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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 acc

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 I sold my Bitcoins a few months back, but the USD have been sitting in my account waiting to be withdrawn.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.
  - steven2012 13y ago
    I believe your understanding if the situation is flawed, if you are a US citizen. The $3000 per year applies to capital losses. You did not suffer a capital loss. You suffered a loss due to bank insolvency. If you realized your gains in 2013, you actually owe taxes on $500,000 for your 2013 taxes, which is roughly $250k. I believe your losses due to bank insolvency will apply to your income for 2014. But you may be on the hook for $250,000 in income taxes this year. But it probably won't offset your tax liability from 2013. And the state of NYC subpoenaed MtGox's records so they may share this with the IRS. I would consult a CPA if I were you, you could have a huge tax liability with no adequate way to offset it.
    - patio11 13y ago
      Yep, talk to a CPA. One key issue is you may not have a capital loss, but rather a casualty, which by my read of the flowchart becomes a miscellaneous itemized deduction. Those are limited to 2% of MAGI and I don't believe they carry over. Also, there is a hard cap at $20k for lost deposits. See publication 547. It may be to your advantage to file it under a loss to personal property (form 4648) - the math isn't straightforward for me to work out. Talk to a CPA. This is the sort of thing they live for.
      - wtvanhest 13y ago
        It may depend on why the exchange went insolvent. If it is not a technical problem, and is rather a Ponzi Scheme, the tax implications may be much different since there are IRS rules that handle Ponzi Schemes. Additionally, those that gained profits in the exchange may be required to pay back those profits to victims through clawback lawsuits+. This IRS link below is a brief overview of how victims of Ponzi Schemes are treated. The most important piece of information is that there is a real chance of a clawback for the people who withdrew and currently think they made money. http://www.irs.gov/uac/Help-for-Victims-of-Ponzi-Investment-Schemes http://www.irs.gov/uac/Help-for-Victims-of-Ponzi-Investment-... I don't have time to read these documents this morning, but I do know that the people who received returns from Madoff are now the focus of lawsuits. Here is a Forbes article on the subject, there are plenty more you can read out there as well: http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-scheme-victims-may-owe-triple-damages-for-usury-in-clawback-lawsuits-a-new-tool-in-ponzi-scheme-litigation/ http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-s... Here is one example of a hospital having to pay a Clawback. http://www.jewishpress.com/news/breaking-news/hadassah-doctors-strike-over-hospital-deficit-fallout/2014/02/05/ http://www.jewishpress.com/news/breaking-news/hadassah-docto... +My guess is that the clawback lawsuits would yield very little real money since much of the value of Bitcoined gained was due to price appreciation which may keep lawsuits against those who gained fairly minimal since there isn't much money for lawyers to sue for in complex litigation.
JumpCrisscross 13y ago
>I lost a bit more than $500,000 USD that was in my MtGox account Sorry for your loss. Why didn't you move it to an interest-bearing bank account?
- shawabawa3 13y ago
  > waiting to be withdrawn Withdrawals have been massively delayed for at least 6 months. The smart thing to do was to withdraw bitcoins to another exchange while you still could
- dcc1 13y ago
  probably because the withdrawals to bank havent worked for months, the writing was on the wall for a long time, people who lost money in it took a huge gamble he should have transferred the bitcoins to bitstamp when transfers worked and cashed out.
  - mtgoxloser 13y ago
    > the writing was on the wall for a long time I wish I had hindsight like you. It was only up until these few months that Bitstamp became of any competition to MtGox. Its liquidity sucked, which was why many early adopters like me stayed.
    - smtddr 13y ago
      >> hindsight I'm only making this comment because you used the term "hindsight". Let me first start off by saying I feel very, very sorry for all the people who lost funds in MtGox. It'll take awhile before you get over the pain of losing a life-changing amount of money. But let's be very clear about this; hindsight wasn't needed here. The warning signs that MtGox was a house of cards became visible a long time ago. Definitely before the disabling of BTC-transfers. A lesson should have been learned here and nothing like this should happen to you again. -- http://www.livetradingnews.com/the-bitcoin-tangle-were-warning-signs-overlooked-in-mt-gox-collapse-33625.htm#.UxCAolQhAZU http://www.livetradingnews.com/the-bitcoin-tangle-were-warni... "Some signs of a strain were visible early on. The exchange was quick to accept purchases but slow in giving them back. Additional proofs were asked for. The site also had technical issues; some users complained that passwords were displayed in plain text. Users are now left wondering if the small hints portrayed deeper crises."
bbosh 13y ago
Did you invest $500,000 in real dollars, or earn it from mining?
- mtgoxloser 13y ago
  Majority of it was from mining, but I had already realized my profits.
  - deleted 13y ago
    [deleted]
  - celticninja 13y ago
    to be fair, with the funds in $ you probably have a better chance of getting some of that back than if it was BTC.
    - pistle 13y ago
      Yeah, call in the regulators to get some back. Thank a US fiat tax payer. You're welcome. It's the biggest load of hypocrisy that people who enthusiastically wanted to play in the libertarian paradise of an unregulated currency think they should be able to turn around and request the help of the regular, regulated, tax-supported economy to make them partial or whole. First, we'll crap a bunch of processing resources into thin air, ponzi up value in the system, scream self-righteous screeds to the nay-sayers... then, when it goes to shit, call in the cops you were giving the finger to a second ago. You took your chances. You relished in the freedom of the risk. You eat your pudding.
      - danielweber 13y ago
        I know why you are annoyed, but many libertarians (of the non-anarchist variety) still believe in the court system to recover damages. If they use the courts to recover part of their losses from MtGox's assets there's nothing hypocritical there. If they want a bailout, ie a cash injection, then I'm with you.
btcfn 13y ago
I have little sympathy for Mark. Assuming he didn't straight up stole the money, it all happened because of his incompetence. How do you not notice a leak of 850,000 BTC? How do you not have most of it in cold storage? How do you not have all kinds of alert systems warning you about even a 500 BTC discrepancy, let alone hundreds of thousands?
- danielweber 13y ago
  You have to get bookkeeping exactly right. You have to get crypto exactly right. Bitcoin sits on top of both of those sharp pyramids. Yesterday someone on HackerNews compared a Bitcoin account to a pressurized system where the slightest failure means you lose everything irretrievably and instantly which is a great analogy. You don't need Good Enough for this. You need Perfect for this.
  - jeremyjh 13y ago
    No you don't need perfection to add some basic controls that would have prevented most of the damage here.
- wmf 13y ago
  Hence the theory that the missing BTC is in cold storage but the private keys have been lost.
miguelrochefort 13y ago
Did you try to get your money out of MtGox? A friend of mine has been trying to get his money (CAD) out of MtGox for 2 months. He received his money yesterday.
- mcdougle 13y ago
  Where is he? I've read about a few people getting their money, but they were all in Japan moving $ into Japanese bank accounts. I tried to withdraw a couple hundred at the start of January into a US bank account and I'm curious if I'll ever get it. It's a very small amount of money (and I paid even less to get the BTC originally), so it's not a big deal at all if I lose it all but I'd still like to get it.
  - miguelrochefort 13y ago
    Canada.
- rbobby 13y ago
  I would advise him to close the bank account the money went into. Wire transfers can be cancelled... and if the bankruptcy folks are quick on their feet the first thing they'll do is cancel every completed wire transfer they can.
- tlrobinson 13y ago
  Why the hell are they still processing withdrawals and simultaneously filing for bankruptcy?
  - miguelrochefort 13y ago
    MtGox might not be responsible for the delay. All I know is that he started the process months ago, they kept saying that "money was on the way", and he eventually received it.

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.
- steven2012 13y ago
  I believe your understanding if the situation is flawed, if you are a US citizen. The $3000 per year applies to capital losses. You did not suffer a capital loss. You suffered a loss due to bank insolvency. If you realized your gains in 2013, you actually owe taxes on $500,000 for your 2013 taxes, which is roughly $250k. I believe your losses due to bank insolvency will apply to your income for 2014. But you may be on the hook for $250,000 in income taxes this year. But it probably won't offset your tax liability from 2013. And the state of NYC subpoenaed MtGox's records so they may share this with the IRS. I would consult a CPA if I were you, you could have a huge tax liability with no adequate way to offset it.
  - patio11 13y ago
    Yep, talk to a CPA. One key issue is you may not have a capital loss, but rather a casualty, which by my read of the flowchart becomes a miscellaneous itemized deduction. Those are limited to 2% of MAGI and I don't believe they carry over. Also, there is a hard cap at $20k for lost deposits. See publication 547. It may be to your advantage to file it under a loss to personal property (form 4648) - the math isn't straightforward for me to work out. Talk to a CPA. This is the sort of thing they live for.
    - wtvanhest 13y ago
      It may depend on why the exchange went insolvent. If it is not a technical problem, and is rather a Ponzi Scheme, the tax implications may be much different since there are IRS rules that handle Ponzi Schemes. Additionally, those that gained profits in the exchange may be required to pay back those profits to victims through clawback lawsuits+. This IRS link below is a brief overview of how victims of Ponzi Schemes are treated. The most important piece of information is that there is a real chance of a clawback for the people who withdrew and currently think they made money. http://www.irs.gov/uac/Help-for-Victims-of-Ponzi-Investment-Schemes http://www.irs.gov/uac/Help-for-Victims-of-Ponzi-Investment-... I don't have time to read these documents this morning, but I do know that the people who received returns from Madoff are now the focus of lawsuits. Here is a Forbes article on the subject, there are plenty more you can read out there as well: http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-scheme-victims-may-owe-triple-damages-for-usury-in-clawback-lawsuits-a-new-tool-in-ponzi-scheme-litigation/ http://www.forbes.com/sites/jordanmaglich/2012/10/23/ponzi-s... Here is one example of a hospital having to pay a Clawback. http://www.jewishpress.com/news/breaking-news/hadassah-doctors-strike-over-hospital-deficit-fallout/2014/02/05/ http://www.jewishpress.com/news/breaking-news/hadassah-docto... +My guess is that the clawback lawsuits would yield very little real money since much of the value of Bitcoined gained was due to price appreciation which may keep lawsuits against those who gained fairly minimal since there isn't much money for lawyers to sue for in complex litigation.

JumpCrisscross 13y ago

>I lost a bit more than $500,000 USD that was in my MtGox account Sorry for your loss. Why didn't you move it to an interest-bearing bank account?

shawabawa3 13y ago
> waiting to be withdrawn Withdrawals have been massively delayed for at least 6 months. The smart thing to do was to withdraw bitcoins to another exchange while you still could
dcc1 13y ago
probably because the withdrawals to bank havent worked for months, the writing was on the wall for a long time, people who lost money in it took a huge gamble he should have transferred the bitcoins to bitstamp when transfers worked and cashed out.
- mtgoxloser 13y ago
  > the writing was on the wall for a long time I wish I had hindsight like you. It was only up until these few months that Bitstamp became of any competition to MtGox. Its liquidity sucked, which was why many early adopters like me stayed.
  - smtddr 13y ago
    >> hindsight I'm only making this comment because you used the term "hindsight". Let me first start off by saying I feel very, very sorry for all the people who lost funds in MtGox. It'll take awhile before you get over the pain of losing a life-changing amount of money. But let's be very clear about this; hindsight wasn't needed here. The warning signs that MtGox was a house of cards became visible a long time ago. Definitely before the disabling of BTC-transfers. A lesson should have been learned here and nothing like this should happen to you again. -- http://www.livetradingnews.com/the-bitcoin-tangle-were-warning-signs-overlooked-in-mt-gox-collapse-33625.htm#.UxCAolQhAZU http://www.livetradingnews.com/the-bitcoin-tangle-were-warni... "Some signs of a strain were visible early on. The exchange was quick to accept purchases but slow in giving them back. Additional proofs were asked for. The site also had technical issues; some users complained that passwords were displayed in plain text. Users are now left wondering if the small hints portrayed deeper crises."

bbosh 13y ago

Did you invest $500,000 in real dollars, or earn it from mining?

mtgoxloser 13y ago
Majority of it was from mining, but I had already realized my profits.
- deleted 13y ago
  [deleted]
- celticninja 13y ago
  to be fair, with the funds in $ you probably have a better chance of getting some of that back than if it was BTC.
  - pistle 13y ago
    Yeah, call in the regulators to get some back. Thank a US fiat tax payer. You're welcome. It's the biggest load of hypocrisy that people who enthusiastically wanted to play in the libertarian paradise of an unregulated currency think they should be able to turn around and request the help of the regular, regulated, tax-supported economy to make them partial or whole. First, we'll crap a bunch of processing resources into thin air, ponzi up value in the system, scream self-righteous screeds to the nay-sayers... then, when it goes to shit, call in the cops you were giving the finger to a second ago. You took your chances. You relished in the freedom of the risk. You eat your pudding.
    - danielweber 13y ago
      I know why you are annoyed, but many libertarians (of the non-anarchist variety) still believe in the court system to recover damages. If they use the courts to recover part of their losses from MtGox's assets there's nothing hypocritical there. If they want a bailout, ie a cash injection, then I'm with you.

btcfn 13y ago

I have little sympathy for Mark. Assuming he didn't straight up stole the money, it all happened because of his incompetence. How do you not notice a leak of 850,000 BTC? How do you not have most of it in cold storage? How do you not have all kinds of alert systems warning you about even a 500 BTC discrepancy, let alone hundreds of thousands?

danielweber 13y ago
You have to get bookkeeping exactly right. You have to get crypto exactly right. Bitcoin sits on top of both of those sharp pyramids. Yesterday someone on HackerNews compared a Bitcoin account to a pressurized system where the slightest failure means you lose everything irretrievably and instantly which is a great analogy. You don't need Good Enough for this. You need Perfect for this.
- jeremyjh 13y ago
  No you don't need perfection to add some basic controls that would have prevented most of the damage here.
wmf 13y ago
Hence the theory that the missing BTC is in cold storage but the private keys have been lost.

miguelrochefort 13y ago

Did you try to get your money out of MtGox? A friend of mine has been trying to get his money (CAD) out of MtGox for 2 months. He received his money yesterday.

mcdougle 13y ago
Where is he? I've read about a few people getting their money, but they were all in Japan moving $ into Japanese bank accounts. I tried to withdraw a couple hundred at the start of January into a US bank account and I'm curious if I'll ever get it. It's a very small amount of money (and I paid even less to get the BTC originally), so it's not a big deal at all if I lose it all but I'd still like to get it.
- miguelrochefort 13y ago
  Canada.
rbobby 13y ago
I would advise him to close the bank account the money went into. Wire transfers can be cancelled... and if the bankruptcy folks are quick on their feet the first thing they'll do is cancel every completed wire transfer they can.
tlrobinson 13y ago
Why the hell are they still processing withdrawals and simultaneously filing for bankruptcy?
- miguelrochefort 13y ago
  MtGox might not be responsible for the delay. All I know is that he started the process months ago, they kept saying that "money was on the way", and he eventually received it.