Do we need BailCoin? FBI refuses to take cryptocurrency in videogame hacking case

This post was originally published on this site

After being arrested by federal agents for allegedly hacking videogame giant Electronic Arts Inc.’s systems, Martin Marsich tried to post a $750,000 bond with cryptocurrency.

That’s when Masich, federal authorities and the court ran into problems that show how difficult it can be to use digital currency in the real world, even as it becomes more prevalent online. In this case making its way through federal court in San Francisco, there were concerns that selling a large stash of small and lightly traded coins could have caused severe fluctuations in their prices.

Last known to reside in Italy, Marsich, 25, has been accused by the Justice Department and Federal Bureau of Investigation of infiltrating EA EA, -1.31%  systems related to its “FIFA” soccer franchise and stealing roughly $324,000 worth of digital goods, according to court documents. Arrested at San Francisco International Airport amid a sightseeing trip to Los Angeles, Marsich tried to use his stash of cryptocurrency as bail.

Don’t miss: The cryptocurrency market has shed more than $600 billion from its peak — what exactly happened?

While trying to set up the bond, government and defense lawyers spent several minutes hammering out the precise details of the exchange, and one lawyer suggested it wasn’t the first time the issue had come up.

“My sense is that it’s happened before, but it’s not the most common thing, so it might take a couple of days to get set up,” assistant U.S. attorney Ben Kingsley said in an Aug. 9 court hearing, according to an audio tape of the proceedings obtained by MarketWatch. “By then we should have the [cryptocurrency] wallet set up and we can do the transaction with the agents present.”

After trying to set up the bond — including taking steps to create a cryptocurrency wallet to facilitate the transfer — the government reversed course the next week and said it was not, in fact, able to take the digital money.

“Unfortunately, the FBI could not take possession of the cryptocurrency even though part of it would be used for restitution to Electronic Arts, due to liability issues,” assistant U.S. attorney Susan Knight said at an Aug. 13 hearing. “I had extended conversations with their district counsel and they refused to accept it, to have it as part of a bond and part of forfeiture.”

Instead, Knight suggested that Marsich sell $750,000 worth of his cryptocurrency to pay bail — but to sell such a large chunk of the currency Marsich holds could tank the value of the currency because it is thinly traded. And if that happened, Marsich would not be able to pay restitution that could be owed to EA.

Marsich holds several lesser known cryptocurrencies instead of a more well-known currency like bitcoin BTCUSD, +1.38%  , and Masich’s lawyer said in court that selling off a $750,000 stake would have the potential to crash the price. MarketWatch was unable to determine the exact currencies Marsich holds Friday.

Ultimately, the prosecutors and the defense agreed that Marsich would sell $200,000 worth of his cryptocurrency via a broker to secure his bail. From court documents, it’s not clear whether the transfer has occurred yet.

While in other parts of the country, court officials may deny such an approach because of a lack of knowledge about cryptocurrencies, that did not appear to be the case in the heart of Silicon Valley. At several points during the various proceedings, those in court showed knowledge of cryptocurrency, including the judge overseeing the case.

“I just went to a conference where I learned all about this,” magistrate judge Jacqueline Corley said in court. “It is very volatile, that I know,” she added later in that hearing.

Marsich is accused of using developer software designed to let two apps communicate, as well as a secret key that EA posses to gain access to EA’s systems and alter databases related to granting tens of thousands people online access to “FIFA 18” and digital content associated with it. The accounts Marsich effectively stole give players access to the game, which normally would cost players up to $60, plus the cost of the additional digital content.

See also: ICO swindlers have absconded with some $100 million in investor dough, research firm says

EA told the FBI that it suspects the hacker sold the stolen accounts over the dark web or online black markets, according to the FBI’s affidavit.

EA spokesman John Reseburg said Friday that EA works hard to protect its players and took steps to mitigate the problem as soon as it discovered the intrusion. No player data was exposed, he said.

During a court hearing earlier in August, Kingsley said that Marsich admitted to federal agents that he converted some of the proceeds from the scheme into cryptocurrency, which he then used for his trip to the U.S.

The hack began Sept. 24 of last year and EA figured out that its systems had been compromised March 25, 2018. Marsich faces up to five years in federal prison and a $250,000 fine.

EA stock fell 2.5% this week, as the S&P 500 index SPX, +0.33%  rose 0.3%.

More from MarketWatch
Be Sociable, Share!

Related Posts


MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.

This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.

The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The educational training program and software services are provided to improve financial understanding.

The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.