4 ms·

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 s

by 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.
  - Cyther606 12y ago
    Sorry, but your line of thinking takes for granted that criminality doesn't pay. On the contrary. Having a hidden fortune is more valuable than having a pubilc fortune, objectively in that you pay less taxes and forego frivilous lawsuits and subjectively in that you can walk around less paranoid of kidnappings. Second of all, there's no way to stop Karpeles from mixing his coins. People who don't have much experience using Bitcoin are often operating in the PayPal model, where it takes a trusted third party to spend your money and even if not, the other person is known. In the Bitcoin space, there is no trusted third party, and if your coins are mixed and you and the other person are behind Tor, there's effectively no identifiable information involved in the transaction. Embezzling Bitcoins is the perfect crime. As has been mentioned already, Karpeles has a history of computer fraud, so embezzling digital money would be right up his alley. He had the means, motive and opportunity to do so. When you consider the rampant embezzlement in a historical context ... it's pretty much case closed. Your argument boils down to "this time it's different". Also, laughing stock digital billionaire? Sorry but there's no such thing as a laughing stock billionaire. I'd take a billion knowing it would make me the "laughing stock" of the world, and so would anyone with a brain. If the community hadn't called Karpeles out on using transaction malleability as a fictional excuse for losing 850,000 BTC, and we had all believed Karpeles, he would in all likelihood be looking at Japanese bankruptcy court followed by a lifetime of traveling the world with a hidden fortune rivaling Satoshi's.
    - kbenson 12y ago
      If embezzling Bitcoins was the perfect crime, there wouldn't be an active police investigation.
- nikcub 12y ago
  No logical person would give up $3-5M+ per month in growing legit income for $400M+ in dirty money with a risk of lifetime of jail. Not when they controlled 60%+ of all btc trades at the time and the VC/private equity rush at the time would have easily cashed him out legitimately for a value higher than the total value of deposits. The whole entire point of money laundering is to get to the legit income, it would be unheard of to go the other way especially when you own 100% of the company, are high profile and your future spending will be extremely scrutinized. Simplest explanation is best: Karpeles was incompetent and distracted, didn't trust others, wrote horrible code nowhere near suitable for a bitcoin exchange and when he noticed a year later that he had been robbed attempted to cover it up.
  - Cyther606 12y ago
    A generous estimate would put accumulating 850,000 BTC in profits through exchange fees at 85,000,000 BTC in volume. That assumes a 1% fee on all trades, which is already unsustainable in the current exchange market. It also assumes 0 operating expenses, but hey we're being generous in this calculation. To do 85,000,000 in BTC on MtGox would mean averaging over 230,000 BTC of daily trading volume for 365 days. For context, most Bitcoin exchanges these days are doing 20% of that on a record day. So if we're super duper generous in our calculations, we'd assume it would take Karpeles 5 years to accumulate the amount he stole in a legal way. This further assumes two equally incredibly unlikely things: 1. MtGox stays ahead of the competition 2. MtGox maintains a 1% trading fee Remember that in April of 2013, which is when MtGox had its second huge trading engine crash, there was already significant demand amongst traders to move away from MtGox, which is precisely how MtGox started rapidly losing marketshare. The TLDR is, Karpeles wouldn't have made nearly as much money by engaging in legal business. He would've found it much more tempting to close MtGox before having to deal with burdensome regulations coming out of America, a trend which started in 2013. And even if he had tried to deal with regulators, MtGox most likely wouldn't have been able to maintain its number 1 position for much longer. So the fact of the matter is he was looking at spending the next 10-20 years pursuing a business he wasn't prepared to run, or he could've just taken the money and walked away, declaring bankruptcy. > Simplest explanation is best: Karpeles was incompetent and distracted, didn't trust others, wrote horrible code nowhere near suitable for a bitcoin exchange and when he noticed a year later that he had been robbed attempted to cover it up. I find it absolutely, positively _unbelievable_ that 850,000 BTC were stolen out of a hot wallet. If it had been due to terrible coding practices, he would've gone to that as his first alibi rather than claiming 850,000 BTC were lost due to"transaction malleability". If the code was the likely culprit, he could and would have proved it.
danielweber 12y ago
Without any specific evidence, the null hypothesis ought be "did small mistakes that kept on compounding on themselves." It's quite normal human behavior. If there were an oracle that could answer, I'd comfortably bet even odds that he started out with some rather small mistake, and then thought "well, I just need to keep things afloat a while to cover for it, and then we will all be good." Oh, I'll borrow a little money from my spouse. Oh, I'll just take some money from my neighbor without him knowing, but I'll get it back and return it to him later. Lots of gambling addicts flame out this way, and my gut tells me that the Bitcoin community has more than its fair share of gambling-addictive personalities.

by argc 12y ago

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.
- Cyther606 12y ago
  Sorry, but your line of thinking takes for granted that criminality doesn't pay. On the contrary. Having a hidden fortune is more valuable than having a pubilc fortune, objectively in that you pay less taxes and forego frivilous lawsuits and subjectively in that you can walk around less paranoid of kidnappings. Second of all, there's no way to stop Karpeles from mixing his coins. People who don't have much experience using Bitcoin are often operating in the PayPal model, where it takes a trusted third party to spend your money and even if not, the other person is known. In the Bitcoin space, there is no trusted third party, and if your coins are mixed and you and the other person are behind Tor, there's effectively no identifiable information involved in the transaction. Embezzling Bitcoins is the perfect crime. As has been mentioned already, Karpeles has a history of computer fraud, so embezzling digital money would be right up his alley. He had the means, motive and opportunity to do so. When you consider the rampant embezzlement in a historical context ... it's pretty much case closed. Your argument boils down to "this time it's different". Also, laughing stock digital billionaire? Sorry but there's no such thing as a laughing stock billionaire. I'd take a billion knowing it would make me the "laughing stock" of the world, and so would anyone with a brain. If the community hadn't called Karpeles out on using transaction malleability as a fictional excuse for losing 850,000 BTC, and we had all believed Karpeles, he would in all likelihood be looking at Japanese bankruptcy court followed by a lifetime of traveling the world with a hidden fortune rivaling Satoshi's.
  - kbenson 12y ago
    If embezzling Bitcoins was the perfect crime, there wouldn't be an active police investigation.
nikcub 12y ago
No logical person would give up $3-5M+ per month in growing legit income for $400M+ in dirty money with a risk of lifetime of jail. Not when they controlled 60%+ of all btc trades at the time and the VC/private equity rush at the time would have easily cashed him out legitimately for a value higher than the total value of deposits. The whole entire point of money laundering is to get to the legit income, it would be unheard of to go the other way especially when you own 100% of the company, are high profile and your future spending will be extremely scrutinized. Simplest explanation is best: Karpeles was incompetent and distracted, didn't trust others, wrote horrible code nowhere near suitable for a bitcoin exchange and when he noticed a year later that he had been robbed attempted to cover it up.
- Cyther606 12y ago
  A generous estimate would put accumulating 850,000 BTC in profits through exchange fees at 85,000,000 BTC in volume. That assumes a 1% fee on all trades, which is already unsustainable in the current exchange market. It also assumes 0 operating expenses, but hey we're being generous in this calculation. To do 85,000,000 in BTC on MtGox would mean averaging over 230,000 BTC of daily trading volume for 365 days. For context, most Bitcoin exchanges these days are doing 20% of that on a record day. So if we're super duper generous in our calculations, we'd assume it would take Karpeles 5 years to accumulate the amount he stole in a legal way. This further assumes two equally incredibly unlikely things: 1. MtGox stays ahead of the competition 2. MtGox maintains a 1% trading fee Remember that in April of 2013, which is when MtGox had its second huge trading engine crash, there was already significant demand amongst traders to move away from MtGox, which is precisely how MtGox started rapidly losing marketshare. The TLDR is, Karpeles wouldn't have made nearly as much money by engaging in legal business. He would've found it much more tempting to close MtGox before having to deal with burdensome regulations coming out of America, a trend which started in 2013. And even if he had tried to deal with regulators, MtGox most likely wouldn't have been able to maintain its number 1 position for much longer. So the fact of the matter is he was looking at spending the next 10-20 years pursuing a business he wasn't prepared to run, or he could've just taken the money and walked away, declaring bankruptcy. > Simplest explanation is best: Karpeles was incompetent and distracted, didn't trust others, wrote horrible code nowhere near suitable for a bitcoin exchange and when he noticed a year later that he had been robbed attempted to cover it up. I find it absolutely, positively _unbelievable_ that 850,000 BTC were stolen out of a hot wallet. If it had been due to terrible coding practices, he would've gone to that as his first alibi rather than claiming 850,000 BTC were lost due to"transaction malleability". If the code was the likely culprit, he could and would have proved it.

danielweber 12y ago

Without any specific evidence, the null hypothesis ought be "did small mistakes that kept on compounding on themselves." It's quite normal human behavior. If there were an oracle that could answer, I'd comfortably bet even odds that he started out with some rather small mistake, and then thought "well, I just need to keep things afloat a while to cover for it, and then we will all be good." Oh, I'll borrow a little money from my spouse. Oh, I'll just take some money from my neighbor without him knowing, but I'll get it back and return it to him later. Lots of gambling addicts flame out this way, and my gut tells me that the Bitcoin community has more than its fair share of gambling-addictive personalities.