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

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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.

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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.

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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%.

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