was eventually tracked down to
Speaker 1: San Francisco and dramatically arrested in a public library there.
Speaker 1: This was September, and the way they tracked him down
Speaker 1: was was very very clever. They managed to dig up
Speaker 1: old user names that he'd used they could then link
Speaker 1: back to his email address that act that had his
Speaker 1: actual name in. But it was a very painstaking process
Speaker 1: and they were on his tail for a long time.
Speaker 1: But yeah, they they tracked him down, and yeah, when
Speaker 1: they arrested him, they had to make sure that they
Speaker 1: got him with his laptop open because they knew that.
Speaker 1: I think they'd tried to arrest somewhat some other hacker
Speaker 1: a couple a few years previously. I think the FBI
Speaker 1: had tried to seize this computer hacker and he'd managed
Speaker 1: to close his laptop just before he was arrested, which
Speaker 1: he automatically encrypted everything, and it took them a lot
Speaker 1: of it was really I think they meant they managed
Speaker 1: to crack his password in the end, but yeah, so
Speaker 1: that it was vital that they got him without him
Speaker 1: being able to close his laptop and and encrypted. So
Speaker 1: I think they staged the distraction, I think to two
Speaker 1: FBI agents pretended to be like lovers having a quarrel
Speaker 1: or something like that, shouting at each other, and he
Speaker 1: was distracted. And when he was distracted, like others moved
Speaker 1: in and grabbed him, and one of them grabbed his
Speaker 1: laptop and stuck a flash drive into copy it. It It
Speaker 1: was all very very dramatic Hollywood stuff. And Ross was
Speaker 1: charged with money laundering. He was charged with conspiracy to
Speaker 1: commit computer hacking and conspiracy to traffic narcotics a pretty
Speaker 1: long rap sheet. Now. The prosecution also presented evidence that
Speaker 1: he tried to have several people killed because they had
Speaker 1: threatened to expose him. And I'm not quite sure why
Speaker 1: they didn't present that evidence exactly, but there there is. Yeah,
Speaker 1: he as as the pressure of the site had gotten worse.
Speaker 1: He was obviously being blackmailed and extorted and all this
Speaker 1: sort of stuff, And yeah, there is there is evidence
Speaker 1: to suggest that he tried to have certain people bumped off.
Speaker 1: I think he got trying to get the Hell's Angels
Speaker 1: involved at one point, and the the FBI or the
Speaker 1: d e A, one of the two actually staged the
Speaker 1: torture and execution of one guy who had been an
Speaker 1: administrator on Silk Road. They managed to turn him. They
Speaker 1: managed to catch him, catch him in the act. They
Speaker 1: managed to turn him, and they sort of video themselves
Speaker 1: supposedly torturing him and took videos of his pictures of
Speaker 1: his supposedly dead body and sent them to Ross saying,
Speaker 1: you know, job done, now give us the rest of
Speaker 1: our money. It was all pretty shady, but it turned
Speaker 1: out that nobody was actually killed. And yes, so evidence
Speaker 1: was submitted for these attempted assassinations, but Ross wasn't charged however,
Speaker 1: when he was saying, he was found guilty of the
Speaker 1: other charges sentenced at the end of May. Quite a sentence, yes,
Speaker 1: double life imprisonment plus forty years. I mean, look, that
Speaker 1: seems I know he's facilitating a lot more transactions of drugs,
Speaker 1: but is that I don't know. It seems they were
Speaker 1: making an example really well. Absolutely, yeah, absolutely, I think
Speaker 1: Ross Albrick sentences is unnecessarily harsh. And yeah, the the
Speaker 1: evidence for the attempted killings was apparently a factor in
Speaker 1: the judge's decision, and law enforcement also subsequently managed to
Speaker 1: secure convictions against dozens of dealers who'd used the side
Speaker 1: as well. So it did all it did all come
Speaker 1: crashing down. And yeah, Ross's arrest and conviction they did
Speaker 1: cause the price of bitcoin to dip, but only temporarily,
Speaker 1: so bitcoin yeah kind of weather this storm as well. Um,
Speaker 1: So let's let's bring this all to a close. I'd
Speaker 1: love to have talked about especially Silk Road more because
Speaker 1: it's such a fascinating it's such a fascinating experiment. Really,
Speaker 1: but there there really isn't There really isn't time today,
Speaker 1: So I do urge people to to read that Nick
Speaker 1: Bilton book. And as you say, there are various documentaries
Speaker 1: about it as well. Yeah for those who don't read yea,
Speaker 1: which may be quite a few of you seeing as
Speaker 1: you're listening to this, Um, there's some great great videos
Speaker 1: to watch. Yeah, Coin Bureau has a few, Yes, I
Speaker 1: think we I think we have talked about Silk Road before,
Speaker 1: but there are yeah, there are lots of There are
Speaker 1: lots of sort of specialist documentar I think there's even
Speaker 1: a feature film. Yeah, so you can dive into the
Speaker 1: Silk Road story a lot deeper, both books, films or
Speaker 1: podcasts and gean, So let's bring this all to a conclusion.
Speaker 1: And so It's fair to say Mount Cox and Silk
Speaker 1: Road both played huge roles in bring bitcoin into wider
Speaker 1: public consciousness, but both also contributed to the perception that
Speaker 1: it was a scam or you incredibly risky, or only
Speaker 1: used by criminals. And like I've said before, I think
Speaker 1: a lot of people still hold these views today. So
Speaker 1: it's an image it's they both caused image problems that
Speaker 1: bitcoin is still trying to shake to an extent with
Speaker 1: some people. I think the most of the world has
Speaker 1: moved on. Yeah, I think now that there's a big
Speaker 1: headge fund and stuff getting involved in it, it's yeah.
Speaker 1: So what's important to remember, though, is that whatever whatever
Speaker 1: the perception of bitcoin in in in the wake of
Speaker 1: these in the wake of these cases, what's important to
Speaker 1: remember is that bitcoin itself was never hacked or compromised.
Speaker 1: It was these It was these other uses, this exchange
Speaker 1: and this drugs marketplace. And you can't I don't think
Speaker 1: you can pin the rap on bitcoin for what people
Speaker 1: chose to do with it, certainly in the case of
Speaker 1: in the case of So Grown So yeah, it was
Speaker 1: the centralized services that used it. They were the weak
Speaker 1: points in bitcoin. Bitcoin lived on. So next episode we've
Speaker 1: covered bitcoin in quite a lot of depth over these
Speaker 1: last three episodes. I'm going I think we'll do one
Speaker 1: more episode on bitcoin next time, and we're just going
Speaker 1: to bring it up to the present day, because there's
Speaker 1: so much to the bitcoin story, and we could talk
Speaker 1: for we could talk for hours, we could talk for
Speaker 1: days about all the ins and outs of it. But
Speaker 1: I think probably it's a nice synopsis of it, bring
Speaker 1: up to speed and then crack on with maybe a
Speaker 1: different coin. Yeah. Oh yeah, there's lots there's lots more
Speaker 1: there's lots more coins, there's lots more projects, There's there's
Speaker 1: so much more to talk about about crypto. So but
Speaker 1: I think yeah, by the end of by the end
Speaker 1: of the next episode, will will be sort of Bitcoin
Speaker 1: will be with us in the present day. We'll have
Speaker 1: had a good general overview of its history, and I
Speaker 1: hope everyone will. I hope everyone will understand it better,
Speaker 1: understand where it came from, what it's trying to do,
Speaker 1: where it's, where it's gone, and and the people, crucially,
Speaker 1: I think the people involved with it, because again, as
Speaker 1: we've seen today with Mark car Police and Russell Brittain,
Speaker 1: people like that, there are just some so many fascinating people,
Speaker 1: even if some of them are a bit more a
Speaker 1: little unscrupulous. Yes, let's say that. Let's leave it at that.
Speaker 1: Thanks Mike, see you next time. I see you next week. Guys,
Speaker 1: see you next week. Thank you so much for listening
Speaker 1: to the coin Bureau podcast. If you'd like to learn
Speaker 1: more about cryptocurrency, you can visit our YouTube channel at
Speaker 1: YouTube dot com forward slash coin Bureau. You can also
Speaker 1: go to coin bureau dot com for loads more information
Speaker 1: about all things crypto. You can follow me on Twitter
Speaker 1: and at coin Bureau all on word, and I'm also
Speaker 1: active on TikTok and Instagram as well. First of all,
Speaker 1: it's not thank you for listening, You're welcome for great content. Yeah,
Speaker 1: Like this is free and they're learning about a fairly
Speaker 1: great topic in a non boring way. If you'd like
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