Well, congratulations to Faruk Fatih Ozer, who now has the unenviable distinction of being the hacker with the longest custodial sentence in history. Despite PR-generated rumours, Hamza Bendellaj was not sentenced to death and instead pled guilty and got a much gentler sentence. This poor sod has an 11,196 year sentence to serve.
What did Ozer do that other hackers didn’t? And was it even a hack? Well, for one, whatever it was, he did it in Turkey. Having finally eliminated the death penalty, Turkey has chosen to replace the death penalty with additional time. Gratuitous lashings of over-dramatic additional time. So, here we are.
Sentenced last Thursday, Faruk Fatih Ozer was the head man of the Turkish crypto exchange Thodex. A high school dropout (not Stanford for once!) he built the exchange with a small team, and they went live in 2017.
He denies all accusations of criminal activity, of course, saying, “I am smart enough to lead any institution on Earth, That is evident in this company I established at the age of 22. I wouldn’t have acted so amateurishly if this were a criminal organization.”
But then, he did flee to Albania, which may or may not have been amateurish but sure didn’t make him look innocent.
The crypto exchange was chugging along normally, but fell apart after he did his runner. One day it was business as usual, the next the boss is MIA and the feds are at the door. The business premises were raided by police, and evidence and servers seized. Police estimated that there were 390,000 active users although the company estimated one tenth as many. We will come back to that number.
The crux of the issue appears to be a high-profile Dogecoin giveaway. Thodex promoted itself to crypto newbies with a simple offer. In the old days, banks might give you a toaster or a tablet for opening a new account. Thodex would give you free crypto, usually cheap altcoin, which customers could then trade on Thodex. Smart gimmick, and very appealing to crypto newcomers.
The choice of Dogecoin was a fatal mistake. That giveaway was in March of 2021, but in part thanks to Elon Musk’s jokey pumping of the stock on Twitter, it rose in price by a factor of nearly ten in the next few weeks, making fulfilling the promise ruiniously expensive.
It appears Ozer simply decided not to bother even trying, dishing out Dogecoin to the few new clients who’d opened accounts before Musk’s highly inconvenient tweets, and simply stiffing the rest. Thus, the difference between the police’s claim of 390,000 customers and the company’s claim of more like 39,000 is essentially the difference between the number who opened accounts before Musk juiced the price of Doge, and the number who did after, and were consequently stiffed by Thodex.
Many users claim they never received their doge, despite having opened new accounts with the exchange. The giveaway succeeded in bringing in new users, but they were not happy users, in the main. With the sudden growth in Doge price, they thought they were rich, but the amount of Dogecoin Thodex purchased and distributed to its new users was only a fraction of what they’d promised.
Cemil Ertem, senior economic adviser to President Recep Tayyip Erdogan strongly suggested to Bloomberg that it was a pyramid scheme. But it may just have been an enticing offer they couldn’t afford to pay out. They had paid out plenty of worthless altcoin before; the problem this time appears to be the sudden price inflation which made it impossible for them to afford the Doge they had promised to new clients.
Thodex was unable to continue commercial operations after Ozer failed to transfer his “shares to another investor,” the CEO said in a statement on the company’s website. He blamed the exchange’s financial woes on a “hacking incident” he said happened years ago. The number of people who have investments in the exchange is “about 30,000” the chief executive said.
There was a decline in Thodex’s assets. When too many users demanded their money back, the company was unable to meet those,” the Thodex attorney said by phone, describing the situation as a “liquidity problem."
Well, you could put it that way.
It’s a black eye for Turkey, which had previously been very proud to have its own crypto exchange. Now it has the distinction of giving a crypto executive the longest prison sentence ever for crypto or hacking activities.
And if I were Elon Musk, I’d give Turkey a wide berth for the next little while. Lotta angry crypto-newbies there at the moment.