The JCC bomb threat suspect, identified as Michael Kaydar by The Daily Beast, leaving court in Rishon Lezion, Israel, March 23. Photo by Jack Guez/AFP/Getty Images.

JCC bomb threat suspect reportedly used Bitcoin, Google Voice


The Israeli-American teenager suspected of perpetrating more than 100 bomb threats against Jewish institutions used technologies including Google Voice, a call forwarding service, and Bitcoin, a digital currency, to make the threats.

According to an article in The Daily Beast, the 19-year-old suspect’s name is Michael Kaydar. Israel’s anti-fraud squad arrested Kaydar at his home in southern Israel and searched the premises on Thursday.

He also is accused of a series of threats made in Europe, Australia and New Zealand in the past six months, according to reports in Israel, and is reported to have called in threats to the Israel Police two months ago regarding Israeli educational institutions.

To hide his identity, Kaydar used a technology called SpoofCard that masks a number’s caller ID, according to the Daily Beast. When police subpoenaed SpoofCard’s parent company to trace the call’s real number, they learned that he had called from a disposable Google Voice number.

He paid for SpoofCard through Bitcoin, also untraceable, and routed his internet through proxies, making his IP address untraceable as well. In addition, he masked his voice in the calls to sound like a woman.

Kaydar was caught after he forgot to trace his internet connection through a proxy server, allowing police to trace his IP address, which led to his home.

A yearlong trip around the world – using only bitcoin


Felix Weis has gotten used to blank stares anytime he tries to pay for something. Since January, the 28-year-old freelance computer programmer from Luxembourg has been on a trip around the world using only bitcoin.

Most store clerks, bartenders and tour operators he's encountered have never heard of the virtual currency. But that is what Weis intended. He is targeting ordinary people rather than tech geeks who already understand it.

“Bitcoin is the most exciting global socioeconomic experiment right now,” Weis said. “I really believe in it.”

As proof of his devotion to the six-year-old currency, Weis converted all his money into bitcoin and cut up his credit card. He carries the two halves in a clear plastic bag for anyone who doubts his seriousness.

Often three or four people gather to listen as he – usually – convinces someone to accept it as payment. Then he pulls out a selfie stick. In the 14 countries Weis has visited so far, he has snapped dozens of photos with first-time bitcoin users holding up their smartphones to show off their first transaction. That includes this reporter.

Bitcoin was invented as an alternative to government-run monetary systems, and allows users to make payments instantly and anonymously, even across borders, with no need for a bank or other third party. It can be used to buy goods and services, traded for traditional currency on a bitcoin exchange, or stored in a virtual “wallet.”

The virtual currency is controlled by an international network of computers, rather than a central bank or government. Its underlying technology is the blockchain, a sort of public ledger of each bitcoin transaction. Thousands of specialized computers worldwide verify transactions using a computer code that – in theory – is unbreakable. That transparency and cryptographic proof are bitcoin's appeal for users who distrust banks or government-backed currencies – or would like to keep their transactions out of sight.

To use bitcoin, you need to first download a bitcoin wallet app to your smartphone. Then you can buy bitcoins online through an exchange, or in person through a local seller. Websites such as spendbitcoins.com show where you can spend bitcoin in your area.

Its potential advantages for frequent travelers are obvious: paying by bitcoin is instantaneous, with no need to exchange currency in each country or pay foreign transaction fees.

Weis intends to visit 21 countries by the end of the year to symbolize the 21 million bitcoins that can ever come into use, as designed by the currency's mysterious founder, who is known only by the name Satoshi Nakamoto. The name is widely believed to be fake.

Weis sticks to three rules: He must use bitcoin whenever possible to pay for food, accommodations and travel. He can never use a debit or credit card. And he may use limited amounts of local currency, but only if he obtains it by exchanging bitcoin for physical money with local people found via a special website, localbitcoins.com.

So far he has visited much of Europe, plus Turkey, Israel and Ukraine. To book his travel, Weis uses travel companies that accept the digital currency. Expedia.com customers can use it to pay for hotel bookings, while CheapAir takes it for hotels and flights.

After a free historical tour of the Israeli port city Jaffa, Weis had offered to tip his tour guide in bitcoin. To do so, he had her download a bitcoin wallet app to her smartphone, then used his own phone to scan the wallet's QR code. Within seconds the guide possessed the bitcoin equivalent of 30 shekels. Finally, Weis pulled up a map of Tel Aviv on Coinmap.org to show her all the nearby stores, restaurants and services where she could spend it.

In other countries, Weis has used the virtual currency to pay for scuba diving lessons, paragliding and bungee jumping. Weis' experiences in each country vary widely depending on bitcoin adoption rates and awareness. Sometimes he has a limited choice of stores, restaurants and activities, and he can't always persuade merchants to take a chance on a new currency.

For a few days in Varna, Bulgaria, Weis' only meal was the complimentary hotel breakfast. Budapest and Berlin had the most places that took bitcoin. In Turkey in May, Weis celebrated “Bitcoin Pizza Day” – the anniversary of the first real-world transaction using bitcoin in 2010 – two days late because it took him that long to find a pizzeria he could convince to accept it.

Despite his enthusiasm for bitcoin, Weis does not encourage others to go to the same extremes. As with any digital technology, bitcoin wallets are susceptible to hacking or file corruption. But unlike bank-issued cards, bitcoins aren't overseen by an authority that can help in those situations.

The currency is highly volatile: At one point in 2013, the price per bitcoin soared to more than $1,200 and crashed 70 percent a month later. Days after he started his trip, Weis thought he would have to cut it short by two months when the price dropped to $180. He'd budgeted for a year with bitcoin selling for at least $250. It now trades around $255 on the Bitstamp exchange.

Last week, Weis flew to Hong Kong to begin the Asian leg of his journey. He will go to South America later in the fall. He hopes to learn more about how bitcoin is used differently depending on economic factors, he said. In the Philippines, for instance, personal remittances make up 10 percent of the GDP. Bitcoin makes it cheaper to transfer money, because there's little to no fee.

Meanwhile, in Venezuela and Argentina, bitcoin adoption has been fueled by high inflation and capital controls. At least 65 percent of Latin Americans do not have bank accounts, but many do have smartphones, which give them easy and cheap access to bitcoin, according to Sebastian Serrano, founder of BitPagos, Argentina's biggest bitcoin company.

Weis' last stop will be Berlin, where his trip began and where he's thinking about creating a software startup to make using bitcoin “easier and safer for the average person.” He says he would like to get paid in bitcoin and plans to keep his savings in the digital currency as well.

Said Weis: “Now that I know it's possible to live off bitcoin in 14 countries, why go back to the boring old system?”


Tania Karas is an Istanbul-based multimedia journalist covering legal trends and human rights. The opinions expressed are her own.

Silk Road operator convicted on U.S. drug charges


The suspected operator of the underground website Silk Road was convicted on Wednesday on narcotics and other criminal charges for his role in orchestrating a scheme that enabled around $200 million of anonymous online drug sales using bitcoins.

Ross Ulbricht, 30, was convicted by a federal jury in Manhattan on all seven counts he faced following a closely watched four-week trial that spilled out of U.S. investigations of the use of the bitcoin digital currency for drug trafficking and other crimes.

The jury of six men and six women needed a little over three hours to deliberate before finding Ulbricht guilty of charges that included drug trafficking and conspiracies to commit money laundering and computer hacking.

Ulbricht faces up to life in prison. He has attracted many supporters to his cause, including some who say the government's case is an attack on Internet freedom.

After the verdict was read, Ulbricht turned toward his supporters and raised his hand as he was led from the court. “Ross is a hero,” shouted one supporter wearing dreadlocks.

Silk Road operated from at least January 2011 until October 2013, when authorities seized the website and arrested Ulbricht at a public library in San Francisco.

Prosecutors said Ulbricht ran Silk Road as “Dread Pirate Roberts,” an alias borrowed from a character in the 1987 movie “The Princess Bride.”

'FALL GUY'

The website relied on the so-called Tor network, which lets users communicate anonymously, and accepted payment through bitcoins, which according to prosecutors allowed users to conceal their identities and locations.

By the time it was shut down, Silk Road had generated nearly $213.9 million in sales and $13.2 million in commissions, prosecutors said.

Prosecutors said Ulbricht took extreme steps to protect Silk Road, soliciting the murder of several people who posed a threat. No evidence exists that the murders were carried out.

Ulbricht conceded that he created Silk Road, and his lawyer Joshua Dratel said it was intended as a “freewheeling, free market site” where all but a few harmful items could be sold.

But Dratel said Ulbricht's “economic experiment” eventually became too stressful for him, so he handed it off to others. He was lured back toward its end, he said, becoming the “fall guy” for its true operators.

Bitcoin makes aliyah: Cryptocurrency finds Israeli fans


Blocks away from the Tel Aviv Stock Exchange and the headquarters of two major banks, in the corner of the lobby of a boutique hotel, Nimrod Gruber sticks his hand into an ATM.

A few seconds later, a QR code prints out. Gruber takes the slip of paper and walks away, no cash in hand.

He’s not worried. He owns the ATM, and there’s nothing like it in the Middle East. It identifies users by scanning their palms, and instead of dispensing dollars, euros or shekels, it dispenses Bitcoin.

“It shows up in your account in 30 seconds, a minute,” he said.

Bitcoin, a digital currency invented in 2008, has spread across the world, and made a hefty profit for its holders, without printing a single bill. As Bitcoin has gained value over the years, an ecosystem of startups and organizations has taken shape in Tel Aviv to promote its use in Israel’s tech scene.

“Here we adopt new technology earlier than other places,” said Gruber, 28, a former model who became involved in Bitcoin technology during a stint living in New York City. “It makes sense that this would be a Bitcoin center. We’re at the heart of the high-tech area and the Tel Aviv financial district.”

Called a “cryptocurrency” because it is secured by encrypted data, Bitcoin itself could be best described as cryptic. Its reputed inventor, who goes by the name Satoshi Nakamoto, has communicated only by email. Unlike mainstream currencies, Bitcoin isn’t backed by a government or central bank and has no physical form.

Instead, it exists in computer code, and its value is determined purely through supply and demand in online exchanges where Bitcoin holders buy and sell it for other currencies. People can “mine” new Bitcoins by performing complex calculations on their computers.

Bitcoin has encountered a host of issues in its development, from the question of government regulation to use for illegal activities to a volatile growth pattern. According to a digital currency tracker, one Bitcoin was worth about $100 a year ago and had spiked to nearly $1,000 by last November. Three weeks later, though, its value dropped to about $600 after China banned its use. It’s worth roughly $630 now, with $8 billion of total Bitcoins on the market.

The ups and downs haven’t deterred Israeli Bitcoin believers, who expect growth ahead and say the currency will stabilize as more people adopt it. Dozens of startups have proliferated around Bitcoin use in Israel, and more than 120 Israeli businesses, from restaurants to real estate firms, accept Bitcoin as payment.

“I hope we can make Israel a lab for Bitcoin,” said Ayal Yona Segev, an “ambassador” at Bitcoin Embassy, which provides guidance and acts as a meeting spot for Israeli Bitcoin entrepreneurs a few blocks from Gruber’s ATM. “We have the flexibility to become a place where we test and develop everything.”

The ATM in the hotel hooks up to an online exchange. Users can log in to their accounts and either deposit cash to buy Bitcoin or sell Bitcoin and receive cash. Similar ATMs already exist in the United States, Canada and Europe.

Gruber hopes the ATM will be one of many in Israel. He jokes about placing one in the middle of the divider between men and women at the Western Wall.

Another Israeli startup, Colored Coins, allows users the opportunity to trade other currencies online using the Bitcoin code. BitcoinBox offers Bitcoin holders insurance for their “digital wallets.” Coin Commerce offers businesses a service to accept Bitcoin as payment.

“We have a good community here,” said Aaron Aguillard, founder and CEO of Coin Commerce. “What Coin Commerce is trying to do is set up Tel Aviv for the tourist season so people can buy Bitcoin and travel around Israel, and book hotels and use Bitcoin on the beach.”

Israeli Bitcoin entrepreneurs see the currency as a practical tool as well as an ideological dimension to their work. Segev’s office sells Bitcoin-themed T-shirts and bumper stickers, one of which writes out Nakamoto’s name in a style of chant traditionally used to celebrate the Hasidic sage Rebbe Nachman of Breslov.

Segev says that in addition to Bitcoin’s startup nature, it appeals to Israelis who took to the streets three years ago in massive numbers to protest income inequality. He calls it an alternative for people who are mistrustful of their banks and tired of high credit card fees.

“It will make people aware of the current situation” in Israeli banking, Segev said. “This is an alternative that will make service providers — banks, the state, insurance companies — compete for customers.”

Bitcoin’s regulatory status remains unclear. The Internal Revenue Service in the United States taxes Bitcoin profits as a capital gain, but Israel only taxes income made from Bitcoin once it is transferred into shekels. In February, the Bank of Israel issued a warning regarding Bitcoin, noting that it isn’t backed by any state, is unsupervised, and could be susceptible to manipulation and criminal use.

But Avi Nov, an Israeli international tax law expert, says the legal concerns will fade as Bitcoin expands and that regular currencies also carry risk.

“The risks are greater in the regular world than in the digital world,” he said, adding that “nobody knows if tomorrow a state or a bank will fail.”

Israel launches a virtual coin


This story originally appeared on themedialine.org.

A virtual currency called “Bitcoin” has become popular in the past few months. Traded digitally, it can be used instead of money. Today, the Bitcoin is trading at about $530.00.

“Every time I go to buy something the person behind the counter doesn’t have change,” Tzvi Ben Yakov, a Bitcoin service provider in Israel told The Media Line. “The Bitcoin can be divided into eight decimal places – that’s tiny tiny pieces of a Bitcoin.”

In some ways using Bitcoin is like using a credit card, but with lower fees.

“Here in Israel, there’s only one credit card clearing company and they decide what the fees are,” Ben Yakov said. “With Bitcoin, the fees are so small that you don’t even notice them. You can transfer Bitcoins for free.”

While Bitcoins are a universal virtual currency, some countries, including Iceland, Cyprus and Spain, also have their own particular type. Now Israel is set to join that club, with the launch of “Isracoins” this week.

“The idea is to create a currency for the citizens of Israel that will help the Israeli economy,” Amnon Dafni, one of the six founders of Isracoin told The Media Line. “There is no competition in the banking system here so fees are very high and every time you want to move money it costs a lot of money.”

Dafni is active in the social protest movement that began in the summer of 2011 when hundreds of thousands of young Israelis protested in Tel Aviv against the high cost of living. Those protests have fizzled out, but the cost of living remains a major issue for many here. Relative to average salaries, the cost of buying an apartment is higher in Israel than in any of the Organization for Economic Cooperation and Development (OECD) countries.

Like Bitcoins, Isracoins are cryptographic, meaning they are created by a computer that anyone can download. Once the system gets underway, 72,000 coins will be released daily up to a total of 4.8 billion over several years.

To encourage its use, Dafni says they will give away 100 coins to each of 2.8 million Israelis over the next few months. The first 50,000 businesses that agree to use the virtual currency will get 500 coins. He says “dozens” of businesses have already expressed interest and hundreds of Israelis have already gone online to download the necessary software.

Some are skeptical that the Isracoin will be able to break the strong banking monopoly in Israel. In Iceland, the alternative currency was used to bring down inflation. But the Israeli currency, the shekel, is the strongest it’s been in years.

“The developers of Isracoin are trying to create something new, but it’s a bit of a publicity stunt,” Orr Hirsachague, a technology reporter for the Ha’aretz newspaper told The Media Line. “But that doesn’t mean there is no chance that it will work.”

Israelis are well-plugged into technology and Israel has a large amount of high-tech start-ups. In the past year alone, there have been more than two dozen start-ups with tools to use Bitcoin. The idea of a digital currency could be accepted here faster than in many other countries.

At the same time, the Bitcoin has shown itself to be very volatile. In late 2013, it hovered around the $1,000 mark for one Bitcoin. In September it was $150, and is now about $530.

In a recent statement, Israeli monetary authorities warned the public that the Bitcoin is unsupervised, and could be used for fraud. Because it is transferred digitally and anonymously, they also warned it could be used for money-laundering and other fraudulent activities.

Israel warns public on bitcoin risks, mulls regulation


Israel said on Wednesday it was considering regulation of bitcoin and warned citizens that using such decentralised virtual currencies was risky.

As a crypto-currency, bitcoin is passed between two parties digitally and can be traded on exchanges for real-world currencies. Its value fluctuates according to user demand but it is not backed by any government or central bank.

Supporters of bitcoin are drawn to its decentralised platform and say it is here to stay. Detractors call it a bubble and expect it to be forgotten in a year or two.

However, it has proved increasingly popular and governments and regulators around the world have been searching for the best way to respond.

Israel, home to pioneering firms in hi-tech fields such as cryptography, has emerged as a bitcoin hotspot, prompting central bank governor Karnit Flug to convene a meeting this week with other regulators, including those for capital markets, taxes, securities and money laundering and terror financing.

“It was agreed to continue to examine various perspectives related to the use of, and trade in, virtual currencies,” the authorities said in a joint statement on Wednesday.

“These perspectives include possible macro effects, their legal standing, their regulation, money laundering and terror financing risks, taxation and consumer protection.”

They said the Israeli public should be aware that bitcoin is unsupervised, is not legal tender and presents fertile ground for fraudulent activities. At the same time, such transactions are anonymous and often hard to trace, they added.

CRIMINAL ACTIVITY

“This anonymity is liable to be exploited for criminal activity, including money laundering, financing illegal activities and financing terrorism,” the statement said.

“Law enforcement authorities are therefore likely to close trading platforms in virtual currencies which are used for illegitimate activities, by preventing access or use of customers' capital, which would likely be held by those platforms,” the statement added.

Other governments have also issued warnings on the use of bitcoin and New York's financial regulator revealed plans this month to govern virtual currency firms in the state in order to protect consumers and combat money laundering.

At least two dozen Israeli startups have popped up in the past year with a view to creating tools that will allow bitcoin to be used in almost any kind of transaction – from buying shoes to issuing company stock.

In recent weeks, bitcoin was hit by attacks from unknown computer hackers that led to problems at two exchanges. They had to temporarily halt withdrawals by customers who stored bitcoins in digital wallets provided by the exchanges.

This week, a bitcoin is worth about $635, down from around the $1,000 mark in late 2013. However, it was worth only about $150 as recently as last September.

Israeli startups dream of a Bitcoin world


“Welcome to the new economy,” boasts a sign at the entrance of the self-styled Bitcoin Embassy in the heart of Tel Aviv.

The sparely furnished property opened a few months ago to support a community of Bitcoin fanatics, perhaps the most active in the world, who are out to build just that – a next-generation trading system based on the digital currency.

At least two dozen startups have popped up in Israel over the past year with a view to creating tools that will allow the currency to be used in almost any kind of transaction – from buying shoes to sending remittances or issuing company stock.

Israeli companies are pioneers in hi-tech fields like cryptography, fraud prevention, and semiconductors, all of which interact with the Bitcoin universe.

That makes the country as much of a Bitcoin hotspot as Singapore or California's Silicon Valley, says Eli Novershtern, principal of Israel's biggest venture capital firm Pitango, which manages assets worth over $1.6 billion.

“We see a lot of activity here and are certainly looking to invest (in such firms), even significant sums if we recognise an attractive opportunity,” he said, without offering details of specific plans.

As a crypto-currency, Bitcoin is passed between two parties digitally and can be traded on exchanges for real-world currencies. Its value fluctuates according to user demand but it is not backed by any government or central bank.

New bitcoins come from a process called mining. Computer programmers around the world compete to crack an automatically generated code and the first to do so is rewarded with a small stash. This happens about every 10 minutes.

The maximum potential number of bitcoins in circulation is 21 million compared with around 12 million currently – meaning that, over time, the payoffs get smaller.

Enthusiasts hope the circulation limit and wider acceptance of the currency will mean its value goes up. One bitcoin is currently worth about $700, giving the currency a total potential market value of about $9 billion.

As recently as 2012 it was changing hands for $10.

Netanel Goldberg, 42, heads GetReal Platforms, a company he and two other graduates of Israel's military cyber intelligence unit founded last year.

He foresees a “bloodbath” as ever stronger computer networks compete to mine the most bitcoins – a market he expects to grab a sizable chunk of, thanks to a silicon-based chip that GetReal is developing.

SECONDARY MARKET

Bitcoin was spawned by a still unidentified developer known as Satoshi Nakamoto in 2009, when the global financial crisis meant distrust of banks and governments was high.

Initially there was a libertarian appeal, said Ron Finberg, who runs the website Digital Currency Magnates.

But in Israel, technology had always been the currency's driving force, he said. Now the “boundary-less system” was fostering ever more innovative applications.

Mathematician Meni Rosenfeld said his team is developing a product called “colored coins” that will allow bitcoins to carry a secondary value, such as equity in a company.

A company will be able to take small fractions of a bitcoin, give them a digital marker, or “color”, and distribute them to shareholders.

“They represent stock in every way,” said Rosenfeld, who is also chairman of the Israeli Bitcoin Association. The same could be done with bonds or car ownership, he said.

REGULATORY RESPONSE

There has been a mixed reaction to Bitcoin around the world.

Supporters are drawn to its decentralised platform and say it is here to stay. Detractors call it a bubble and expect it to be forgotten in a year or two.

But its growing popularity is undeniable, and governments and regulators have been searching for the best way to respond.

“The Bank of Israel is … examining the need for some sort of regulation regarding electronic, virtual and other similar currencies,” said Yoav Seffer, spokesman for the central bank.

Most retailers do not accept Bitcoin, making it hard for users to shop. One Tel Aviv startup, however, has shown that the convenience of using digital money can draw enormous interest.

AppCoin developed a programme that easily generates virtual currencies and teamed up with an online community of mothers in a trial run. The moms were given a new tender, called “hearts”, and agreed to use it to buy and sell items.

A year later the network swelled to 50,000 members with hundreds of transactions carried out each day.

The company plans to offer a service so anyone, anywhere can create their own currency, but for now it is focused on a beta-version it just released of a Bitcoin bazaar, called Satoshi Marketplace, accessible by phone to anyone in the world.

“Just as the internet revolutionized the way we exchange information, smartphones will redefine how people exchange value – by using digital currencies and virtual marketplaces,” said Eyal Hertzog, product architect at AppCoin.

Last month, members of the Bitcoin community and officials from the private sector and government gathered at the Tel Aviv Stock Exchange to discuss the future of the digital currency.

The assembly was hosted by Eden Shochat, founder of venture capital firm Aleph, which manages about $150 million.

“The ability to transfer value in a frictionless way without transaction fees represents a tidal wave, and when that happens our role is to help, advise and fund these kinds of companies,” he said.