E-Sports company fined over Bitcoin malware

November 20, 2013 | 11:18

Tags: #bitcoin-mining #class-action #court-case #cryptocurrency #fine #malware #peer-to-peer

Companies: #bitcoin #esports #e-sports-entertainment-association

The E-Sports Entertainment Association has been hit with a million-dollar fine after it was discovered to have been secretly using its customers computers to mine the Bitcoin cryptocurrency.

The value of an individual Bitcoin, a peer-to-peer currency based on an arbitrary and ever-decreasing value assigned to mathematical work carried out by computers known as 'miners,' has exploded in the last year and currently sits at around £360 from its beginnings as a worthless experiment. The amount of computational effort that must be expended to earn said coins, however, has grown exponentially - leading to some shady types attempting to co-opt others' systems for their own personal gains.

The E-Sports Entertainment Association was found to be hiding a Bitcoin mining client in with its anti-cheat software. Installed on over 14,000 client systems, according to figures released by the New Jersey Attorney General's office as part of a case against the company, the software used ESEA customers' electricity to generate Bitcoins with a final total of 30BTC - a value of around £10,800 at current market prices - before the malware was discovered two weeks after its launch.

At the time, ESEA claimed that the mining malware was the result of a rogue employee, since dismissed, who had inserted the code into the software without authorisation. The state's Acting Attorney General, John J. Hoffman, claims otherwise, with the case findings suggesting that the malware was inserted by a directly-employed software engineer with the full knowledge and consent of one of the company's co-founders, Eric Thunberg.

'These defendants illegally hijacked thousands of people’s personal computers without their knowledge or consent,' the Attorney General's office claimed in a closing statement on the case, 'and in doing so gained the ability to monitor their activities, mine for virtual currency that had real dollar value, and otherwise invade and damage their computers.'

The Attorney General has now found ESEA guilty, closing the case with a whopping fine of $1 million against the company. The ESEA is required to pay $325,000 now, with the remainder of the fine suspended pending good behaviour for the next 10 years. The company is still facing a class-action lawsuit brought by its customers regarding the same matter.

Eric Thunberg has hit back at the ruling, however, claiming that the Attorney General's statements on the matter are misleading. 'The settlement that was signed makes explicitly clear that we do not agree, nor do we admit, to any of the State of New Jersey's allegations,' Thunberg wrote in a formal statement. 'The press release issued by the Attorney General about our settlement represents a deep misunderstanding of the facts of the case, the nature of our business, and the technology in question.'

Following the discovery of the Bitcoin mining software, which had been running on client systems for two weeks, the company donated the proceeds - $3,713.55 at the then-current exchange rate - to the American Cancer Society, along with a matched donation of $3,713.55 from its own coffers and a third helping of $3,713.55 going to increase the prize pot for its gaming league. 'As a team, we work hard to create cool things and we’ve worked even harder to consistently do things the right way,' claimed co-founder Craig Levine at the time. 'While it’s incredibly disturbing and disappointing that this happened, we’re committed to improving ourselves and rebuilding trust with our community.'
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