Snippings

Earlier this year there was a massive theft of cryptocurrency from the supposedly secure offline hardware crypto wallet Coldcard, made by Coinkite. The cirminals made off with around $130 million. This theft attracted attention because the point of using a product like Coldcard is that it’s supposed to be, at least in theory, one of the safer ways to store their cryptocurrency.

(The hackers figured out that there was a flaw in how Coldcard wallets generated users’ seed phrases, which made them predictable. Once they figured out the flaw, they simply needed to brute-force to obtain the victims’ seed phrases in reasonable time.)

An even more ingenious attack hit the Ledger hardware wallet. Hackers physically implanted hardware into Ledger wallets sold through Southeast Asian reseller CryptoBilis, and then used this trojan horse chip to get hold of the wallet contents, draining roughly $86 million from victims.

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Unveiled in the budget, the government is directing HM Revenue & Customs to work with stakeholders and publish a technical consultation next summer that will set out detailed implementation proposals.

The standards, covering electronic and mobile POS systems, will aim to tackle the problem of “electronic sales suppression”.

From: UK Government takes on till fraud with POS software .

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The nice people at Financial Crime 360 invited me to close out the first day of their event in London with a fireside chat with my good friend Erica Stanford. Erica has a new book out on 1st December, “XXX”, which made the obvious person to answer the question posed: are stablecoins good or bad for criminals?

As it was the last panel of the day, I thought we should probably have some and give the delegates something to think about. As many of you already know, I think that sometimes you can get people to think in new ways, and challenge assumptions, by having people laugh during the event and then find themselves reflecting on the train on the way home. Given that Robert Courtneidge had just moderated an excellent panel dicussion that ranged across the Binance hack, UK regulation and stablecoin issuing, I had to modify our chat so as not to go over the same ground. Well, I’ll let Robert take over from here, as he picked out a few elements of our discussion to put up on LinkedIn…

“On Dave’s proposed prediction market: Dave pitched a brand-new business model: a prediction market for when people are going to die. He generously used me sitting in the front row as his prime example – explaining how a hitman could place a £5 bet on the exact date he pushes me under a train to claim a £10M payout! (Note to self: avoiding train platforms for the foreseeable future.)”

The combination of truly anonymous digital money and prediction markets is truly frightening. You can read more about assassination markets here:

https://dgwbirch.substack.com/p/prime-ministers-predictions-and-programmability?utm_source=publication-search

“When discussing how North Korean hackers get hired as remote developers at major banks, Dave summarised Erica’s legal advice perfectly:

‘So your suggestion to the audience is… if you want to rob a bank, you should just go work for it?’”

Know-your-employee is a serious issue now.

https://dgwbirch.substack.com/p/kye-know-your-employees?utm_source=publication-search

“Dave couldn’t help poking fun at the infamous Bitfinex hackers, a couple in America who were not really making it as rappers🙄, who got caught when they decided to ‘off ramp’ their stolen billions to buy gift cards from Amazon which they then had posted to their own home address”

The point holds although Erica meant to say Walmart, not Amazon. You can read all of tbis here:

https://dgwbirch.substack.com/p/dirty-laundry?utm_source=publication-search

On the UK keeping up with the rest of the world: Dave warned that if we don’t embrace tech, London’s position as a global center for ‘money laundering’ might slip:

We spend an enormous amount of money on KYC/AML and for what? Money laundering keeps going up while the friction for law-abiding folk is becoming intolerable.

https://dgwbirch.substack.com/p/aml-isnt-working?utm_source=publication-search

“A huge thanks to Dave and Erica for keeping the audience laughing right to the end! 🤣👏”

Well you are very kind Robert, thank you for the write up! And I love the cartoon, which I will of course steal.

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Just as the rise of smartphones sparked the development of a more atomized and attention-grabbing internet, the advent of powerful AI systems heralds a new era: We’re facing not the semantic web but the agentic web. This new web is developing out of sight and in ways that might not be entirely within our control. As it grows, the agentic web will inevitably transform the human web—and whether the human web survives this transition is anyone’s guess.

From: The agentic web is here | MIT Technology Review.

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I am sure that you are all familiar with the biggest “crypto” heist of all time in which more than six billion dollars’ worth of cryptocurrency and digital currency was redirected from Binance to wallets controlled by the thieves. The FBI specifically blamed the North Korean “TraderTraitor” group of hackers linked to North Korea, for crime, saying it expected the funds to be converted and “further laundered”. So what does all of this mean for the world of stablecoins and digital assets? Probably nothing.

To understand the implications of this event, it is very important to distinguish between the theft of cryptocurrency (in this particular case, BTC and ETH) and the theft of digital assets such as stablecoins (in this particular case, XXX). At high level, the difference is this: digital asset transfers can be blocked and assets can be frozen, whereas cryptocurrency transfers cannot be blocked, because censorship resistance is fundamental to their architecture. Thus, at the time of writing about $3 billion of digital currency is frozen: Tether alone reported more than 1.567B USDT frozen and Circle more than 800M USDC while Ripple, World Liberty, the Arbitrum Security Council and others froze smaller amounts. TRM Labs says the attacker now holds more than 420,000 ETH and 18,270 BTC, about $2.4 billion beyond any issuer’s reach.

The cryptocurrency fans guiding principle is “not your keys, not your coins”. In their view, people should be responsible for the management and protection of their cryptocurrency. This is why I wrapped my USB stick wallet in tinfoil and buried it in my back garden. Unfortunately, even this level of security is inadequate now that attackers ranging from mischief makers and mountebanks of all kinds to agents of hostile foreign powers.

Earlier this year there was a massive theft of cryptocurrency from the supposedly secure offline hardware crypto wallet Coldcard, made by Coinkite. The cirminals made off with around $130 million. This theft attracted attention because the point of using a product like Coldcard is that it’s supposed to be, at least in theory, one of the safer ways to store their cryptocurrency.

(The hackers figured out that there was a flaw in how Coldcard wallets generated users’ seed phrases, which made them predictable. Once they figured out the flaw, they simply needed to brute-force to obtain the victims’ seed phrases in reasonable time.)

An even more ingenious attack hit the Ledger hardware wallet. Hackers physically implanted hardware into Ledger wallets sold through Southeast Asian reseller CryptoBilis, and then used this trojan horse chip to get hold of the wallet contents, draining roughly $86 million from victims.

When I stopped by MIT’s Dome at Davos in 2025, I  was priviledged to sit in on a discussion about AI in which Youshua Bengio put forward an interesting perspective. He suggested that perhaps we should treat AI as a hostile foreign power, and noted that the security services work to protect us from the actions of such powers. Indeed. And his view only reinforced my conviction that we need to accelerate our thinking about extending digital identity infrastructure to AIs as soon as possible.

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In a recent podcast discussion with the New York Times, Sir Demis talked about the near future for AI. Naturally, as the guy is a genius, it is all worth listening to. But one thing he said in particular caught my attention. He was talking about what truly useful AI assistants might look like and he said that if a personal agent knows you well then you could teach it to “protect your attention”. He went on to explain what this means, by talking about how social media is vying for your attention and how an AI could defend your attention from “being assaulted by other algorithms” that want to capture (and, indeed, overrun) it.

To protect your attention. What a succinct and evocative phrase to describe what AI can do for you. When it comes down to it, your attention is a very valuable resource, so protecting and managing that resource is really important

From: What The Mad Men Characters Might Do To Attract AI Agents.

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Italy’s largest bank, Intesa Sanpaolo, has been hit by so-called CEO fraud. AI scammers managed to obtain 95 million euros from Fideuram, a private banking subsidiary of the bank. The criminals posed as top bank officials using a deepfake voice. A large portion of the stolen money has since been recovered, although approximately 36 million euros is still missing.

From: Major Italian bank defrauded of 95 million euros: criminals use CEO’s deepfake voice – ITdaily.

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In the Bybit hack, the laundering followed human working patterns. The Binance funds are being moved by something that does not sleep.

From: The Binance hack is laundering on autopilot | Elliptic.

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AI hallucinations are appearing in rising numbers of consumer complaints to Britain’s Financial Ombudsman Service, which is responding by calling more people to discuss their cases over the phone.

From: UK financial ombudsman hits phones to cut through AI hallucinations.

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The IMF constructed a globally representative panel of money flows in 188 countries representing more than $21.4 trillion in gross flows from 2018 to 2025. What they found is fascinating
Activity is disproportionately concentrated in emerging markets and developing economies, which hold three quarters of stablecoins. When countries restrict capital outflows, stablecoin activity rises by roughly 30 percent over the following six months, then plateaus, and does not fall back when restrictions are removed. When currency crises hit, stablecoin holdings increase by roughly 75 percent within a year, and the new holdings persist.

From: Binance’s $6.36B hack and the stablecoin freeze test.

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