4 ms·

For me the underlying question is still: was he initially just incredibly incompetent, or always a scam using incompetence as a cover? Even in the case of just

by rdl 12y ago

For me the underlying question is still: was he initially just incredibly incompetent, or always a scam using incompetence as a cover? Even in the case of just pure incompetence, there was a failure of ethics/law in how problems were handled, but if it was just incompetence fundamentally, bringing in a good partner early on might have saved it.

wpietri 12y ago
At the limit, I'm not sure those two are distinguishable. There was a story a while back about a law firm that discovered its escrow account was empty, even though it should have had millions in it. Turns out a legal secretary had gotten caught up in a Nigerian scam. She started out sending a small amount of her own money. They'd tell her they just needed a little more and then she'd get it all back plus a lot more. As she got deeper in trouble, at some point she started "borrowing" from her employer. Incompetence led to pressure that created ethical failure. My guess (as uninformed as anybody's) is that Karpeles started out merely incompetent and with underdeveloped ethics. As he got in deeper, he just focused on trying to stay out of trouble in the short term. That led to massive snowballing of problems. His very modest helpings of competence and ethical backbone were quickly overrun, demoted in priority to the same level as getting enough niacin in his diet. The best liars I know aren't people who know that they're lying; they're people who focus on saying what you want to hear while ignoring entirely what the truth might be. For those unfamiliar with the Dunning-Kruger effect, it also seems relevant here: http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
- argc 12y ago
  Seems likely, any references that support your theory? Many people on /r/bitcoin and such places seemed to think that he outright stole it, but could be pure speculation (I didn't follow the story, don't take my word for it).
  - streptomycin 12y ago
    The theory I've heard along those lines is that he lost the Bitcoins years ago due to incompetence and was trying to make back the losses so that he wouldn't have to own up to it. You can imagine how that strategy might have spiraled out of control as the price of Bitcoins increased. It's mostly speculation. But nearly everything we know at this point is speculation, other than that Karpeles has a history of both technical and ethical shortcomings, which basically means that anything is possible.
  - Cyther606 12y ago
    This is because embezzlement is rampant in the Bitcoin space, e.g.: Inputs.io, TradeFortress, MyBitcoin, Silk Road 2.0, GBL, I could go on. Embezzlement, as in you get "hacked", oops, we lost everyone's money, everyone move along, nothing to see here. Anyone who thinks Mark Karpeles isn't guilty of embezzlement at a minimum - MINIMUM - just isn't viewing the situation in light of the massive amounts of operator fraud that have historically taken place, not to mention copious amounts of evidence suggesting Mark Karpeles' talking points have been entirely fabricated from the beginning. Remember, he stole over a _billion_ dollars: 850,000 * 1200. He only relinquished control of 200,000 of those 850,000 after being called out on it by the community. At this point the legal system is the least of Karpeles' worries.
    - michaelt 12y ago
      While you're right that embezzlement is rampant, it's possible the embezzlement was by an employee rather than Karpelès himself. It doesn't sound like they had very strict change control policies.
      - danielweber 12y ago
        A private key is 256 bits, right? A determined insider given the chance to visually see the key once per day could probably take the whole thing out in his brain in a few weeks.
    - aianus 12y ago
      Why would he want to be a laughingstock digital billionaire under police scrutiny in bankruptcy court when he's already a successful business owner with tens of millions? It really doesn't make sense that he up and decided to steal them. If he did it he'll die having spent less of his stolen fortune than he would have spent of his legitimate fortune. Seems a lot more likely he's an idiot who got in over his head.
- deleted 12y ago
  [deleted]
- AJ007 12y ago
  For those effected, the two are not distinguishable. If the bank robs you or loses your money, it is still a loss. When it comes to the law, neither is "I don't know" perhaps gives some lenience at sentencing. When your business involves holding money on deposit for people, you have a very high moral and legal standard to follow. Unfortunately the very legal leverage and fractional reserve lending by financial institutions makes that line very blurry. A single technical misstep and you are now an insolvent ponzi scheme. Being lazy or "over your head" in this area is like laying down in front of a moving truck. US laws relating to money laundering and finance are very strict, accidents and lapses still lead to convictions. I don't know anything about Japanese law. I'll take a page from the BNP Paribas case and say that because Mt Gox used US dollars it falls under US jurisdiction and must also follow US law, not just Japan's.
  - tim333 12y ago
    There's a critical difference in this case. If the lost bitcoins are now in the possession of some random hackers then Karpeles is incompetent. If they are in fact effectively in the possession of Karpeles then he is a competent thief. It's hard to tell but in the future they may catch him cashing some coins in to buy a yacht or pay the rent or some such at which point it would be distinguishable in a meaningful way. Being in Japan I guess he'd get away with it but in the US they'd be tapping his phones and so on.
kordless 12y ago
Any decent amount of incompetence is likely to be viewed as a 'scam' by others. When you invert trust, in any portion of the business, you get what is generally viewed as 'privacy'. Bitcoin is essentially trusted privacy. Connect that notion of 'trusted privacy' to a business/controlling entity dealing with people's money, and you get fear. A 'scam' or fraud is defined as wrongful or criminal deception intended to result in financial or personal gain. Good reasons to fear. A violation of trust when dealing with people's money is a perfect way to describe what happened at Mt. Gox, but it doesn't necessarily mean it was scam. That is only possible because Bitcoin.
saalweachter 12y ago
This comes up a lot in the skeptic community: we know X is not actually psychic/finding ghosts/healing people, but are they an outright, knowing fraud, or do they believe it themselves?
canvia 12y ago
The Willy Report makes it seem like there was more at play than simply incompetence: http://willyreport.wordpress.com/ http://willyreport.wordpress.com/
- sirdogealot 12y ago
  The willy report depicts whale buy bots that were buying large amounts of Bitcoin on a drip feed styled system. The "investigator" of the free willy report got it wrong.
nikcub 12y ago
my assessment based on the statements of others that knew him better was that he got bored with MtGox very quickly and was distracted with side projects, such as the bitcoin foundation, bitcoin ATM's and the bitcoin cafe he was building downstairs from MtGox (apparent sunk cost of $2M+). the tech guy that Roger Ver bought in when Gox was at crisis point talked about how despite the state of emergency Karpeles would leave the office mid-work-day to go and pick some silly color scheme for the new bitcoin cafe. This is days/hours before Gox was going under. The other part was inability to delegate and lack of trust in the code that wasn't his own. Despite his lack of interest in Gox, he still was the central (and choke point) in all site updates (which he merged manually, no source control) which explained the lack of development. In getting MtGox into trouble I don't think he was intentionally fraudulent, just a bad case of dev project ADD. In terms of the lying and cover up, he definitely was - but seems like the type of person who doesn't realize how serious that is. In terms of culpability, the DOJ indictment with his name on it (which i'm 95% certain exists) won't distinguish between incompetence/ignorance and willful fraud.

by rdl 12y ago

wpietri 12y ago

At the limit, I'm not sure those two are distinguishable. There was a story a while back about a law firm that discovered its escrow account was empty, even though it should have had millions in it. Turns out a legal secretary had gotten caught up in a Nigerian scam. She started out sending a small amount of her own money. They'd tell her they just needed a little more and then she'd get it all back plus a lot more. As she got deeper in trouble, at some point she started "borrowing" from her employer. Incompetence led to pressure that created ethical failure. My guess (as uninformed as anybody's) is that Karpeles started out merely incompetent and with underdeveloped ethics. As he got in deeper, he just focused on trying to stay out of trouble in the short term. That led to massive snowballing of problems. His very modest helpings of competence and ethical backbone were quickly overrun, demoted in priority to the same level as getting enough niacin in his diet. The best liars I know aren't people who know that they're lying; they're people who focus on saying what you want to hear while ignoring entirely what the truth might be. For those unfamiliar with the Dunning-Kruger effect, it also seems relevant here: http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect

argc 12y ago
Seems likely, any references that support your theory? Many people on /r/bitcoin and such places seemed to think that he outright stole it, but could be pure speculation (I didn't follow the story, don't take my word for it).
- streptomycin 12y ago
  The theory I've heard along those lines is that he lost the Bitcoins years ago due to incompetence and was trying to make back the losses so that he wouldn't have to own up to it. You can imagine how that strategy might have spiraled out of control as the price of Bitcoins increased. It's mostly speculation. But nearly everything we know at this point is speculation, other than that Karpeles has a history of both technical and ethical shortcomings, which basically means that anything is possible.
- Cyther606 12y ago
  This is because embezzlement is rampant in the Bitcoin space, e.g.: Inputs.io, TradeFortress, MyBitcoin, Silk Road 2.0, GBL, I could go on. Embezzlement, as in you get "hacked", oops, we lost everyone's money, everyone move along, nothing to see here. Anyone who thinks Mark Karpeles isn't guilty of embezzlement at a minimum - MINIMUM - just isn't viewing the situation in light of the massive amounts of operator fraud that have historically taken place, not to mention copious amounts of evidence suggesting Mark Karpeles' talking points have been entirely fabricated from the beginning. Remember, he stole over a _billion_ dollars: 850,000 * 1200. He only relinquished control of 200,000 of those 850,000 after being called out on it by the community. At this point the legal system is the least of Karpeles' worries.
  - michaelt 12y ago
    While you're right that embezzlement is rampant, it's possible the embezzlement was by an employee rather than Karpelès himself. It doesn't sound like they had very strict change control policies.
    - danielweber 12y ago
      A private key is 256 bits, right? A determined insider given the chance to visually see the key once per day could probably take the whole thing out in his brain in a few weeks.
  - aianus 12y ago
    Why would he want to be a laughingstock digital billionaire under police scrutiny in bankruptcy court when he's already a successful business owner with tens of millions? It really doesn't make sense that he up and decided to steal them. If he did it he'll die having spent less of his stolen fortune than he would have spent of his legitimate fortune. Seems a lot more likely he's an idiot who got in over his head.
deleted 12y ago
[deleted]
AJ007 12y ago
For those effected, the two are not distinguishable. If the bank robs you or loses your money, it is still a loss. When it comes to the law, neither is "I don't know" perhaps gives some lenience at sentencing. When your business involves holding money on deposit for people, you have a very high moral and legal standard to follow. Unfortunately the very legal leverage and fractional reserve lending by financial institutions makes that line very blurry. A single technical misstep and you are now an insolvent ponzi scheme. Being lazy or "over your head" in this area is like laying down in front of a moving truck. US laws relating to money laundering and finance are very strict, accidents and lapses still lead to convictions. I don't know anything about Japanese law. I'll take a page from the BNP Paribas case and say that because Mt Gox used US dollars it falls under US jurisdiction and must also follow US law, not just Japan's.
- tim333 12y ago
  There's a critical difference in this case. If the lost bitcoins are now in the possession of some random hackers then Karpeles is incompetent. If they are in fact effectively in the possession of Karpeles then he is a competent thief. It's hard to tell but in the future they may catch him cashing some coins in to buy a yacht or pay the rent or some such at which point it would be distinguishable in a meaningful way. Being in Japan I guess he'd get away with it but in the US they'd be tapping his phones and so on.

kordless 12y ago

Any decent amount of incompetence is likely to be viewed as a 'scam' by others. When you invert trust, in any portion of the business, you get what is generally viewed as 'privacy'. Bitcoin is essentially trusted privacy. Connect that notion of 'trusted privacy' to a business/controlling entity dealing with people's money, and you get fear. A 'scam' or fraud is defined as wrongful or criminal deception intended to result in financial or personal gain. Good reasons to fear. A violation of trust when dealing with people's money is a perfect way to describe what happened at Mt. Gox, but it doesn't necessarily mean it was scam. That is only possible because Bitcoin.

saalweachter 12y ago

This comes up a lot in the skeptic community: we know X is not actually psychic/finding ghosts/healing people, but are they an outright, knowing fraud, or do they believe it themselves?

canvia 12y ago

The Willy Report makes it seem like there was more at play than simply incompetence: http://willyreport.wordpress.com/ http://willyreport.wordpress.com/

sirdogealot 12y ago
The willy report depicts whale buy bots that were buying large amounts of Bitcoin on a drip feed styled system. The "investigator" of the free willy report got it wrong.

nikcub 12y ago

my assessment based on the statements of others that knew him better was that he got bored with MtGox very quickly and was distracted with side projects, such as the bitcoin foundation, bitcoin ATM's and the bitcoin cafe he was building downstairs from MtGox (apparent sunk cost of $2M+). the tech guy that Roger Ver bought in when Gox was at crisis point talked about how despite the state of emergency Karpeles would leave the office mid-work-day to go and pick some silly color scheme for the new bitcoin cafe. This is days/hours before Gox was going under. The other part was inability to delegate and lack of trust in the code that wasn't his own. Despite his lack of interest in Gox, he still was the central (and choke point) in all site updates (which he merged manually, no source control) which explained the lack of development. In getting MtGox into trouble I don't think he was intentionally fraudulent, just a bad case of dev project ADD. In terms of the lying and cover up, he definitely was - but seems like the type of person who doesn't realize how serious that is. In terms of culpability, the DOJ indictment with his name on it (which i'm 95% certain exists) won't distinguish between incompetence/ignorance and willful fraud.