MtGox Files For Bankruptcy Protection 465
Sockatume writes "The beleaguered MtGox bitcoin exchange has officially filed for bankruptcy protection in Tokyo. According to the Wall Street Journal, Bitcoin held an impromptu press conference that addressed recent rumors. They state that they have over $60m in liabilities against just $30m in assets, and confirm the loss of over $500m worth of Bitcoins, split between customers' balances (750,000 BTC) and company assets (100,000 BTC). Owner Mark Karpeles said, 'There was some weakness in the system, and the bitcoins have disappeared. I apologize for causing trouble.'"
Re:"some weakness" (Score:5, Informative)
MTGox's fault for not understanding a spec whilst using it to move vast sums around but it probably highlights the importance of good naming practices when creating a spec.
Re:Bitcoin did what? (Score:5, Informative)
This one's on me and not the editors, somehow I went from "the exchange's owner so-and-so" to "the exchange" to "Bitcoin" in the space of about half a cup of coffee. Although the image of the bitcoin network showing up in person is an amusing one.
I'm annoyed with myself because the misconception that this is a Bitcoin issue and not a MtGox issue is one I try to dispel.
Re:Legitimization (Score:5, Informative)
Actually more like 18 [wired.co.uk], but MtGox counts as the first major exchange to fail. The rest of those amount to you or I throwing up an "exchange" as our CompSci101 project and then vanishing when they lost their shirts.
The loss of MtGox definitely counts as a blow to Bitcoin, but as others will no doubt point out, it had already started "failing" months ago (when you have a good 20% price spread vs the next highest exchange and you don't see arbitrage occurring on a massive scale, you know you have a problem). Any fools with either USD or BTC left in Gox since the beginning of the year (and even before that) pretty much stopped paying attention and deserve what they got.
And the effect on the BTC market since then bears that out - The price initially plummeted, but has already stabilized at 2/3rds its previous stable value. If anything, this counted (and still does, IMO) as a great opportunity to get in during a market correction and load up on deeply discounted BTC.
MtGox (Score:2, Informative)
Ht Charles Stross [antipope.org]
Re:"some weakness" (Score:2, Informative)
No, that's exactly what OP is describing. The fact that a single transaction can have different binary formats owing to variations in zero-padding on the txid is called "transaction malleability".
Re:This is actually good news (Score:3, Informative)
So what you're saying is that everyone is supposed to magically learn from this how to defend against the next exchange which does a better job of handling its theft so no one gets any red flags until its too late and they've take ALL of the money rather than just half of it? Is that what you're saying?
YES! Well, not the "magically" part.
Here is the lesson: You do not store a crypto-currency on someone else's server. You maintain control of it yourself.
Now, you might need to convert that crypto-currency into a local currency, or vice versa. And to do that, you will need to find an individual or an exchange with a solid reputation (because you can not inherently trust them). But once that transaction is complete, you immediately take back control of your crypto-currency. You DO NOT leave it in someone else's control, ever.
Comment removed (Score:3, Informative)
so you can predict performance then? (Score:2, Informative)
> a great opportunity to get in during a market correction and load up on deeply discounted BTC.
Sounds just like those stock pump-and-dump spam emails I get.
Re:Ha ha (Score:5, Informative)
When declaring bankruptcy you have to declare assets and liabilities. If the liabilities are in other currencies you have to declare them too, usually in the local currency equivalent.
Re:Ha ha (Score:5, Informative)
And next time someone comes in and robs them blind, will the perpetrators be buttpirates?
Already been done by "pirateat40" (aka Trendon Shavers). [bitcoin.it]
Dude was offering 1% per week returns on an "investment" that he refused to give any information about because of his "proprietary business model".
There was no shortage of dupes lining up to give him their coins.
Re:How can they have only $60M of liabilities? (Score:2, Informative)
No, client funds are not company funds. If you run a parking lot and a car gets stolen from the lot you're not liable for replacing the car. You might get that liabilty if your valet wrecked the car, but not in general. Same with deposit boxes, storage lockers, mail packages and so on if you want to get your money back in case of theft you need insurance. Which is what FDIC is for bank accounts. No insurance, then you might not even have a claim against MtGox. First you'd have to take them to court and win to make them liable for damages. And even if you do, well there won't be any money to collect there anyway.
Re:so you can predict performance then? (Score:4, Informative)
That completely skips over the idea that shareholders may demand companies not accept or stop accepting BTC calling it fiduciary irresponsibility.
And, what if the governments get involved? Governments could start regulating the exchanges. Governments could issue onerous orders concerning BTC transactions. Imagine being a business and selling something for 1BTC and having the value drop by half before you have shipped the item. Do you continue the transaction as is, ask for more money, or cancel it? What if the government says you must continue with the transaction?
Now, image buying something for 1BTC and then having to pony up another the next day because the value dropped over night and the company will not ship unless you pay for the change in value? What if the government says you either pay or the transaction is canceled AND the business can charge you a fee for cancelling the transaction?
Finally, anyone who got BTC back in November have lost about 1/2 the value. Think about the people who have been talking up BTC to their family, friends, etc. who now get to answer about how this has effected them.