6 ms·

What are the issues?

by mxx 13y ago

venomsnake 13y ago
Bad case of stealingeverithingus ... usual treatment is long prison term unless you are a wall street dear.
- NateDad 13y ago
  stealing / losing ... exactly which is a little unclear at this point. Honestly, probably a little (a lot?) of both.
patio11 13y ago
If you haven't been following along, the brief version: Mt. Gox is a Tokyo-based company which, most famously, took deposits in dollars, yen, and a few other currencies and also Bitcoin, and allowed people to trade Bitcoin for dollars/etc and vice versa. They charged traders a commission, and so earned a percentage of transaction volume. Transaction volume was massive -- Mt. Gox was the leading exchange for over a year. They had a rough year in 2013, partly because their US subsidiary was closed by the US for being a money laundering operation and because, in their haste to exit the US regulatory environment, they attempted to engage a US company to serve the US/Canadians markets. This went poorly, as their counterparty was transparently also going to get shut down for money laundering. Between the feds and the counterparty, Mt. Gox had several million dollars of customers' funds frozen. Some time after funds were seized, Mt. Gox started delaying outbound wire transfers. They variously blamed technical issues, issues with partner banks (including "The second largest bank in Japan can't process more than 10 wire transfers per day"), regulatory issues, etc etc. They didn't seem to have much problem with inbound transfers. They also didn't seem to have problems with domestic Japanese transfers until about December/January, which they blamed on the end-of-the-year holiday. Waits for withdraws stretched from weeks to months to unbounded. During this time, they routinely transferred out Bitcoins in minutes. As a consequence, people wanting to exit Mt. Gox would buy BTC on the exchange and withdraw it. This caused the price of BTC at Gox to exceed that of other exchanges in a sustained fashion, since at least August. Some weeks ago, Mt. Gox started delaying BTC withdraws as well. Their excuse for this was that their bookkeeping systems did not handle an edge case in the Bitcoin "protocol", where a) the One True Bitcoin Client searches for transactions by ID, b) the One True Bitcoin Client identifies a transaction by ID immediately upon creation, c) despite the above two facts, an emergent "feature" of the protocol is that that ID can change for up to about an hour after creation of the transaction. People freaked out, because Mt. Gox now allowed neither real money nor Internet money to leave their company. In the last 48 hours, it has been credibly alleged that Mt. Gox has suffered a theft to the tune of 700k BTC (worth somewhere north of $300 million) and that they are insolvent -- they owe debts to their customers far in excess of the Bitcoin and hard currency they have on hand. People are quite concerned. Mt. Gox's crisis communications have been wildly below the level of professionalism one would hope to see from a company with several hundred million dollars of financial assets. This is getting wide play in the media both internationally and in Japan, and it is possible that Mt. Gox has finally woken Leviathan, who may now take adverse notice to the fact that no-account foreigners are in his capitol making him look stupid and potentially ruining the livelihoods of some of his citizens. Mt. Gox customers currently are unaware when (if ever) and to what degree their claims against Mt. Gox will be satisfied. People interested in Bitcoin are worried that this will tarnish the system's reputation and/or lead to additional adversarial interest from government and other parties. [In evaluating whether I've been accurate with the above description, you might consider it useful to note that I'm a Japan-based entrepreneur with a fair bit of understanding about Bitcoin technically and systemically, and that I'm an open and notorious critic of it.]
- nissehulth 13y ago
  Excellent summary!
- ChristianMarks 13y ago
  If Godzilla is angry, that is an ominous sign.
- kyro 13y ago
  Clearest, most concise and level-headed summary of the whole ordeal. This comment is what I'll be linking to people who ask me to explain what's happened.
- theknown99 13y ago
  > "People are quite concerned. Mt. Gox's crisis communications have been wildly below the level of professionalism one would hope to see from a company with several hundred million dollars of financial assets." That's kinda why banks are regulated surely.
  - thenmar 13y ago
    If bitcoin fails because of this incident, won't that be the free market deciding that unregulated financial institutions aren't acceptable?
- offmango 13y ago
  Comments like these are why I tend to read the HN comments before (or in lieu of) the posted articles. Thanks for such an excellent synopsis.
- sillysaurus3 13y ago
  I believed in Mark (the owner of MtGox) and his team, defending them vigorously, and got screwed as a consequence. The support staff was on IRC every day saying "Yes, we have customers' funds. No, we aren't insolvent. Everything is fine, everything will be fine." They answered every question in a level-headed fashion. They were either being paid to lie, or being fed lies, or somehow MtGox didn't become aware of the fact that they were missing >700,000btc until a day or two before they shut off their website. So I was pretty gullible. And I just want to thank Patrick (patio11) for being a constant throughout this whole ordeal: constantly skeptical, and with good reason.

What are the issues?

by mxx 13y ago

What are the issues?

venomsnake 13y ago

Bad case of stealingeverithingus ... usual treatment is long prison term unless you are a wall street dear.

NateDad 13y ago
stealing / losing ... exactly which is a little unclear at this point. Honestly, probably a little (a lot?) of both.

patio11 13y ago

If you haven't been following along, the brief version: Mt. Gox is a Tokyo-based company which, most famously, took deposits in dollars, yen, and a few other currencies and also Bitcoin, and allowed people to trade Bitcoin for dollars/etc and vice versa. They charged traders a commission, and so earned a percentage of transaction volume. Transaction volume was massive -- Mt. Gox was the leading exchange for over a year. They had a rough year in 2013, partly because their US subsidiary was closed by the US for being a money laundering operation and because, in their haste to exit the US regulatory environment, they attempted to engage a US company to serve the US/Canadians markets. This went poorly, as their counterparty was transparently also going to get shut down for money laundering. Between the feds and the counterparty, Mt. Gox had several million dollars of customers' funds frozen. Some time after funds were seized, Mt. Gox started delaying outbound wire transfers. They variously blamed technical issues, issues with partner banks (including "The second largest bank in Japan can't process more than 10 wire transfers per day"), regulatory issues, etc etc. They didn't seem to have much problem with inbound transfers. They also didn't seem to have problems with domestic Japanese transfers until about December/January, which they blamed on the end-of-the-year holiday. Waits for withdraws stretched from weeks to months to unbounded. During this time, they routinely transferred out Bitcoins in minutes. As a consequence, people wanting to exit Mt. Gox would buy BTC on the exchange and withdraw it. This caused the price of BTC at Gox to exceed that of other exchanges in a sustained fashion, since at least August. Some weeks ago, Mt. Gox started delaying BTC withdraws as well. Their excuse for this was that their bookkeeping systems did not handle an edge case in the Bitcoin "protocol", where a) the One True Bitcoin Client searches for transactions by ID, b) the One True Bitcoin Client identifies a transaction by ID immediately upon creation, c) despite the above two facts, an emergent "feature" of the protocol is that that ID can change for up to about an hour after creation of the transaction. People freaked out, because Mt. Gox now allowed neither real money nor Internet money to leave their company. In the last 48 hours, it has been credibly alleged that Mt. Gox has suffered a theft to the tune of 700k BTC (worth somewhere north of $300 million) and that they are insolvent -- they owe debts to their customers far in excess of the Bitcoin and hard currency they have on hand. People are quite concerned. Mt. Gox's crisis communications have been wildly below the level of professionalism one would hope to see from a company with several hundred million dollars of financial assets. This is getting wide play in the media both internationally and in Japan, and it is possible that Mt. Gox has finally woken Leviathan, who may now take adverse notice to the fact that no-account foreigners are in his capitol making him look stupid and potentially ruining the livelihoods of some of his citizens. Mt. Gox customers currently are unaware when (if ever) and to what degree their claims against Mt. Gox will be satisfied. People interested in Bitcoin are worried that this will tarnish the system's reputation and/or lead to additional adversarial interest from government and other parties. [In evaluating whether I've been accurate with the above description, you might consider it useful to note that I'm a Japan-based entrepreneur with a fair bit of understanding about Bitcoin technically and systemically, and that I'm an open and notorious critic of it.]

nissehulth 13y ago
Excellent summary!
ChristianMarks 13y ago
If Godzilla is angry, that is an ominous sign.
kyro 13y ago
Clearest, most concise and level-headed summary of the whole ordeal. This comment is what I'll be linking to people who ask me to explain what's happened.
theknown99 13y ago
> "People are quite concerned. Mt. Gox's crisis communications have been wildly below the level of professionalism one would hope to see from a company with several hundred million dollars of financial assets." That's kinda why banks are regulated surely.
- thenmar 13y ago
  If bitcoin fails because of this incident, won't that be the free market deciding that unregulated financial institutions aren't acceptable?
offmango 13y ago
Comments like these are why I tend to read the HN comments before (or in lieu of) the posted articles. Thanks for such an excellent synopsis.
sillysaurus3 13y ago
I believed in Mark (the owner of MtGox) and his team, defending them vigorously, and got screwed as a consequence. The support staff was on IRC every day saying "Yes, we have customers' funds. No, we aren't insolvent. Everything is fine, everything will be fine." They answered every question in a level-headed fashion. They were either being paid to lie, or being fed lies, or somehow MtGox didn't become aware of the fact that they were missing >700,000btc until a day or two before they shut off their website. So I was pretty gullible. And I just want to thank Patrick (patio11) for being a constant throughout this whole ordeal: constantly skeptical, and with good reason.