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From the comments: "Pretty sure Mt. Gox would have legal responsibility for coins/funds lost due to the exploit. Allowing users who haven't read this thread

From the comments: "Pretty sure Mt. Gox would have legal responsibility for coins/funds lost due to the exploit. Allowing users who haven't read this thread to lose funds is negligent." IANAL, but pretty sure this is completely wrong. That is what a completely unregulated market is like: freedom, but no recourse if something goes wrong. I have to wonder what happens when people who are used to the benefits of regulated markets (not saying there aren't downsides, just that there ARE benefits) enter into a market they assume is regulated, but isn't. With bitcoin, this is more than just a hypothetical musing.

IgorPartola 15y ago
I imagine you can still attempt to sue them. However, yhe person to cast the first stone would probably incur the wrath of Anonymous or some such.
omouse 15y ago
Well you get what you get in a free market; private companies/groups form that act as Consumer Reports. Still unregulated but then you have a trust network built up. Also, with more people entering and after this vulnerability has been exposed, there will be some more caution when using random websites.
smokeyj 15y ago
People getting into bitcoin now are buying it because of it's decentralized unregulated nature. This whole p2p economy thing is very new, so you can't compare it to an established market like the US economy. It could easily be argued that market regulation doesn't add much value considering the constant and systematic recurrence of financial crisis in the US.
- hysterix 15y ago
  This is absurd seeing as how we are purposefully led into these many "market crisis" by the federal reserve and the people who run it. Your argument is ridiculous because you are making an assumption that the federal reserve and the like are acting in the best interest for the united states and the crises, "just keeps on happening" which is absolutely wrong.
  - hugh3 15y ago
    http://en.wikipedia.org/wiki/Hanlon%27s_razor http://en.wikipedia.org/wiki/Hanlon%27s_razor
- rauljara 15y ago
  That is not so easy an argument to make as you seem to think it is. Several of the major sources of the recent financial crisis (the derivatives market, the rating of junk financial products as AAA, and the over leveraging of major financial firms) all suffered from lack of regulation (derivatives, rating agencies), or relatively recent deregulation (the over-leveraging).
  - byrneseyeview 15y ago
    Actually, the whole point of rating that stuff AAA was a regulatory arbitrage. Buying AAA-rated CDOs and buying credit default swaps against them was a capital-efficient way to lever up. And that level of leverage was only possible due to central banking backstops. If deregulation caused the crisis, why weren't hedge funds (the least regulated entities out there) a big part of it? I seem to remember a bunch of the major investment banks (much more regulated) losing money because of their positions in mortgages (a very strongly-regulated investment). It's really hard to describe the financial crisis without talking about decisions that only make sense in the context of gaming regulations.
    - TheCowboy 15y ago
      Hedge funds may not have been a big part of this crisis. But the next to last major financial crisis is a case study in this: http://en.wikipedia.org/wiki/Long-Term_Capital_Management http://en.wikipedia.org/wiki/Long-Term_Capital_Management Hedge funds were also more a result of a lack of regulation, or side-stepping current regulations by being defined differently, not so much a matter of deregulation. See it as regulators not stepping up or not allowed to step up and adapt. It's not like regulation serves to make any financial crisis avoidable. But smarter, more adaptable regulation can limit the depth of the rot, help shore up the integrity and health of the financial system, and possibly allow for a softer landing.
  - OstiaAntica 15y ago
    The whole stupid AAA ratings regime is a government regulatory scheme-- only a handful of ratings agencies (they've opened it up a little since the crisis) were permitted by the government to rate bonds. Contrast that with equities, where there is no rigid "AAA" rating system and where thousands of analysts compete to provide the best research on stocks. Over-regulation is at the heart of the financial crisis, from the broken ratings system to the role played by Fannie and Freddie.
hugh3 15y ago
IANAL either, but I'm not so sure if it's wrong. The fact that the market is "unregulated" in the sense that it doesn't have special regulations written about it the way that regular financial markets do doesn't mean that no laws apply. On the other hand, is it even possible to prove (or even provide evidence) that someone stole your bitcoins?
- DrJokepu 15y ago
  Even if there are laws regulating Mt. Gox, given the fact that Mt. Gox is operated by a Japanese company, Japanese laws apply to Mt. Gox, meaning that anyone willing to take legal action against Mt. Gox would at least have to find a Japanese lawyer and litigate in Japan, which, I imagine, makes the process more complicated and possibly more expensive for most BitCoin users.
  - wtn 15y ago
    No, this is what US federal courts are for. You can even sue a foreign entity with no US presence in state courts (depending on the state). Maybe an expert could comment.
    - piotrSikora 15y ago
      Huh? By what law? US courts (federal or not) have no jurisdiction over foreign entities without US presence.
      - burgerbrain 15y ago
        You can also sue Zeus. It won't be worth your time, but you can do it, and people have done it.
        hugh3 15y ago
        Oh great, now I have another item for my To Do list.
    - 15y ago
_delirium 15y ago
All markets are implicitly regulated by a country's background civil-law doctrines, even if there aren't specific regulations of a particular market. For example, fraud can be alleged in any market; it's illegal to defraud someone, even in otherwise unregulated kinds of commerce. In this case, 'negligence' is a doctrine that, in most countries, is at least in principle applicable to any interaction in any field of endeavor, though what exactly constitutes negligence might vary. That doesn't mean any particular claim would win, but the fact that a market isn't subject to a specific regulatory regime doesn't mean that you can't bring a claim of negligence.
r0s 15y ago
In an open market, some company could offer security as a service, that's pretty much the theory for banks.
drivebyacct2 15y ago
Who in their right mind thinks BitCoin is regulated? I ask this question rhetorically because places that I hold to be intelligent, HN/reddit, seem to continue to operate under the assumption that BTC should enjoy all the benefits of a regulated currency. Does the word "decentralized" not mean anything to anyone? Do people not realize that this currency has potential BECAUSE of the lack of central authority that would guard, protect and monitor their cash flows?
teyc 15y ago
Actually, I'm wondering how does a bitcoin bank avoid physical robberies? For example, a criminal or government officials physically kidnaps a bank official and demands the private keys? How do you implement the equivalent of cryptographic vaults that only trusted officials have access? In addition, how do you track the serial numbers of stolen bitcoins?

IgorPartola 15y ago

I imagine you can still attempt to sue them. However, yhe person to cast the first stone would probably incur the wrath of Anonymous or some such.

omouse 15y ago

Well you get what you get in a free market; private companies/groups form that act as Consumer Reports. Still unregulated but then you have a trust network built up. Also, with more people entering and after this vulnerability has been exposed, there will be some more caution when using random websites.

smokeyj 15y ago

People getting into bitcoin now are buying it because of it's decentralized unregulated nature. This whole p2p economy thing is very new, so you can't compare it to an established market like the US economy. It could easily be argued that market regulation doesn't add much value considering the constant and systematic recurrence of financial crisis in the US.

hysterix 15y ago
This is absurd seeing as how we are purposefully led into these many "market crisis" by the federal reserve and the people who run it. Your argument is ridiculous because you are making an assumption that the federal reserve and the like are acting in the best interest for the united states and the crises, "just keeps on happening" which is absolutely wrong.
- hugh3 15y ago
  http://en.wikipedia.org/wiki/Hanlon%27s_razor http://en.wikipedia.org/wiki/Hanlon%27s_razor
rauljara 15y ago
That is not so easy an argument to make as you seem to think it is. Several of the major sources of the recent financial crisis (the derivatives market, the rating of junk financial products as AAA, and the over leveraging of major financial firms) all suffered from lack of regulation (derivatives, rating agencies), or relatively recent deregulation (the over-leveraging).
- byrneseyeview 15y ago
  Actually, the whole point of rating that stuff AAA was a regulatory arbitrage. Buying AAA-rated CDOs and buying credit default swaps against them was a capital-efficient way to lever up. And that level of leverage was only possible due to central banking backstops. If deregulation caused the crisis, why weren't hedge funds (the least regulated entities out there) a big part of it? I seem to remember a bunch of the major investment banks (much more regulated) losing money because of their positions in mortgages (a very strongly-regulated investment). It's really hard to describe the financial crisis without talking about decisions that only make sense in the context of gaming regulations.
  - TheCowboy 15y ago
    Hedge funds may not have been a big part of this crisis. But the next to last major financial crisis is a case study in this: http://en.wikipedia.org/wiki/Long-Term_Capital_Management http://en.wikipedia.org/wiki/Long-Term_Capital_Management Hedge funds were also more a result of a lack of regulation, or side-stepping current regulations by being defined differently, not so much a matter of deregulation. See it as regulators not stepping up or not allowed to step up and adapt. It's not like regulation serves to make any financial crisis avoidable. But smarter, more adaptable regulation can limit the depth of the rot, help shore up the integrity and health of the financial system, and possibly allow for a softer landing.
- OstiaAntica 15y ago
  The whole stupid AAA ratings regime is a government regulatory scheme-- only a handful of ratings agencies (they've opened it up a little since the crisis) were permitted by the government to rate bonds. Contrast that with equities, where there is no rigid "AAA" rating system and where thousands of analysts compete to provide the best research on stocks. Over-regulation is at the heart of the financial crisis, from the broken ratings system to the role played by Fannie and Freddie.

hugh3 15y ago

IANAL either, but I'm not so sure if it's wrong. The fact that the market is "unregulated" in the sense that it doesn't have special regulations written about it the way that regular financial markets do doesn't mean that no laws apply. On the other hand, is it even possible to prove (or even provide evidence) that someone stole your bitcoins?

DrJokepu 15y ago
Even if there are laws regulating Mt. Gox, given the fact that Mt. Gox is operated by a Japanese company, Japanese laws apply to Mt. Gox, meaning that anyone willing to take legal action against Mt. Gox would at least have to find a Japanese lawyer and litigate in Japan, which, I imagine, makes the process more complicated and possibly more expensive for most BitCoin users.
- wtn 15y ago
  No, this is what US federal courts are for. You can even sue a foreign entity with no US presence in state courts (depending on the state). Maybe an expert could comment.
  - piotrSikora 15y ago
    Huh? By what law? US courts (federal or not) have no jurisdiction over foreign entities without US presence.
    - burgerbrain 15y ago
      You can also sue Zeus. It won't be worth your time, but you can do it, and people have done it.
      - hugh3 15y ago
        Oh great, now I have another item for my To Do list.
  - 15y ago

_delirium 15y ago

All markets are implicitly regulated by a country's background civil-law doctrines, even if there aren't specific regulations of a particular market. For example, fraud can be alleged in any market; it's illegal to defraud someone, even in otherwise unregulated kinds of commerce. In this case, 'negligence' is a doctrine that, in most countries, is at least in principle applicable to any interaction in any field of endeavor, though what exactly constitutes negligence might vary. That doesn't mean any particular claim would win, but the fact that a market isn't subject to a specific regulatory regime doesn't mean that you can't bring a claim of negligence.

r0s 15y ago

In an open market, some company could offer security as a service, that's pretty much the theory for banks.

drivebyacct2 15y ago

Who in their right mind thinks BitCoin is regulated? I ask this question rhetorically because places that I hold to be intelligent, HN/reddit, seem to continue to operate under the assumption that BTC should enjoy all the benefits of a regulated currency. Does the word "decentralized" not mean anything to anyone? Do people not realize that this currency has potential BECAUSE of the lack of central authority that would guard, protect and monitor their cash flows?

teyc 15y ago

Actually, I'm wondering how does a bitcoin bank avoid physical robberies? For example, a criminal or government officials physically kidnaps a bank official and demands the private keys? How do you implement the equivalent of cryptographic vaults that only trusted officials have access? In addition, how do you track the serial numbers of stolen bitcoins?