An Eau Claire man has reported losing more than $150,000 in an international Internet scam using a different kind of money.
Jamie Russell, a 34-year-old software engineer who lives in Eau Claire, first invested in bitcoin -- digital currency exchanged through a peer-to-peer network -- in August 2012. He purchased hundreds of bitcoins in their infancy for $5 per coin. Since then the currency has increased in value to more than $800 apiece.
Concerned about the security of his digital bitcoins, Russell agreed to digitally submit 201.7 bitcoins to a man in the United Kingdom for 190 physical bitcoins, or tokens with a bitcoin digital key hidden behind a tamper-proof strip. (Russell actually has some of the physical currency, which he keeps in a safe place outside his home.)
Between Dec. 9 and 11, Russell transmitted digital bitcoins worth $151,275 to the digital wallet of a man who identified himself as David Williamson, according to an Eau Claire police report. The men met through the website
bitcointalk.org and had been in contact for more than a year, and Russell came to trust Williamson.
Williamson provided Russell with two shipping tracking numbers and indicated the physical coins were en route to his home in Eau Claire. But they never arrived, prompting Russell to contact Williamson, who provided excuses and eventually cut off all communication.
Russell, who had completed a number of bitcoin transactions -- but none with Williamson -- prior to this with no problems, posted the information online on
bitcointalk.org and subsequently learned that as many as a dozen other users also had been defrauded by Williamson.
"I guess criminals flock to places that are fairly new," said Russell, noting Williamson had attempted to get him to exchange even more of his digital bitcoins for the physical tokens. "It's very unfortunate."
Russell reported the fraud to UK officials, who told him he also needed to file a complaint with local police. He then reported the scam to an Eau Claire police officer on Dec. 29.
"It was pretty devastating to have this happen," said Russell, who remains a proponent of the bitcoin. "It still makes me sick to say the amount of money that was lost."
Even with the theft, Russell, who got into bitcoins as a high-risk, speculative investment, said he's still money ahead of where he was before he invested in the virtual money.
Still, he's not taking the loss lightly.
"My mistake was paying money (in the form of the digital bitcoins) first, which exposed me to more risk," he said.
Before sending money in any form to someone or some business overseas, Eau Claire police Lt. Derek Thomas advises people to research the intended recipient.
"These people overseas try to develop a rapport with people in the U.S., ... and once they get the money, they run," Thomas said. And "when a crime occurs overseas, it's very difficult for us to follow up."
Russell, who reads bitcoin articles daily, makes no apologies for his actions.
"Everything I've done in the bitcoin realm has been with my eyes wide-open," he said.
Even though Williamson lives in another country, Russell remains "expectant that he is going to be prosecuted," he said. However, "I'm not expectant that I'm going to get any money out of him."
Post Source: http://www.twincities.com/localnews/ci_25057486/wisconsin-man-loses-150-000-international-bitcoin-scam
