There's a £60m Bitcoin heist going down right now, and you can watch in real-time

Sheep Marketplace closed down over the weekend after someone got away with 96,000 bitcoins - and angry users are chasing him around the internet.

One of the largest heists in bitcoin history is happening right now. 96,000 bitcoins - that’s roughly £60m as of the time of writing - was taken from the accounts of customers, vendors and administrators of the Sheep Marketplace over the weekend.

Sheep was one of the main sites that came to replace the Silk Road when it closed in October, but it too has now closed as a result of this theft. It’s a little hard to work out exactly what’s happened, but Sheep customers have been piecing it together on reddit’s r/sheepmarketplace.

Here's what happened: someone (or some group) managed to fake the balances in peoples’ accounts on the site, showing that they had their bitcoins in their wallets when they’d actually been transferred out. Over the course of a week the whole site was drained, until the weekend when the site's administrators realised what was happening and shut everything down.

Originally it was thought that only 5,200BTC - or £3m - was taken, with a message posted on Sheep's homepage blaming a vendor called "EBOOK101" for finding and exploiting a bug. However, over the weekend it became clear that the amount stolen was much, much larger.

In a normal robbery that money would be gone by now, but it isn't. Bitcoin is pseudonymous, not anonymous, and bitcoins can’t just disappear. It works because each and every transaction is public and visible to each and every other person using the Bitcoin network, and a person is only as anonymous as their link to their wallet.

A couple of reddit users realised that the sheer size of the heist makes “tumbling” the coins - the normal method of laundering bitcoins - impossible, as long as they kept on their toes. Someone with bitcoin can send some to a tumbler like bitcoinfog, where it will be split into smaller subdivisions and mixed with other bitcoins from other places, recombining and splitting again several times over until the whole amount eventually comes out the other end, theoretically in such a way that it’s impossible to track. Silk Road’s in-built tumbler successfully foiled the FBI, allegedly.

However, reddit user TheNodManOut managed to track where the first bunch of transfers out of Sheep went, and from there and silkroadreloaded2 worked out which tumbler that the thief was using. Here’s how silkroadreloaded2 describes what’s happened since (“Tomas” is the alleged owner of Sheep, and one of the suspects for many users):

All day, we've been chasing the scoundrel with our stolen bitcoins through the blockchain. Around lunchtime (UK), I was chasing him across the roof of a moving train, (metaphorically). I was less than 20 minutes, or 2 blockchain confirmations, behind "Tomas".

He was desperately creating new wallet addresses and moving his 49 retirement wallets through them, but having to wait for 3 or 4 confirmations each time before moving them again. Each time I caught up, I "666"ed him - sent 0.00666 bitcoins to mess up his lovely round numbers like 4,000. Then,all of a sudden, decimal places started appearing, and fractions of bitcoins were jumping from wallet to wallet like grasshoppers on a hotplate without stopping for confirmations.

Shit!

He was tumbling our stolen bitcoins a second time, and a tumbler is unbeatable....

Unless you guess which one it is, nearly all the coins belong to the person you're tracking, jump in with him, and get jumbled up through the same wallets using the same algorithm. I was hopping from foot to foot shouting "come on!" at my laptop, waiting an age for 6 blockchain confirmations to get 0.5 btc into "bitcoin fog". My half a bitcoin got sliced and diced through loads of wallets and I followed the biggest chunk with blockchain.info - along with 96,000 stolen ones!

Or, in other words:

He gathered 96,000 in one pot, then split it into about 50 smaller ones. then he saw me 666ing them all. Imagine a sports stadium with 96,000 people in it, each with $1000.

He sent them all via different routes all over the world, but the same 96,000 people then arrived at a different stadium and he went to bed.

Now there are 96,001, and I just phoned you on my mobile to tell you where the stadium is.

A major problem with tumblers is that they only work with lots of bitcoins coming and going from a lot of different sources - if a tumbler is taking in 96,000 bitcoins, those will massively outnumber all other bitcoins being tumbled and it’ll be easy to spot them coming out the other end. Mix in a little of your own with all those other ones and you'll find out the wallet addresses that the tumbler uses, and it should be easy to spot large transactions splitting off from there.

The fascinating consequence of this is that you can see the stolen bitcoins on the public blockchain, and as long as there are people keeping tabs on it there’s going to be no way for the thief to cash in on their haul. Considering how people rely on tumblers to maintain anonymity when buying illegal stuff online, this unusual loophole is something of a revelation.

Right now, as you’re reading this, you can watch as the the thief starts trying to move their bitcoins on again - it’s currently down to 92,000 bitcoins and dropping as smaller chunks begin going out. Selling those bitcoins and turning them into cash is going to be extremely difficult, as the major Bitcoin exchanges all demand proof of identity (specifically to avoid charges that they're involved in money laundering), and if they're broken down into smaller quantities to sell via a site like localbitcoins.com a paper trail will still be generated. As soon as it's possible to link one real-life bank account or identity to any bitcoins from that stash, it will be possible to work out their real-life identity.

This counts as one of the largest robberies in history at Bitcoin's current market value, ranking in the same company as real-life thefts like the $108m diamond theft at the Harry Winston store in Paris in 2008. 96,000 bitcoins also places the thief as one of the wealthiest Bitcoin millionaires on the current rich list (but bear in mind that few serious Bitcoin players keep their currency in just one wallet) - and all without having to go to the trouble of wearing balaclavas or threatening someone with a gun.

Let's watch and see what happens next.

Some fan-made physical bitcoins. (Photo: antanacoins/Flickr)

Ian Steadman is a staff science and technology writer at the New Statesman. He is on Twitter as @iansteadman.

@Simon_Cullen via Twitter
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All 27 things wrong with today’s Daily Mail front cover

Where do I even start?

Hello. Have you seen today’s Daily Mail cover? It is wrong. Very wrong. So wrong that if you have seen today’s Daily Mail cover, you no doubt immediately turned to the person nearest to you to ask: “Have you seen today’s Daily Mail cover? It is wrong.”

But just how wrong is the wrong Mail cover? Let me count the ways.

  1. Why does it say “web” and not “the web”?
  2. Perhaps they were looking on a spider’s web and to be honest that makes more sense because
  3. How does it take TWO MINUTES to use a search engine to find out that cars can kill people?
  4. Are the Mail team like your Year 8 Geography teacher, stuck in an infinite loop of typing G o o g l e . c o m into the Google search bar, the search bar that they could’ve just used to search for the thing they want?
  5. And then when they finally typed G o o g l e . c o m, did they laboriously fill in their search term and drag the cursor to click “Search” instead of just pressing Enter?
  6. The Daily Mail just won Newspaper of the Year at the Press Awards
  7. Are the Daily Mail – Newspaper of the Year – saying that Google should be banned?
  8. If so, do they think we should ban libraries, primary education, and the written word?
  9. Sadly, we know the answer to this
  10. Google – the greatest source of information in the history of human civilisation – is not a friend to terrorists; it is a friend to teachers, doctors, students, journalists, and teenage girls who aren’t quite sure how to put a tampon in for the first time
  11. Upon first look, this cover seemed so obviously, very clearly fake
  12. Yet it’s not fake
  13. It’s real
  14. More than Google, the Mail are aiding terrorists by pointing out how to find “manuals” online
  15. While subsets of Google (most notably AdSense) can be legitimately criticised for profiting from terrorism, the Mail is specifically going at Google dot com
  16. Again, do they want to ban Google dot com?
  17. Do they want to ban cars?
  18. Do they want to ban search results about cars?
  19. Because if so, where will that one guy from primary school get his latest profile picture from?
  20. Are they suggesting we use Bing?
  21. Why are they, once again, focusing on the perpetrator instead of the victims?
  22. The Mail is 65p
  23. It is hard to believe that there is a single person alive, Mail reader or not, that can agree with this headline
  24. Three people wrote this article
  25. Three people took two minutes to find out cars can drive into people
  26. Trees had to die for this to be printed
  27. It is the front cover of the Mail

Amelia Tait is a technology and digital culture writer at the New Statesman.