Major bitcoin exchange said to be insolvent
Major bitcoin exchange said to be insolvent
Major bitcoin exchange apparently goes bust, delivers blow to emerging virtual currency
TOKYO (AP) -- One of the world's largest bitcoin exchanges has seemingly disappeared, delivering a severe blow to the virtual currency as it struggles to gain legitimacy.
A coalition of virtual currency companies said Tuesday that Tokyo-based Mt. Gox went under after secretly racking up catastrophic losses.
Mt. Gox's website was returning a blank page Tuesday. The disappearance of the site follows the resignation Sunday of Mt. Gox CEO Mark
Karpeles from the board of the Bitcoin Foundation, a group seeking legitimacy for the exotic new form of money. The exchange had imposed a ban on withdrawals earlier this month.
Prominent supporters of bitcoin — including San Francisco-based wallet service Coinbase and Chinese exchange BTC China — sought to shore up confidence in the currency by saying Mt. Gox's collapse was an isolated case of mismanagement. They said it had abused users' trust, but did not offer details.
"As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today," the statement said.
Since its creation in 2009, bitcoin has become popular among tech enthusiasts, libertarians and adventurous investors because it allows people to make one-to-one transactions, buy goods and services and exchange money across borders without involving banks, credit card issuers or other third parties. Criminals like bitcoin for the same reasons.
For various technical reasons, it's hard to know just how many people around the world own bitcoins, but the currency has attracted outsize media attention and the fascination of millions as an increasing number of large retailers such as Overstock.com begin to accept it.
Speculative investors have jumped into the bitcoin fray, too, sending the currency's value fluctuating wildly in recent months. In December, the value of a single bitcoin hit an all-time high of $1,200. In the aftermath of the Mt. Gox collapse Tuesday, one bitcoin stood at around $470.
Central banks across the globe have been hesitant to recognize bitcoin as a legitimate form of money, and Mt. Gox's virtual vanishing isn't helping.
Mt. Gox "reminds us of the downside of decentralized, unregulated currencies. There is no Federal Reserve or IMF to come to the rescue. There is no deposit insurance," said Campbell Harvey, a professor at the Duke University Fuqua School of Business who specializes in financial markets and global risk management.
Campbell believes, however, that Mt. Gox's disappearance "doesn't mean the end of the road" for bitcoin and other virtual currencies.
The collapse "might represent the end of the 'wild west,' where anyone can set up shop and deal in crypto-currencies," he said. But "increasingly sophisticated investors" are funding serious ventures that will "raise both quality and confidence."
Documents purportedly leaked from Mt. Gox lay out the scale of the problem. An 11-page "Crisis Strategy Draft" published on the blog of entrepreneur and bitcoin enthusiast Ryan Selkis said that 740,000 bitcoins are missing from Mt. Gox, which roughly translates to hundreds of millions of dollars' worth of losses, although figures are fuzzy given Bitcoin's extreme volatility.
"At the risk of appearing hyperbolic, this could be the end of bitcoin, at least for most of the public," the draft said.
In a post to his blog, Selkis said that the document was handed to him by a "reliable source" and that several people close to the company had confirmed the figures. Reached by phone, he declined further comment. The Japanese government has not announced any formal investigation.
The scandal may cost customers dearly.
At the Tokyo office tower housing Mt. Gox, bitcoin trader Kolin Burges said he had picketed the building since Feb. 14 after flying in from London, hoping to get back $320,000 he has tied up in bitcoins with Mt. Gox.
"I may have lost all of my money," said Burgess, next to placards asking if Mt. Gox is bankrupt. "It hasn't shaken my trust in bitcoin, but it has shaken my trust in bitcoin exchanges."
Mt. Gox CEO Karpeles did not immediately return several messages seeking comment. A security officer at the office tower said no one from Mt. Gox was in the building. Tibbane, an Internet company that Karpeles is CEO of, still has its name listed on the building's directory.
"I have no idea" where they are, said Burges, the trader. "I'm both annoyed and worried."
The disappearance of Mt. Gox could be fatal for bitcoin, which was started as a currency free from government controls. Bitcoin's boosters say the currency's design makes it impossible to counterfeit and difficult to manipulate.
But the currency has struggled to shake off its associations with criminality, particularly its role in powering the now-defunct online drug marketplace Silk Road. Only last month, another member of the Bitcoin Foundation, Vice Chairman Charlie Shrem, was arrested at New York's Kennedy Airport on charges of money laundering.
Authorities have been taking an increasingly hard look at bitcoin and related virtual currencies including Litecoin, Namecoin, Ripple and countless others. Some countries, including Russia, have effectively banned the currency. In other jurisdictions, authorities are weighing whether to try to tame the marketplace through licenses or other mechanisms.
Even if Mt. Gox doesn't drag bitcoin down with it, there's fear that the exchange's demise will push officials to take an even more skeptical stance.
"I think this is disastrous from a (regulatory) standpoint," Selkis, the enthusiast, said in a message posted to Twitter. "The hammer will now come down hard."
Yahoo Finance.com
Almost Half a Billion Worth of Bitcoins Vanish
Quote:
"Mt. Gox, once the dominant exchange for bitcoin trading, on Friday said more than $470 million of the virtual currency vanished from its digital coffers, kicking into high gear a search for the missing money by victims and cybersleuths."
Quote:
"Because Mt. Gox was unregulated, customers might not have much recourse unless they hunt down missing bitcoins on their own. By contrast, customers of MF Global Inc., a regulated brokerage, have nearly been made whole after they lost an estimated $1.6 billion in its 2011 collapse. U.S. customers who traded on U.S. exchanges have received about 98% of their funds, while U.S. customers who traded on foreign exchanges have received about 78%.
Federal regulators have encouraged bitcoin companies to follow money-laundering rules, but beyond that have generally been silent on whether they have legal authority to regulate companies like Mt. Gox in the future or set up rules that would protect bitcoin users. The Consumer Financial Protection Bureau and the Federal Trade Commission have held meetings in recent weeks to study the issue.
Market regulators including the SEC are still evaluating whether bitcoin falls under their jurisdiction. Agencies that oversee banks and payment systems are monitoring bitcoin, but Federal Reserve Chairwoman Janet Yellen said this past week that the Fed has no authority to regulate the virtual currency as long as it "doesn't touch" banks the Fed oversees."
More...
Almost Half a Billion of Bitcoins Vanishes - WSJ.com
Re: Major bitcoin exchange said to be insolvent
Japan finmin: Gathering facts on bitcoin, unsure whether crime involved
TOKYO (Reuters) - Japanese Finance Minister Taro Aso said on Tuesday that the government is still trying to figure out what has led to the collapse of the Tokyo-based bitcoin exchange Mt. Gox and is not sure whether crime is involved.
"We still have not had a clear grasp of the situation," Aso said in response to a reporter's question after a cabinet meeting. "(We) don't know if it was a crime or just theft."
Mt. Gox, once the world's biggest bitcoin exchange, filed for bankruptcy protection in Japan on Friday, saying it may have lost nearly half a billion dollars worth of the virtual currency due to hacking into its faulty computer system.
REUTERS.com
Re: Major bitcoin exchange said to be insolvent
Re: Major bitcoin exchange said to be insolvent
Bitcoin exchange MtGox faced 150,000 attacks per second before filing for bankruptcy
BITCOIN exchange MtGox faced a massive hacker offensives last month, coming under 150,000 DDoS attacks a second for several days ahead of its spectacular failure, a report says.
The Tokyo-based exchange, which filed for bankruptcy protection in February and admitted losing half a billion dollars in the digital currency, has come under serious cyber-attacks in particular since about February 7, the Yomiuri Shimbun reports.
While MtGox faced hacker attempts to steal Bitcoins, the exchange also confronted massive distributed denial-of-service (DDoS) attacks, crippling
its systems, the newspaper said without naming its sources.
Under DDoS attacks, hackers hijack multiple computers to send a flood of data to the target, crippling its computer system.
The attacks on MtGox lasted for several days and many Bitcoins were stolen, the Yomiuri said on Sunday.
MtGox's lawyers said 750,000 Bitcoins belonging to the firm's customers had gone missing, along with about 100,000 units the company owned.
Unlike traditional currencies backed by central banks, Bitcoin is generated by complex chains of interactions among a huge network of computers around the planet.
After trading for cents per Bitcoin for the first two years of its existence, it began a frenzied climb in 2011 that took it to $US40 a coin in late 2012 and $US1100 last year, before falling off to the current $610 level.
Its relative anonymity and lack of regulation has been attacked by critics who fear it could be used to finance organised crime or terrorism.
US Federal Reserve head Janet Yellen has said the Fed had no powers over a currency that only exists virtually with no central authority behind it. Several countries, including Russia and China, have heavily restricted how Bitcoin can be used.
Telegraph.co.UK
Re: Major bitcoin exchange said to be insolvent
Re: Major bitcoin exchange said to be insolvent
Heh, Jed McCaleb sold MtGox to Mark Karpeles long ago, before the rise of bitcoin, canadians still want to sue Jed?
He does have some money from OpenCoin / Ripple Labs ;)
Re: Major bitcoin exchange said to be insolvent
Mt.Gox finds 200,000 bitcoins in old wallet
Embattled exchange Mt.Gox said Friday that it has found 200,000 bitcoins in a "forgotten" digital wallet -- a haul worth $116 million at current prices.Mt.Gox CEO Mark Karpeles said in a statement that the bitcoins had been uncovered in an old-format wallet that was thought to be empty. Bitcoin wallets allow users to store the digital currency and execute transactions. "On March 7, 2014, Mt.Gox Co., Ltd. confirmed that an old-format wallet which was used prior to June 2011 held a balance of approximately 200,000 BTC," the statement said.
Karpeles said that the discovery was reported to lawyers on March 8. The bitcoins were later moved to "offline" wallets.
Mt.Gox was one of the world's largest Bitcoin exchanges until last month, when it stopped investors from withdrawing money and blamed the disruption on technical issues and cyber attacks.
The Japan-based company then filed for bankruptcy in Tokyo and the U.S., with debts totaling $64 million.
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Why Bitcoin will recover from Mt.Gox
At the time of its closure, Mt.Gox said that it was unable to locate 850,000 bitcoins, the vast majority of which belonged to customers. The discovery reduces the number of lost bitcoins to 650,000, but also raises questions about what really happened to the missing currency.
While the search for the missing bitcoins will continue, many investors harbor little hope that all will be recovered. Japanese authorities had not regulated the exchange, and no deposit insurance was offered.
Responding to the wave of doubt generated by the exchange's failure, several other exchanges and digital wallet providers have sought to reassure investors.
"This tragic violation of the trust of users of Mt.Gox was the result of one company's abhorrent actions and does not reflect the resilience or value of Bitcoin and the digital currency industry," an industry group said in February.
In related news, the team of volunteer computer developers who manage the Bitcoin software program has fixed some of the technical issues that Mt.Gox initially blamed for its troubles -- a quirk in the way Bitcoin works called transaction malleability.
CNN Money
