17 ms·

Mt. Gox Files for Bankruptcy Protection

279 points by adidash 13y ago

ck2 13y ago
It's easy to be angry at them and/or see how stupid they were about accounting, security, etc. But I guess on the other hand we do have to realize they are victims of massive theft, as far as we know this massive loss was not due to their own profiteering or internal theft, it was an organized outside force targeting them. It occurs to me it is like blaming someone for getting mugged, although they were stupid enough to walk down a really bad street at a bad time of night with their cash out in their hands, it did take a criminal to make the crime happen, not the victim.
- buro9 13y ago
  The word you are looking for is negligence.
  - panacea 13y ago
    Negligence is when I forget to set my alarm.
- bodski 13y ago
  It seems it is too early to state with any certainty that MtGox are also a victim here. http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detectives-reveal-billion-dollar-heist-as-inside-job/ http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detecti... http://letstalkbitcoin.com/the-ghost-in-the-machine-at-mtgox/ http://letstalkbitcoin.com/the-ghost-in-the-machine-at-mtgox...
  - deleted 13y ago
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  - ck2 13y ago
    These are very interesting reads if only for the facts they lay out in detail.
  - danielweber 13y ago
    The allegation that an address that MtGox's controls still holds all the Bitcoins but that they've lost the key is fascinating. If true, how can MtGox prove it lost the key? If he walks away, he can wait 10 years and then transfer the funds out and spend them. But if false, can we demand he produce the key? What if someone else entirely different has the key? It's all fascinating.
  - whyenot 13y ago
    Another POV from Greg Maxwell (a Bitcoin core developer): Claims that MTGox has a lot of coin so far look completely spurious to me. https://www.reddit.com/r/Bitcoin/comments/1z3v4k/claims_that_mtgox_has_a_lot_of_coin_so_far_look/ https://www.reddit.com/r/Bitcoin/comments/1z3v4k/claims_that... In Falkvinge's case, it may be wishful thinking. He has also posted that he had 160 BTC and 1500 euros on Mt.Gox
- deleted 13y ago
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- mertd 13y ago
  Isn't it more like walking down the same bad street every night with other people's cash in their hands, getting mugged repeatedly, not telling anyone and still taking more money?
  - ck2 13y ago
    This is a very good point. But they were also dumb enough not to realize they were getting mugged, or so they claim. Maybe I should have used "pick-pocketed" instead of mugged as an example. I am not trying to give them an excuse but we don't seem to have enough anger against the criminals that caused this.
    - deleted 13y ago
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    - vidarh 13y ago
      > But they were also dumb enough not to realize they were getting mugged, or so they claim. This is what I don't get, and which makes it hard to trust that they indeed "lost" this many coins. At the very least one would expect that for a company like this, they would regularly reconcile what the blockchain states the content of the wallets they control is, and what their internal customer records says should be there. That's the very barest minimum I'd expect anyone to do. And the moment they found a discrepancy they should have suspended everything until they'd figured out why there was a discrepancy. If they've truly managed to keep losing coins over years, it means they had no effective audit mechanisms in place at all. Whoever took these coins certainly also is to blame, but if they've managed to lose the coins that way, this ought to be criminal levels of negligence.
- deleted 13y ago
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- pakitan 13y ago
  I would have some sympathy for them, if they had shut down immediately after realizing they would not be able to pay their debts. Instead we were fooled with "everything is ok, we are reopening soon" PRs while massive insider trading was going on. Victims or not, the way they handled this is probably criminal.
- nemof 13y ago
  Not really. When someone gets mugged it's simple to be sympathetic to what's happened. When someone gets mugged and you gave them assets to hold and/or transfer, and they didn't take due care of the security of these assets, this makes them culpable and negligent. Yes, MtGox are probably having a really shit time right now, and yes I'd feel sorry for anyone who'd just fucked up this royally (assuming there was definitely no intent to defraud on their part), but that sympathy is tempered by a recognition that they've made the world vanish from under thousands of peoples feet as they see assets they trusted with the exchange float away into the ether. This is why managing risk and having rules that protects consumers is so useful. Everyone's a hedgefund investor until suddenly the rug gets pulled out from under their feet.
- ghshephard 13y ago
  "they are victims of massive theft," What leads you to believe this?
- deleted 13y ago
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- egeozcan 13y ago
  You are running an antique accessory business. You have a van to carry all the valuable stuff you borrow from people to sell in their name. Your van starts to leak oil. You figure out how to fix it yourself. Check engine light of the van is still blinking though, but you happened to put a post-it in your dashboard blocking it. By the way, you also never have it serviced. You keep driving for years while the situation in your engine gets worse and worse. Finally, you end up causing an accident. You didn't have anything to protect your cargo even from a bumpy ride, let alone a crash. You lost too many of your antiques because you were carrying them around with you everywhere. You also don't have resources or any insurance to cover the expenses. You think it may be a good idea to hide this fact from your customers because the antique business in your town is still new and you don't want them to lose trust for the whole sector. You first tell your customers they can't sell or take back their stuff. Then you take off your signboard. Then you sell your van. You eventually close down your shop as well. Meanwhile, you keep telling them there is something wrong with how the van is designed, so you may have lost some valuables here and there. You end up filing for bankruptcy. Would this be just negligence?
  - davedx 13y ago
    Sounds like the definition of gross negligence to me.
  - fab13n 13y ago
    Indeed. However, the whole point of crypto-currencies is decentralization: you give up both (some of) the constraints and (most of) the protection that goes with government-backed currencies. Choosing who you trust then becomes your own problem, your fully personal responsibility. So yes, MtGox is at least criminally negligent, and maybe simply criminal. But the (largely libertarian) crowds who chose to trust them are fully responsible for their own poor assessment of MtGox' trustworthiness. That's the flip-side of choosing deregulation.
  - aragot 13y ago
    Sounds like customers should have judged by themselves it wasnt a safe van to put your valuable antiques in.
- steven2012 13y ago
  Your analogy is terrible. They are actively in the financial services industry, and by default protection from criminals is one of their mandates. People put money into mtgox expecting them to be secure. They claimed to be secure. For them to turn around and lose 750,000 BTC is not analogous to being innocently mugged. It's more like a taxi driver guaranteeing a safe trip, actually driving drunk, then crashing and killing the passenger.
  - aet 13y ago
    The point is that you should be prepared for this type of loss due to the speculative nature of Bitcoin. Here is a note from Morgan Stanley on alternative investments: Investing in alternative investments is speculative, not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment, which can include: -loss of all or a substantial portion of the investment due to leveraging, short-selling or other speculative investment practices; -lack of liquidity in that there may be no secondary market for the fund and none expected to develop; -volatility of returns; -restrictions on transferring interests in a fund; -potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized; -absence of information regarding valuations and pricing; -delays in tax reporting; -less regulation and higher fees than mutual funds; -funds of hedge funds often have a higher fee structure than single manager funds as a result of the additional layers of fees; -risks associated with the operations, personnel, and processes of the manager.
- jellicle 13y ago
  Almost all theft at financial institutions is internal theft. There is not one single official statement from anyone to the effect that there has been an external theft from Mt. Gox. No one has reported a theft to police. There is zero basis to believe an external theft has occurred. If Mt. Gox does file a police report, at least then someone has done something (with official penalty for false statement) indicating that they believe a theft has occurred, and some possibly-accurate information would be available. But for now, there is nothing to stand behind a claim of external theft.
  - deleted 13y ago
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wintersFright 13y ago
what happens to the BTC in their wallets that they didn't lose? Liquidated to pay creditors 1c in the dollar? with 63 million in debt, I imagine customers aren't first class debt holders either?
- broolstoryco 13y ago
  > 63 million in debt it is still not clear if it is 63 million + 750k BTC in debt, or in total. If in total it is not clear how btc are valued.
  - Yuioup 13y ago
    Zero. Bitcoins are worthless.
    - ivanca 13y ago
      TIL: $565 are worthless (http://www.bitcoinexchangerate.org/ http://www.bitcoinexchangerate.org/)
    - laichzeit0 13y ago
      You forgot to add "just as Fiat money is worthless".
    - gambiting 13y ago
      Just like everything, until we decide to give it value. Gold is completely and absolutely worthless to us humans, we don't need it to function and it serves no biological function in our organisms whatsoever. But because we like it and there is a scarcity of it, we will trade goods for it. Just like with bitcoins.
      - michael_h 13y ago
        I get what you're saying, but gold is not 'completely and absolutely worthless'. It conducts electricity very well and does not corrode very easily. It is used on satellites to reflect electromagnetic radiation. It can be used as a glass coating to help prevent ice formation (airplanes). A gold isotope is used for cancer treatment. It can be used to tint glass red. It can be put into cinnamon schnapps...
mcphilip 13y ago
>One Japanese small-business owner that accepts bitcoin as payment said Japanese banks had expressed skepticism toward the payment method, and that the business's lenders this week asked that the company wouldn't use bitcoin in the wake of Mt. Gox's stopping all transactions on Tuesday. "They're approaching bitcoin very conservatively," the owner said. I don't think that the demise of mtgox will destroy the ecosystem. However, I suspect this will be a major setback in mainstream adoption as a method of payment. Bitcoin speculation (and difficulty of shorting) may very well prop up the price for the foreseeable future, but... so what? The interesting thing about the Bitcoin saga is seeing it work its way into mainstream. I'd be happy to be proven wrong, though.
- interstitial 13y ago
  And is this because it will make you rich with your bitcoin stash, or because somehow "Society Needs This" and you'll just happen to get rich while being so magnanimous. It's a new paradigm, I know.
  - ivanca 13y ago
    Everything you use for your benefit made someone else rich, from your toothbrushes till the banks you use... and you know this to be true, so your discourse is only an attempt to be rude and cynical.
JumpCrisscross 13y ago
>The company's lawyer also said at a news conference at the Tokyo District Court that Mt. Gox had outstanding debt of about ¥6.5 billion ($63.6 million) with assets worth ¥3.84 billion. This implies a debt ratio of 170%. Assume: (1) no outside debt (only customer deposits) and (2) only 100% liquid assets (only currency). Even in that case, a depositor would recover no more than 59 cents to the dollar (the maximum recovery rate). Fifty-nine cents is clearly rose-tinted. Assets include office leases, computers, and other things not easily liquidated at book value. And outside debt is senior to deposits. That is the bite of being unregulated (deposits are at the top of regulated banks' capital structures). After factoring in the cost of chasing bankruptcy claims in Japan I do not see depositors recovering a penny.
- pakitan 13y ago
  > a depositor could expect to recover no more than fifty-nine cents to the dollar 59% is a wet-dream scenario. Apparently they are trying really hard to value the lost 750K BTC at the closing MtGox price which was around $100. And Bitcoin is actually $566 now. It looks more and more that if anyone gets anything at all it will be under 10 cents to the dollar.
  - JumpCrisscross 13y ago
    >Apparently they are trying really hard to value the lost 750K BTC at the closing MtGox price which was around $100. Comical. The equivalent of a shipper, having sunk its cargo, claiming the damages it owes are diminished by the cargo being worth less for having dropped to the sea floor.
  - bushido 13y ago
    Recovery in this case will most likely be in the underlying asset i.e. BTC. Having knowledge of a ton of these situations what will actually reduce the payout/recovery substantially are: a. The time it will take to recover => 2-5 years b. The customers will be on the hook for all accountant and legal fees, which will easily erode 40-80% of the recovery amount So the expected recovery would be in the range of 0.118btc - 0.354btc per 1btc. The only saving grace to recover the USD value would be if at time of recovery BTC was trading at $1600 - $4796 USD/BTC.
sillysaurus3 13y ago
Should the owner Mark Karpeles go to jail? On one hand, there may be a chilling effect if Karpeles is sent to jail, because fewer companies may be willing to participate in an area where the penalty for failure is time behind bars. On the other hand, it feels very inequitable and unjust that Karpeles made millions off of MtGox, lost our money and then is free to enjoy life. But that's a vengeful mindset, and it seems counterproductive. Is it really just a bad situation with no recourse? Karpeles walks, MtGox shuts down, and everyone's money is gone. Poof. The most persuasive argument for jailtime seems to be that if he's not penalized, then others may attempt to orchestrate similar disasters. Bitcoin has a very, very small chance at becoming the next gold standard, but it's a chance nonetheless. Therefore whoever is willing to flaunt the law and steal >5% of all bitcoins that will ever be created has a very, very small chance at becoming extremely powerful in the future, and wealthy in the short term. I don't know. There's probably nothing to be done, and taking away years of a person's life out of a sense of retribution probably isn't the best answer. What does everyone think?
- hanswesterbeek 13y ago
  After this, you still say "Bitcoin may be the next gold standard"?
  - sillysaurus3 13y ago
    My observation is simply that the future is unknown, and therefore a greedy actor would benefit greatly from stealing >5% of a currency. The most straightforward way to do this is to set up a popular exchange and orchestrate a disaster which is secretly a theft. Since there's no way to prove it, and since bitcoin wallets can lay dormant for decades, there's at least some incentive to do this. Should jailtime be on the table for gross negligence? I'm just interested in everyone's thoughts on the matter.
  - Tenoke 13y ago
    Personally, this fiasco hasn't affected in the slightest my beliefs about the protocol. Hell, if anything it might've been a small point in favour of decentralization.
hanswesterbeek 13y ago
Hilarious. Can't wait to hear from the choir of libertarian crypto-currency-zealots, who will sing the praises of the Ponzi scheme that is Bitcoin. On a serious note: who benefits?
- bodski 13y ago
  I hear there is a coin launching soon that may interest you, SchadenCoin!
  - hanswesterbeek 13y ago
    All of these people were in this thing for purely speculative reasons, so please forgive me my lack of empathy :)
- panacea 13y ago
  "who benefits?" Follow the money... erm... crypto bits.. um.
  - hanswesterbeek 13y ago
    Some light: http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detectives-reveal-billion-dollar-heist-as-inside-job/ http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detecti...
  - hanswesterbeek 13y ago
    Some light: http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detectives-reveal-billion-dollar-heist-as-inside-job/ http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detecti...
- theklub 13y ago
  Unfortunately I get the feeling more and more everyday that this really is just a ponzi scheme built on really cool new technology. I mean honestly most people who buy bitcoin aren't looking to spend it or use it because of convenience, they are looking to hold it in the hopes that the price continues to go up and on the way encouraging everyone they know to buy in to drive up the price.
yread 13y ago
> bitcoin industry What the? They certainly do seem to consume a couple of factories worth of electricity
negamax 13y ago
So much speculation and theories. Seems like Occam's razor wins again.
- gdulli 13y ago
  I don't think that applies here. Neither incompetence nor theft strains credulity.
mtgoxloser 13y ago
In this incident I lost a bit more than $500,000 USD that was in my MtGox account. I sold my Bitcoins a few months back, but the USD have been sitting in my account waiting to be withdrawn. This was a massive fuck up by MtGox, but I really do feel sorry for Mark Karpeles. He seemed really enthusiastic about Bitcoin. Right by MtGox's offices in Japan was a Bitcoin Cafe being built. You can [see here](http://si.wsj.net/public/resources/images/BN-BS458_mtgox0_G_20140227225518.jpg http://si.wsj.net/public/resources/images/BN-BS458_mtgox0_G_...) the sign of a Bitcoin logo waiting to be unraveled. Bigger than all the victims (no pun intended) was Mark himself. He lost more Bitcoins than any of us, and it's likely he'll be going to jail. Not to mention the death threats he has and will be receiving. -- One of the (features?) of Bitcoin is its inherent irreversibility. You only have one chance to get things right. Combined with Murphy's Law, something like this was bound to happen. I've been a Bitcoin enthusiast and have been mining since early 2011, and Bitcoin has been a huge part of my life, but I will admit my confidence in Bitcoin ever _practically_ succeeding has diminished a little.
- bifftannen 13y ago
  I got mugged last night, and gave the mugger a little extra because he was just so darn enthusiastic about mugging.
  - bobowzki 13y ago
    I chuckled
- MWil 13y ago
  it may be lost to spend but can't you spread the loss out over some years and never pay taxes for that period?
  - mtgoxloser 13y ago
    Losses can only be taken on your initial investment amount if you have Bitcoins in MtGox. This means that if you invested $10k a year back, and your Bitcoins are now worth $1000k, you can only take $10k in losses. Luckily I have realized my gains which means I can deduct $3k every year in losses with infinite rollover.
stef25 13y ago
Serious question - is now a good time to buy Bitcoin?
- theklub 13y ago
  WAit a couple of hours then yes.
- SquareWheel 13y ago
  Are you planning to buy it as an investment, or to use it as a currency? If the latter, this is not a good time because the currency is less stable than ever. But it could arguably be a good time to "invest" if that's your thing.
  - stef25 13y ago
    Invest
    - dangrossman 13y ago
      What makes BTC a better investment opportunity for you than, say, some stock in Tesla or Amazon?
      - stef25 13y ago
        I feel like doing something different. I'm sure Amazon would be a better investment.
- Thrymr 13y ago
  Either Bitcoin or beanie babies, really up to you.
Oculus 13y ago
To all the HN members who lost a lot of money in this closing, remember the community is here for you. Don't do anything too rash and if you need someone to talk to, myself and most other people would be happy to lend an ear.
- hackerboos 13y ago
  http://www.suicidepreventionlifeline.org/ http://www.suicidepreventionlifeline.org/
  - enscr 13y ago
    This should be at the top
    - xenophanes 13y ago
      Something bad happened. Some people are sad. Let's bring up the topic of suicide and make sure they are all aware of it!!!!!!!!!!!!!!!!!111111111111 And then feel good about how kind and helpful we are. People already know suicide hotlines exist. If they want one they can google it or siri it or whatever. You aren't giving them new information, just telling them, basically, that you wouldn't find it surprising if they killed themselves over this.
      - dkokelley 13y ago
        Emotions run high when something of this magnitude happens. Judgement gets clouded. A reminder is very important as a way to intercept those without a clear head before they do something rash.
      - gargarplex 13y ago
        Fuck you. When you're REALLY upset (hint: I am, and I have thought of suicide) a suicide hotline isn't necessarily the first thing on your mind.
        13y ago
TomGullen 13y ago
What I wonder, is if Mark was actually the only one internally who had access to the cold storage wallets, what would happen if he got hit by a car and died? Have other exchanges got plans for this sort of thing? Some corps don't let their programmers fly on the same aeroplane. I wouldn't want to own that many Bitcoin and be the only one who has access also because someone could profit considerably from your death.
- M4v3R 13y ago
  At Bitalo [0] we use multi signature wallets all over the place - for user wallets (so we cannot move them without users permissions), but also for company wallet for storing fees. For the latter, all board members have keys for them, but you only need a subset of them to access the funds. That way even if one of them loses the key or something bad happens to them, coins can still be moved by the others. For example, you can have 2-of-4 wallets, where 4 people hold the keys, and you need only 2 of them to move funds. [0] https://bitalo.com https://bitalo.com
  - hierro 13y ago
    Please, don't ever send money nor coins to these guys, they're scammers. M4v3R used to run http://bitmarket.eu http://bitmarket.eu and lost all the users' coins while running some sort of (according to his own words) "hedge fund" around December 2012. Around April 2013, with bitcoin around $50 he "kindly" offered to reimburse everyone over time, valuating each coin at 10€ arguing that it was their value when he lost them. I told them wanted my 10btc, not money, and they still owe me to this day. See https://bitcointalk.org/index.php?topic=134208.0 https://bitcointalk.org/index.php?topic=134208.0
happpyherp 13y ago
Can anyone explain to someone who didnt follow whole story from the beginning what exactly happened to Mtgox that caused them to lose all this money?
- ZachPruckowski 13y ago
  No, because nobody knows for sure. The most common theories are stupidity, fraud, and theft (or some combination thereof).
diestl 13y ago
Anyone stupid enough to invest a significant portion of their net worth in a nascent currency like BitCoin only have themselves to blame, high risk.
- dangrossman 13y ago
  Bitcoin hasn't suffered any loss; the exchange rate has been relatively flat all year. People who let a third party hold their assets lost those assets due to that entity's negligence. That can happen to shovels in a storage unit -- the underlying asset is irrelevant to this particular risk.
  - diestl 13y ago
    A currency is only as good as it's exchanges, AFAIK Mtgok was the biggest and most trusted, for me this is a death blow to bitcoin.
    - deleted 13y ago
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JumpCrisscross 13y ago
When you make a deposit you are extending credit. In the case of Mt. Gox, or any other Bitcoin exchange, that credit is secured by nothing and insured by noöne. Advice, going forward, for managing counterparty risk: (1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure at any given time at a manageable level. The downside is it increases exposure to BTC/USD volatility. (2) Split a $100 into 5 $20 transactions executed simultaneously on many exchanges. This keeps exposure to any single institution at a manageable level. The downside is it increases the number of institutions which must be dealt with. (3) Draft a special arrangement with the institution for a large transaction. This should include credit and speedy withdrawal guarantees. The downside is the legal cost. *edit: I am illustrating a hypothetical $100 transaction. Substitute, in place of $10, the most you are willing to lose in the event the exchange proves insolvent.
- ryanjshaw 13y ago
  It's a pity your post isn't at the top of the thread. It is sound advice. I find it fascinating that there are (apparently) people in this thread who lost $500k at MtGox and despite the loss would still have no problem paying $250k in taxes on it if they were required to do so. I would hope if you're making that kind of money you'd either have a sound sense of financial risk management, or the wisdom to hire somebody who does to manage it on your behalf. Of course, it's easy to criticise with the benefit of hindsight.
  - wtvanhest 13y ago
    My comment below highlights the clawback risk for those that were successful at pulling money out. If this turns out to be a Ponzi scheme there is a real chance that people who profited and were able to get their USD out may actually be forced to forfeit all of their profits depending on the jurisdiction.
    - saalweachter 13y ago
      I'm not sure I've heard any claims that would point towards MtGox being a Ponzi scheme. It was a straight forward exchange, not an investment with returns of any sort, let alone those derived from later investors. The allegations are generally much more straight forward, either some sort of incompetence in the form of transaction malleability, or some sort of malfeasance (pilfering the bank for operating costs, outright theft of the funds). Ponzi schemes these are not.
akerl_ 13y ago
If only Bitcoin exchanges had some degree of regulation to ensure they were properly securing their users' funds, or perhaps some level of insurance to prevent their users from suffering financial losses due to the exchange's misfortune.
- bestdayever 13y ago
  The idea of bitcoin was something that was impossible to regulate. This is what happens as a result, you take risks.
- nkrba 13y ago
  Elliptic Vault[1] is an example of a startup attempting to solve this. https://www.elliptic.co/vault https://www.elliptic.co/vault
thefreeman 13y ago
So are they claiming they literally lost ALL of their bitcoin? How is that even possible to have happened without them noticing... It just seems much more likely somebody got greedy on the inside. I am sure they lost some. But I can't help but wonder if that was taken as an excuse to loot the ship as it was sinking.
NotOscarWilde 13y ago
Please correct me if I'm wrong, but they still have not said how much of the (700k + 100k) BTC was stolen and how much was just "lost" by technical incompetence, right? As another Mt. Gox loser (sent my money back a few months before the end, of course they never arrived) this is one question that pains me the most. I don't care too much whether Karpeles goes to jail or not, but I want to know whether theft was made or just gross incompetence.
- 300bps 13y ago
  they still have not said how much of the BTC was stolen and how much was just "lost" by technical incompetence, right Unfortunately, they are known liars. Right up until days before bankruptcy filing they were telling people they were working to resume withdrawals. It doesn't matter what they say at this point or anything they've said in the past because their words do not in any way reflect reality. The only thing left is to investigate and if the facts show fraud has occurred, then prosecute.
pbjorkmarker 13y ago
Perhaps naïve question but can't see any info on this one. So, the Bitcoin ledger is still intact. 750,000 is quite a lot of Bitcoins to be stolen. Mt.Gox may have been shitty built but they must have kept some logs, account databases, etc. What are the odds of recovering the coins/exchange money that was lost? Technically sounds like pretty good odds? No?
- n1c 13y ago
  At the same time it's quite easy for it to all be gone forever due to good old fashioned incompetence.
terranstyler 13y ago
My take: If the money was stolen this year, it was theft by a third party and they were maybe incompetent, however, this is not punishable, see politics. If it was stolen last year, they made all existing (and even worse: new) costumers since the time of the theft believe that they would get their money back. This is fraud.
antocv 13y ago
Learn your lessons and move on. Money, bitcoin, value, economy. Its like a game, like chess, sometimes you loose. https://www.youtube.com/watch?v=GUcXI2BIUOQ&feature=kp https://www.youtube.com/watch?v=GUcXI2BIUOQ&feature=kp Aint got no, ive got life, by nina simone.
jgalt212 13y ago
Is this the largest heist in history?
- gaadd33 13y ago
  I don't think the numbers even reach the low billions, so no Madoff still takes that award.
  - jgalt212 13y ago
    I guess it depends how you define heist. I think I would put Ponzi scheme in a different category, but I do see your point in that a theft is a theft.
enscr 13y ago
I feel bad for Mark Karpeles but the way MtGox communicated & lied to its users makes me sad. It's those nameless individuals who believed in him, whose trust was betrayed - those are the ones that deserve the affection of the community. I've been following the news and I think MtGox was handling so much money that they should have focused on better security practices and audits. Few examples of their lackadaisical attitude : 1. http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_at_mt http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_a... : I arrived at MtGox early, approximately 8am, and stood outside with a sign reading “MtGox, where has my money gone”. I got some curious looks, and a lot of questions from passersby about my protest. Then at approximately 9.20 am, Mark Karpeles himself came along carrying a large, and very fancy coffee in his hand that could have passed as a dessert. I immediately confronted him and told him we needed a chat. So he stopped to hear me out. I told him he was playing with people’s lives, and some people stood to lose their entire savings. Like Gonzague told me the night before, he mentioned technical issues, and that he would look into my case. 2. http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_at_mtgox_offices_5_to_7th_february/cf9dgei http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_a... I was told that up until a few weeks [at time of the interview] ago, there was hardly any development environment to test changes. Most changes were done straight on the production environment. Typing this made me throw up in my mouth. 3. http://i.imgur.com/xMeW43a.jpg http://i.imgur.com/xMeW43a.jpg
- mbillie1 13y ago
  > and some people stood to lose their entire savings. While I am not defending MtGox, having your entire life savings wrapped up in Bitcoin is hardly a sound, proven financial decision and evokes absolutely zero sympathy whatsoever. Losing it all in a get-rich-quick frenzy is sad - but it's sad in a "I can't believe people are willing to bet their lives on this" way, not a "this poor person lost his/her entire life savings due to the corruption of the financial industry" way.
  - theorique 13y ago
    Absolutely right. Putting 5-10% of your net worth in something like this is being innovative and forward thinking and taking a calculated risk. Putting 90-95% of your net worth in something like this is serious, foolhardy gambling.
kphild 13y ago
I was selling a significant amount of Bitcoins in January. I wanted to use Mt Gox because of higher rate. I did not think there was a real possibility of the whole exchange going down. However, I did not pass identity verification because of some minor problem. So I sold the Bitcoins on Bitstamp and had money in the bank a day later. I was really really lucky.
josephlord 13y ago
The company's lawyer said at the news conference that Mt. Gox had outstanding debt of about ¥6.5 billion ($63.6 million) with assets worth ¥3.84 billion. That can't include the value of the bitcoins lost can it? So presumably the assets doesn't include the value of any bitcoins that they still have which all makes this statement rather meaningless.
rondon2 13y ago
Sorry if this is a stupid question, but did Mt. Gox have their wallets? Why didn't these people keep their wallets with them?
- steveklabnik 13y ago
  The way that exchanges work is that they hold a wallet for you, you deposit money into it, and then you do off-blockchain trades with other users. At some point, you ask to withdraw, and give them your local wallet address, and then they send you the coins.
  - rondon2 13y ago
    ok so Mt.Gox should still have the digital wallets. The whole point of bitcoin is that you don't need a central bank/exchange holding your wallet. But people used one anyways and now Mr.Gox doesn't know where the money went.
ChuckMcM 13y ago
Pirates buried their treasure in hidden locations rather than let someone hold on to it for them [1] :-). [1] I realize this isn't strictly true, as there were organizations the pirates did use, but they had the same challenges with them being crooked or getting captured by England or some other authority at the time.
Havoc 13y ago
I just don't see how they missed it. Since they used a hot-wallet system this had to be over a pretty substantial period of time. Surely if you're running an operation with that much cash involved you've got some kind of rolling reconciliation between debt owed vs reserves available? Who misses a 500MM hole in their assets? Or is reckless enough to hide it (trading whilst insolvent)?
carsonreinke 13y ago
So much for cold storage
oznathan 13y ago
No one stole anything from them. Or at least not something remotely close to what is reported. How can 800k btc go missing? Even people with few hundred btc split them between several different offline wallets. Can't be stolen. Their hot wallet being hacked is a total possibility, but it would contain no more than 5% of their coins. So, they just emptied the cold storage until it was completely empty? No. Something else is going on and we will all know soon enough. Don't let yourselves be manipulated like that.
elif 13y ago
It seems like the bitcoin community should collectively decide to not honor transactions for the stolen bitcoins. Not only will it prevent the market from completely crashing as the thief eats up remaining buy orders, but it would moderately discourage future thieves if such a mechanism were in place.

279 points by adidash 13y ago

ck2 13y ago

It's easy to be angry at them and/or see how stupid they were about accounting, security, etc. But I guess on the other hand we do have to realize they are victims of massive theft, as far as we know this massive loss was not due to their own profiteering or internal theft, it was an organized outside force targeting them. It occurs to me it is like blaming someone for getting mugged, although they were stupid enough to walk down a really bad street at a bad time of night with their cash out in their hands, it did take a criminal to make the crime happen, not the victim.

buro9 13y ago
The word you are looking for is negligence.
- panacea 13y ago
  Negligence is when I forget to set my alarm.
bodski 13y ago
It seems it is too early to state with any certainty that MtGox are also a victim here. http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detectives-reveal-billion-dollar-heist-as-inside-job/ http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detecti... http://letstalkbitcoin.com/the-ghost-in-the-machine-at-mtgox/ http://letstalkbitcoin.com/the-ghost-in-the-machine-at-mtgox...
- deleted 13y ago
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- ck2 13y ago
  These are very interesting reads if only for the facts they lay out in detail.
- danielweber 13y ago
  The allegation that an address that MtGox's controls still holds all the Bitcoins but that they've lost the key is fascinating. If true, how can MtGox prove it lost the key? If he walks away, he can wait 10 years and then transfer the funds out and spend them. But if false, can we demand he produce the key? What if someone else entirely different has the key? It's all fascinating.
- whyenot 13y ago
  Another POV from Greg Maxwell (a Bitcoin core developer): Claims that MTGox has a lot of coin so far look completely spurious to me. https://www.reddit.com/r/Bitcoin/comments/1z3v4k/claims_that_mtgox_has_a_lot_of_coin_so_far_look/ https://www.reddit.com/r/Bitcoin/comments/1z3v4k/claims_that... In Falkvinge's case, it may be wishful thinking. He has also posted that he had 160 BTC and 1500 euros on Mt.Gox
deleted 13y ago
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mertd 13y ago
Isn't it more like walking down the same bad street every night with other people's cash in their hands, getting mugged repeatedly, not telling anyone and still taking more money?
- ck2 13y ago
  This is a very good point. But they were also dumb enough not to realize they were getting mugged, or so they claim. Maybe I should have used "pick-pocketed" instead of mugged as an example. I am not trying to give them an excuse but we don't seem to have enough anger against the criminals that caused this.
  - deleted 13y ago
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  - vidarh 13y ago
    > But they were also dumb enough not to realize they were getting mugged, or so they claim. This is what I don't get, and which makes it hard to trust that they indeed "lost" this many coins. At the very least one would expect that for a company like this, they would regularly reconcile what the blockchain states the content of the wallets they control is, and what their internal customer records says should be there. That's the very barest minimum I'd expect anyone to do. And the moment they found a discrepancy they should have suspended everything until they'd figured out why there was a discrepancy. If they've truly managed to keep losing coins over years, it means they had no effective audit mechanisms in place at all. Whoever took these coins certainly also is to blame, but if they've managed to lose the coins that way, this ought to be criminal levels of negligence.
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pakitan 13y ago
I would have some sympathy for them, if they had shut down immediately after realizing they would not be able to pay their debts. Instead we were fooled with "everything is ok, we are reopening soon" PRs while massive insider trading was going on. Victims or not, the way they handled this is probably criminal.
nemof 13y ago
Not really. When someone gets mugged it's simple to be sympathetic to what's happened. When someone gets mugged and you gave them assets to hold and/or transfer, and they didn't take due care of the security of these assets, this makes them culpable and negligent. Yes, MtGox are probably having a really shit time right now, and yes I'd feel sorry for anyone who'd just fucked up this royally (assuming there was definitely no intent to defraud on their part), but that sympathy is tempered by a recognition that they've made the world vanish from under thousands of peoples feet as they see assets they trusted with the exchange float away into the ether. This is why managing risk and having rules that protects consumers is so useful. Everyone's a hedgefund investor until suddenly the rug gets pulled out from under their feet.
ghshephard 13y ago
"they are victims of massive theft," What leads you to believe this?
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egeozcan 13y ago
You are running an antique accessory business. You have a van to carry all the valuable stuff you borrow from people to sell in their name. Your van starts to leak oil. You figure out how to fix it yourself. Check engine light of the van is still blinking though, but you happened to put a post-it in your dashboard blocking it. By the way, you also never have it serviced. You keep driving for years while the situation in your engine gets worse and worse. Finally, you end up causing an accident. You didn't have anything to protect your cargo even from a bumpy ride, let alone a crash. You lost too many of your antiques because you were carrying them around with you everywhere. You also don't have resources or any insurance to cover the expenses. You think it may be a good idea to hide this fact from your customers because the antique business in your town is still new and you don't want them to lose trust for the whole sector. You first tell your customers they can't sell or take back their stuff. Then you take off your signboard. Then you sell your van. You eventually close down your shop as well. Meanwhile, you keep telling them there is something wrong with how the van is designed, so you may have lost some valuables here and there. You end up filing for bankruptcy. Would this be just negligence?
- davedx 13y ago
  Sounds like the definition of gross negligence to me.
- fab13n 13y ago
  Indeed. However, the whole point of crypto-currencies is decentralization: you give up both (some of) the constraints and (most of) the protection that goes with government-backed currencies. Choosing who you trust then becomes your own problem, your fully personal responsibility. So yes, MtGox is at least criminally negligent, and maybe simply criminal. But the (largely libertarian) crowds who chose to trust them are fully responsible for their own poor assessment of MtGox' trustworthiness. That's the flip-side of choosing deregulation.
- aragot 13y ago
  Sounds like customers should have judged by themselves it wasnt a safe van to put your valuable antiques in.
steven2012 13y ago
Your analogy is terrible. They are actively in the financial services industry, and by default protection from criminals is one of their mandates. People put money into mtgox expecting them to be secure. They claimed to be secure. For them to turn around and lose 750,000 BTC is not analogous to being innocently mugged. It's more like a taxi driver guaranteeing a safe trip, actually driving drunk, then crashing and killing the passenger.
- aet 13y ago
  The point is that you should be prepared for this type of loss due to the speculative nature of Bitcoin. Here is a note from Morgan Stanley on alternative investments: Investing in alternative investments is speculative, not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment, which can include: -loss of all or a substantial portion of the investment due to leveraging, short-selling or other speculative investment practices; -lack of liquidity in that there may be no secondary market for the fund and none expected to develop; -volatility of returns; -restrictions on transferring interests in a fund; -potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized; -absence of information regarding valuations and pricing; -delays in tax reporting; -less regulation and higher fees than mutual funds; -funds of hedge funds often have a higher fee structure than single manager funds as a result of the additional layers of fees; -risks associated with the operations, personnel, and processes of the manager.
jellicle 13y ago
Almost all theft at financial institutions is internal theft. There is not one single official statement from anyone to the effect that there has been an external theft from Mt. Gox. No one has reported a theft to police. There is zero basis to believe an external theft has occurred. If Mt. Gox does file a police report, at least then someone has done something (with official penalty for false statement) indicating that they believe a theft has occurred, and some possibly-accurate information would be available. But for now, there is nothing to stand behind a claim of external theft.
- deleted 13y ago
  [deleted]

wintersFright 13y ago

what happens to the BTC in their wallets that they didn't lose? Liquidated to pay creditors 1c in the dollar? with 63 million in debt, I imagine customers aren't first class debt holders either?

broolstoryco 13y ago
> 63 million in debt it is still not clear if it is 63 million + 750k BTC in debt, or in total. If in total it is not clear how btc are valued.
- Yuioup 13y ago
  Zero. Bitcoins are worthless.
  - ivanca 13y ago
    TIL: $565 are worthless (http://www.bitcoinexchangerate.org/ http://www.bitcoinexchangerate.org/)
  - laichzeit0 13y ago
    You forgot to add "just as Fiat money is worthless".
  - gambiting 13y ago
    Just like everything, until we decide to give it value. Gold is completely and absolutely worthless to us humans, we don't need it to function and it serves no biological function in our organisms whatsoever. But because we like it and there is a scarcity of it, we will trade goods for it. Just like with bitcoins.
    - michael_h 13y ago
      I get what you're saying, but gold is not 'completely and absolutely worthless'. It conducts electricity very well and does not corrode very easily. It is used on satellites to reflect electromagnetic radiation. It can be used as a glass coating to help prevent ice formation (airplanes). A gold isotope is used for cancer treatment. It can be used to tint glass red. It can be put into cinnamon schnapps...

mcphilip 13y ago

>One Japanese small-business owner that accepts bitcoin as payment said Japanese banks had expressed skepticism toward the payment method, and that the business's lenders this week asked that the company wouldn't use bitcoin in the wake of Mt. Gox's stopping all transactions on Tuesday. "They're approaching bitcoin very conservatively," the owner said. I don't think that the demise of mtgox will destroy the ecosystem. However, I suspect this will be a major setback in mainstream adoption as a method of payment. Bitcoin speculation (and difficulty of shorting) may very well prop up the price for the foreseeable future, but... so what? The interesting thing about the Bitcoin saga is seeing it work its way into mainstream. I'd be happy to be proven wrong, though.

interstitial 13y ago
And is this because it will make you rich with your bitcoin stash, or because somehow "Society Needs This" and you'll just happen to get rich while being so magnanimous. It's a new paradigm, I know.
- ivanca 13y ago
  Everything you use for your benefit made someone else rich, from your toothbrushes till the banks you use... and you know this to be true, so your discourse is only an attempt to be rude and cynical.

JumpCrisscross 13y ago

>The company's lawyer also said at a news conference at the Tokyo District Court that Mt. Gox had outstanding debt of about ¥6.5 billion ($63.6 million) with assets worth ¥3.84 billion. This implies a debt ratio of 170%. Assume: (1) no outside debt (only customer deposits) and (2) only 100% liquid assets (only currency). Even in that case, a depositor would recover no more than 59 cents to the dollar (the maximum recovery rate). Fifty-nine cents is clearly rose-tinted. Assets include office leases, computers, and other things not easily liquidated at book value. And outside debt is senior to deposits. That is the bite of being unregulated (deposits are at the top of regulated banks' capital structures). After factoring in the cost of chasing bankruptcy claims in Japan I do not see depositors recovering a penny.

pakitan 13y ago
> a depositor could expect to recover no more than fifty-nine cents to the dollar 59% is a wet-dream scenario. Apparently they are trying really hard to value the lost 750K BTC at the closing MtGox price which was around $100. And Bitcoin is actually $566 now. It looks more and more that if anyone gets anything at all it will be under 10 cents to the dollar.
- JumpCrisscross 13y ago
  >Apparently they are trying really hard to value the lost 750K BTC at the closing MtGox price which was around $100. Comical. The equivalent of a shipper, having sunk its cargo, claiming the damages it owes are diminished by the cargo being worth less for having dropped to the sea floor.
- bushido 13y ago
  Recovery in this case will most likely be in the underlying asset i.e. BTC. Having knowledge of a ton of these situations what will actually reduce the payout/recovery substantially are: a. The time it will take to recover => 2-5 years b. The customers will be on the hook for all accountant and legal fees, which will easily erode 40-80% of the recovery amount So the expected recovery would be in the range of 0.118btc - 0.354btc per 1btc. The only saving grace to recover the USD value would be if at time of recovery BTC was trading at $1600 - $4796 USD/BTC.

sillysaurus3 13y ago

Should the owner Mark Karpeles go to jail? On one hand, there may be a chilling effect if Karpeles is sent to jail, because fewer companies may be willing to participate in an area where the penalty for failure is time behind bars. On the other hand, it feels very inequitable and unjust that Karpeles made millions off of MtGox, lost our money and then is free to enjoy life. But that's a vengeful mindset, and it seems counterproductive. Is it really just a bad situation with no recourse? Karpeles walks, MtGox shuts down, and everyone's money is gone. Poof. The most persuasive argument for jailtime seems to be that if he's not penalized, then others may attempt to orchestrate similar disasters. Bitcoin has a very, very small chance at becoming the next gold standard, but it's a chance nonetheless. Therefore whoever is willing to flaunt the law and steal >5% of all bitcoins that will ever be created has a very, very small chance at becoming extremely powerful in the future, and wealthy in the short term. I don't know. There's probably nothing to be done, and taking away years of a person's life out of a sense of retribution probably isn't the best answer. What does everyone think?

hanswesterbeek 13y ago
After this, you still say "Bitcoin may be the next gold standard"?
- sillysaurus3 13y ago
  My observation is simply that the future is unknown, and therefore a greedy actor would benefit greatly from stealing >5% of a currency. The most straightforward way to do this is to set up a popular exchange and orchestrate a disaster which is secretly a theft. Since there's no way to prove it, and since bitcoin wallets can lay dormant for decades, there's at least some incentive to do this. Should jailtime be on the table for gross negligence? I'm just interested in everyone's thoughts on the matter.
- Tenoke 13y ago
  Personally, this fiasco hasn't affected in the slightest my beliefs about the protocol. Hell, if anything it might've been a small point in favour of decentralization.

hanswesterbeek 13y ago

Hilarious. Can't wait to hear from the choir of libertarian crypto-currency-zealots, who will sing the praises of the Ponzi scheme that is Bitcoin. On a serious note: who benefits?

bodski 13y ago
I hear there is a coin launching soon that may interest you, SchadenCoin!
- hanswesterbeek 13y ago
  All of these people were in this thing for purely speculative reasons, so please forgive me my lack of empathy :)
panacea 13y ago
"who benefits?" Follow the money... erm... crypto bits.. um.
- hanswesterbeek 13y ago
  Some light: http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detectives-reveal-billion-dollar-heist-as-inside-job/ http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detecti...
- hanswesterbeek 13y ago
  Some light: http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detectives-reveal-billion-dollar-heist-as-inside-job/ http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detecti...
theklub 13y ago
Unfortunately I get the feeling more and more everyday that this really is just a ponzi scheme built on really cool new technology. I mean honestly most people who buy bitcoin aren't looking to spend it or use it because of convenience, they are looking to hold it in the hopes that the price continues to go up and on the way encouraging everyone they know to buy in to drive up the price.

yread 13y ago

> bitcoin industry What the? They certainly do seem to consume a couple of factories worth of electricity

negamax 13y ago

So much speculation and theories. Seems like Occam's razor wins again.

gdulli 13y ago
I don't think that applies here. Neither incompetence nor theft strains credulity.

mtgoxloser 13y ago

In this incident I lost a bit more than $500,000 USD that was in my MtGox account. I sold my Bitcoins a few months back, but the USD have been sitting in my account waiting to be withdrawn. This was a massive fuck up by MtGox, but I really do feel sorry for Mark Karpeles. He seemed really enthusiastic about Bitcoin. Right by MtGox's offices in Japan was a Bitcoin Cafe being built. You can [see here](http://si.wsj.net/public/resources/images/BN-BS458_mtgox0_G_20140227225518.jpg http://si.wsj.net/public/resources/images/BN-BS458_mtgox0_G_...) the sign of a Bitcoin logo waiting to be unraveled. Bigger than all the victims (no pun intended) was Mark himself. He lost more Bitcoins than any of us, and it's likely he'll be going to jail. Not to mention the death threats he has and will be receiving. -- One of the (features?) of Bitcoin is its inherent irreversibility. You only have one chance to get things right. Combined with Murphy's Law, something like this was bound to happen. I've been a Bitcoin enthusiast and have been mining since early 2011, and Bitcoin has been a huge part of my life, but I will admit my confidence in Bitcoin ever _practically_ succeeding has diminished a little.

bifftannen 13y ago
I got mugged last night, and gave the mugger a little extra because he was just so darn enthusiastic about mugging.
- bobowzki 13y ago
  I chuckled
MWil 13y ago
it may be lost to spend but can't you spread the loss out over some years and never pay taxes for that period?
- mtgoxloser 13y ago
  Losses can only be taken on your initial investment amount if you have Bitcoins in MtGox. This means that if you invested $10k a year back, and your Bitcoins are now worth $1000k, you can only take $10k in losses. Luckily I have realized my gains which means I can deduct $3k every year in losses with infinite rollover.

stef25 13y ago

Serious question - is now a good time to buy Bitcoin?

theklub 13y ago
WAit a couple of hours then yes.
SquareWheel 13y ago
Are you planning to buy it as an investment, or to use it as a currency? If the latter, this is not a good time because the currency is less stable than ever. But it could arguably be a good time to "invest" if that's your thing.
- stef25 13y ago
  Invest
  - dangrossman 13y ago
    What makes BTC a better investment opportunity for you than, say, some stock in Tesla or Amazon?
    - stef25 13y ago
      I feel like doing something different. I'm sure Amazon would be a better investment.
Thrymr 13y ago
Either Bitcoin or beanie babies, really up to you.

Oculus 13y ago

To all the HN members who lost a lot of money in this closing, remember the community is here for you. Don't do anything too rash and if you need someone to talk to, myself and most other people would be happy to lend an ear.

hackerboos 13y ago
http://www.suicidepreventionlifeline.org/ http://www.suicidepreventionlifeline.org/
- enscr 13y ago
  This should be at the top
  - xenophanes 13y ago
    Something bad happened. Some people are sad. Let's bring up the topic of suicide and make sure they are all aware of it!!!!!!!!!!!!!!!!!111111111111 And then feel good about how kind and helpful we are. People already know suicide hotlines exist. If they want one they can google it or siri it or whatever. You aren't giving them new information, just telling them, basically, that you wouldn't find it surprising if they killed themselves over this.
    - dkokelley 13y ago
      Emotions run high when something of this magnitude happens. Judgement gets clouded. A reminder is very important as a way to intercept those without a clear head before they do something rash.
    - gargarplex 13y ago
      Fuck you. When you're REALLY upset (hint: I am, and I have thought of suicide) a suicide hotline isn't necessarily the first thing on your mind.
      - 13y ago

TomGullen 13y ago

What I wonder, is if Mark was actually the only one internally who had access to the cold storage wallets, what would happen if he got hit by a car and died? Have other exchanges got plans for this sort of thing? Some corps don't let their programmers fly on the same aeroplane. I wouldn't want to own that many Bitcoin and be the only one who has access also because someone could profit considerably from your death.

M4v3R 13y ago
At Bitalo [0] we use multi signature wallets all over the place - for user wallets (so we cannot move them without users permissions), but also for company wallet for storing fees. For the latter, all board members have keys for them, but you only need a subset of them to access the funds. That way even if one of them loses the key or something bad happens to them, coins can still be moved by the others. For example, you can have 2-of-4 wallets, where 4 people hold the keys, and you need only 2 of them to move funds. [0] https://bitalo.com https://bitalo.com
- hierro 13y ago
  Please, don't ever send money nor coins to these guys, they're scammers. M4v3R used to run http://bitmarket.eu http://bitmarket.eu and lost all the users' coins while running some sort of (according to his own words) "hedge fund" around December 2012. Around April 2013, with bitcoin around $50 he "kindly" offered to reimburse everyone over time, valuating each coin at 10€ arguing that it was their value when he lost them. I told them wanted my 10btc, not money, and they still owe me to this day. See https://bitcointalk.org/index.php?topic=134208.0 https://bitcointalk.org/index.php?topic=134208.0

happpyherp 13y ago

Can anyone explain to someone who didnt follow whole story from the beginning what exactly happened to Mtgox that caused them to lose all this money?

ZachPruckowski 13y ago
No, because nobody knows for sure. The most common theories are stupidity, fraud, and theft (or some combination thereof).

diestl 13y ago

Anyone stupid enough to invest a significant portion of their net worth in a nascent currency like BitCoin only have themselves to blame, high risk.

dangrossman 13y ago
Bitcoin hasn't suffered any loss; the exchange rate has been relatively flat all year. People who let a third party hold their assets lost those assets due to that entity's negligence. That can happen to shovels in a storage unit -- the underlying asset is irrelevant to this particular risk.
- diestl 13y ago
  A currency is only as good as it's exchanges, AFAIK Mtgok was the biggest and most trusted, for me this is a death blow to bitcoin.
  - deleted 13y ago
    [deleted]

JumpCrisscross 13y ago

When you make a deposit you are extending credit. In the case of Mt. Gox, or any other Bitcoin exchange, that credit is secured by nothing and insured by noöne. Advice, going forward, for managing counterparty risk: (1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure at any given time at a manageable level. The downside is it increases exposure to BTC/USD volatility. (2) Split a $100 into 5 $20 transactions executed simultaneously on many exchanges. This keeps exposure to any single institution at a manageable level. The downside is it increases the number of institutions which must be dealt with. (3) Draft a special arrangement with the institution for a large transaction. This should include credit and speedy withdrawal guarantees. The downside is the legal cost. *edit: I am illustrating a hypothetical $100 transaction. Substitute, in place of $10, the most you are willing to lose in the event the exchange proves insolvent.

ryanjshaw 13y ago
It's a pity your post isn't at the top of the thread. It is sound advice. I find it fascinating that there are (apparently) people in this thread who lost $500k at MtGox and despite the loss would still have no problem paying $250k in taxes on it if they were required to do so. I would hope if you're making that kind of money you'd either have a sound sense of financial risk management, or the wisdom to hire somebody who does to manage it on your behalf. Of course, it's easy to criticise with the benefit of hindsight.
- wtvanhest 13y ago
  My comment below highlights the clawback risk for those that were successful at pulling money out. If this turns out to be a Ponzi scheme there is a real chance that people who profited and were able to get their USD out may actually be forced to forfeit all of their profits depending on the jurisdiction.
  - saalweachter 13y ago
    I'm not sure I've heard any claims that would point towards MtGox being a Ponzi scheme. It was a straight forward exchange, not an investment with returns of any sort, let alone those derived from later investors. The allegations are generally much more straight forward, either some sort of incompetence in the form of transaction malleability, or some sort of malfeasance (pilfering the bank for operating costs, outright theft of the funds). Ponzi schemes these are not.

akerl_ 13y ago

If only Bitcoin exchanges had some degree of regulation to ensure they were properly securing their users' funds, or perhaps some level of insurance to prevent their users from suffering financial losses due to the exchange's misfortune.

bestdayever 13y ago
The idea of bitcoin was something that was impossible to regulate. This is what happens as a result, you take risks.
nkrba 13y ago
Elliptic Vault[1] is an example of a startup attempting to solve this. https://www.elliptic.co/vault https://www.elliptic.co/vault

thefreeman 13y ago

So are they claiming they literally lost ALL of their bitcoin? How is that even possible to have happened without them noticing... It just seems much more likely somebody got greedy on the inside. I am sure they lost some. But I can't help but wonder if that was taken as an excuse to loot the ship as it was sinking.

NotOscarWilde 13y ago

Please correct me if I'm wrong, but they still have not said how much of the (700k + 100k) BTC was stolen and how much was just "lost" by technical incompetence, right? As another Mt. Gox loser (sent my money back a few months before the end, of course they never arrived) this is one question that pains me the most. I don't care too much whether Karpeles goes to jail or not, but I want to know whether theft was made or just gross incompetence.

300bps 13y ago
they still have not said how much of the BTC was stolen and how much was just "lost" by technical incompetence, right Unfortunately, they are known liars. Right up until days before bankruptcy filing they were telling people they were working to resume withdrawals. It doesn't matter what they say at this point or anything they've said in the past because their words do not in any way reflect reality. The only thing left is to investigate and if the facts show fraud has occurred, then prosecute.

pbjorkmarker 13y ago

Perhaps naïve question but can't see any info on this one. So, the Bitcoin ledger is still intact. 750,000 is quite a lot of Bitcoins to be stolen. Mt.Gox may have been shitty built but they must have kept some logs, account databases, etc. What are the odds of recovering the coins/exchange money that was lost? Technically sounds like pretty good odds? No?

n1c 13y ago
At the same time it's quite easy for it to all be gone forever due to good old fashioned incompetence.

terranstyler 13y ago

My take: If the money was stolen this year, it was theft by a third party and they were maybe incompetent, however, this is not punishable, see politics. If it was stolen last year, they made all existing (and even worse: new) costumers since the time of the theft believe that they would get their money back. This is fraud.

antocv 13y ago

Learn your lessons and move on. Money, bitcoin, value, economy. Its like a game, like chess, sometimes you loose. https://www.youtube.com/watch?v=GUcXI2BIUOQ&feature=kp https://www.youtube.com/watch?v=GUcXI2BIUOQ&feature=kp Aint got no, ive got life, by nina simone.

jgalt212 13y ago

Is this the largest heist in history?

gaadd33 13y ago
I don't think the numbers even reach the low billions, so no Madoff still takes that award.
- jgalt212 13y ago
  I guess it depends how you define heist. I think I would put Ponzi scheme in a different category, but I do see your point in that a theft is a theft.

enscr 13y ago

I feel bad for Mark Karpeles but the way MtGox communicated & lied to its users makes me sad. It's those nameless individuals who believed in him, whose trust was betrayed - those are the ones that deserve the affection of the community. I've been following the news and I think MtGox was handling so much money that they should have focused on better security practices and audits. Few examples of their lackadaisical attitude : 1. http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_at_mt http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_a... : I arrived at MtGox early, approximately 8am, and stood outside with a sign reading “MtGox, where has my money gone”. I got some curious looks, and a lot of questions from passersby about my protest. Then at approximately 9.20 am, Mark Karpeles himself came along carrying a large, and very fancy coffee in his hand that could have passed as a dessert. I immediately confronted him and told him we needed a chat. So he stopped to hear me out. I told him he was playing with people’s lives, and some people stood to lose their entire savings. Like Gonzague told me the night before, he mentioned technical issues, and that he would look into my case. 2. http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_at_mtgox_offices_5_to_7th_february/cf9dgei http://www.reddit.com/r/Bitcoin/comments/1x9gue/my_protest_a... I was told that up until a few weeks [at time of the interview] ago, there was hardly any development environment to test changes. Most changes were done straight on the production environment. Typing this made me throw up in my mouth. 3. http://i.imgur.com/xMeW43a.jpg http://i.imgur.com/xMeW43a.jpg

mbillie1 13y ago
> and some people stood to lose their entire savings. While I am not defending MtGox, having your entire life savings wrapped up in Bitcoin is hardly a sound, proven financial decision and evokes absolutely zero sympathy whatsoever. Losing it all in a get-rich-quick frenzy is sad - but it's sad in a "I can't believe people are willing to bet their lives on this" way, not a "this poor person lost his/her entire life savings due to the corruption of the financial industry" way.
- theorique 13y ago
  Absolutely right. Putting 5-10% of your net worth in something like this is being innovative and forward thinking and taking a calculated risk. Putting 90-95% of your net worth in something like this is serious, foolhardy gambling.

kphild 13y ago

I was selling a significant amount of Bitcoins in January. I wanted to use Mt Gox because of higher rate. I did not think there was a real possibility of the whole exchange going down. However, I did not pass identity verification because of some minor problem. So I sold the Bitcoins on Bitstamp and had money in the bank a day later. I was really really lucky.

josephlord 13y ago

The company's lawyer said at the news conference that Mt. Gox had outstanding debt of about ¥6.5 billion ($63.6 million) with assets worth ¥3.84 billion. That can't include the value of the bitcoins lost can it? So presumably the assets doesn't include the value of any bitcoins that they still have which all makes this statement rather meaningless.

rondon2 13y ago

Sorry if this is a stupid question, but did Mt. Gox have their wallets? Why didn't these people keep their wallets with them?

steveklabnik 13y ago
The way that exchanges work is that they hold a wallet for you, you deposit money into it, and then you do off-blockchain trades with other users. At some point, you ask to withdraw, and give them your local wallet address, and then they send you the coins.
- rondon2 13y ago
  ok so Mt.Gox should still have the digital wallets. The whole point of bitcoin is that you don't need a central bank/exchange holding your wallet. But people used one anyways and now Mr.Gox doesn't know where the money went.

ChuckMcM 13y ago

Pirates buried their treasure in hidden locations rather than let someone hold on to it for them [1] :-). [1] I realize this isn't strictly true, as there were organizations the pirates did use, but they had the same challenges with them being crooked or getting captured by England or some other authority at the time.

Havoc 13y ago

I just don't see how they missed it. Since they used a hot-wallet system this had to be over a pretty substantial period of time. Surely if you're running an operation with that much cash involved you've got some kind of rolling reconciliation between debt owed vs reserves available? Who misses a 500MM hole in their assets? Or is reckless enough to hide it (trading whilst insolvent)?

carsonreinke 13y ago

So much for cold storage

oznathan 13y ago

No one stole anything from them. Or at least not something remotely close to what is reported. How can 800k btc go missing? Even people with few hundred btc split them between several different offline wallets. Can't be stolen. Their hot wallet being hacked is a total possibility, but it would contain no more than 5% of their coins. So, they just emptied the cold storage until it was completely empty? No. Something else is going on and we will all know soon enough. Don't let yourselves be manipulated like that.

elif 13y ago

It seems like the bitcoin community should collectively decide to not honor transactions for the stolen bitcoins. Not only will it prevent the market from completely crashing as the thief eats up remaining buy orders, but it would moderately discourage future thieves if such a mechanism were in place.