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Bitcoin Businesses The Almighty Buck

MtGox Files For Bankruptcy Protection 465

Posted by Soulskill
from the all-about-the-bitjamins dept.
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.'"
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MtGox Files For Bankruptcy Protection

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  • Ha ha (Score:5, Insightful)

    by BasilBrush (643681) on Friday February 28, 2014 @09:53AM (#46366841)

    And so the libertarian unregulated money dream dies.

  • Bitcoin did what? (Score:5, Insightful)

    by LordLucless (582312) on Friday February 28, 2014 @10:02AM (#46366901)

    According to the Wall Street Journal, Bitcoin held an impromptu press conference that addressed recent rumors.

    Bitcoin held an impromptu press conference? Did the Dollar and the Peso attend as well?

    Oh, you mean Mt. Gox held an impromptu press conference. Yeah, well, whoever trusted an online card trading portal as if it were a bank deserves whatever they got, IMO.

  • Re:Ha ha (Score:4, Insightful)

    by LordRobin (983231) on Friday February 28, 2014 @10:04AM (#46366927)

    I recently checked Reddit's /r/bitcoin, to see how the True Believers were taking the latest developments. To hear them say it, Bitcoin has already recovered off its lows, which mean everything is fine and all this bad news is just FUD spread by haters. Bitcoin believers truly live in their own universe.

    ------RM

  • Re:Ha ha (Score:5, Insightful)

    by AmiMoJo (196126) * <mojoNO@SPAMworld3.net> on Friday February 28, 2014 @10:09AM (#46366967) Homepage

    To be fair there is a lot of FUD in the story. How did "bitcoin", a distributed crypto-currency, do a press conference? They mean someone claiming to speak for it did.

    I'm not sure how they calculate their liabilities are only $60m either, if they own depositors $700m worth of BTC. Maybe they are hoping that their own collapse will devalue the currency so much their liabilities will fall that far.

  • by Anonymous Coward on Friday February 28, 2014 @10:10AM (#46366971)

    Fail for who, lets face it - people who were in prime position to steal all bitcoins from mtgox were mtgox owners/employees. If you had half a billion dollars in cash sitting in front of you, wouldn't you make off with it? I know i would.

  • by xiando (770382) on Friday February 28, 2014 @10:14AM (#46366999) Homepage Journal
    Failed exchanges are supposed to die. This is how a free market is supposed to work. I have been warning against using MtGox since April 2013 and you can all go check my Bitcointalk posts to see that this is true. If you request a withdraw from an exchange and it suddenly takes two weeks instead of a few days before you get your money then it is time to get out. If the delay increases to four weeks then six then months then it's clearly time to not only get out but also warn others about this exchange. A whole lot of extremely stupid people ignored all the red flags and alarmbells and they lost money when this exchange went bankrupt. This is very good. A small percentage of the people who lost money at MtGox will learn from this and be more careful and picky as to where they place their money in the future. If you do not have control of the private keys of a Bitcoin then you don't have the Bitcoin, you have an IOU with someone who may or may not hold Bitcoin for you. The demise of MtGox will sadly make many of the idiots who lost money there cry for more government, more regulation and more fascism. Fascism is not a good solution, more personal responsibility is the solution. As I said, there were dozens of red flags yet people kept using this clowncar exchange. "but but but I can arbitrage because the price is 25% higher there" said a lot of people who ended up loosing their money. Well duh, why do you think that 25% premium was there in the first place, stupid? In short: Fools and their money are usually separated. If you can't bother to do five minutes of basic research of the place where you plan to place thousands or millions of dollars then you get what you deserve. This is, in my opinion, a good thing.
  • by Anonymous Coward on Friday February 28, 2014 @10:19AM (#46367029)

    Indeed they do. And some 400000 coins Karpeles publicly moved two years ago to prove ownership, still sit where he put them.

    So it seems someone forgot their wallet password. Probably they didn't notice until people rushed to get out and they tried to dip into cold storage.

  • Re:"some weakness" (Score:4, Insightful)

    by Anonymous Coward on Friday February 28, 2014 @10:20AM (#46367047)

    Making a mistake is one thing. Not realising that something is wrong when over $500000000 slowly disappears from your accounts is the criminal thing. I mean, in practice this must mean that they constantly noticed their hot wallet is empty (when it should not be) and filled it from the cold wallet without investigating anything. Over and over and over again.

    Amazing.

  • Re:Ha ha (Score:3, Insightful)

    by Anonymous Coward on Friday February 28, 2014 @10:22AM (#46367067)

    Why, because a private organization failed to centralize a decentralized currency? If you think about, this is a success of Bitcoin: it will be extremely hard to centrally regulate or control this product. The lesson here is the one the crypto-anarchist always wanted you to learn: in a digital society, only you are able to provide your own security, and only you are trust worthy.

    These developments will alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret, and will even alter the nature of trust and reputation.

    -- The Crypto Anarchist Manifesto [mit.edu]
    -- Timothy C. May
    -- tcmay@netcom.com

  • Re:Ha ha (Score:3, Insightful)

    by X.25 (255792) on Friday February 28, 2014 @10:27AM (#46367115)

    I recently checked Reddit's /r/bitcoin, to see how the True Believers were taking the latest developments. To hear them say it, Bitcoin has already recovered off its lows, which mean everything is fine and all this bad news is just FUD spread by haters. Bitcoin believers truly live in their own universe.

    MtGox != Bitcoin

    I hope it will come to you eventually.

  • by BitZtream (692029) on Friday February 28, 2014 @10:30AM (#46367139)

    This is a bitcoin issue, you just don't want it to be.

    Half a billion dollars worth of bit coins just disappeared, well, was just publicly announced as disappeared.

    And there isn't shit that anyone can do about it.

    Thats a problem, and its a problem that exists BY DESIGN.

    Your currency is one for criminals. There will be a few innocents who could benefit from such a currency outside of the governments watchful eye, but your currency isn't outside the governments watchful eye. They still see everything that happens, and that too is BY DESIGN. They just don't help when something like this happens.

    You have your advantages and ideals twisted into ways to commit theft without fear of repercussion and you haven't solved any of the tracking issues really, you're just ignoring them because the bit coin network can magically track all transactions as needed but no one else can syphon that data off for their own correlation ...

    Seriously dude, open your eyes.

    The fact that this happened AT ALL is a direct reflection on the very core design of BitCoin, and its not a bug, its intentional. Short sighted, but intentional.

    Its a good experiment to use as a reference in the future, but for fucks sake man, read the writing on the wall.

  • by BitZtream (692029) on Friday February 28, 2014 @10:33AM (#46367169)

    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?

    This job was sloppy. The next one will be bigger (assuming a collapse doesn't occur this time, which I don't think it will, probably 1 or 2 more first) and probably not show any signs that its happening in advance.

  • by inject_hotmail.com (843637) on Friday February 28, 2014 @10:38AM (#46367207)
    Too bad you don't know who 'he' is...
  • Re:Ha ha (Score:4, Insightful)

    by BasilBrush (643681) on Friday February 28, 2014 @10:51AM (#46367321)

    Obviously some of the libertarian unregulated money dreamers have mod points today.

  • Re:gambling (Score:5, Insightful)

    by BasilBrush (643681) on Friday February 28, 2014 @10:57AM (#46367381)

    Real Bitcoin users don't keep their bitcoins in an exchange but on their device.

    No True Scotsman lost money on Bitcoin.

  • by squiggleslash (241428) on Friday February 28, 2014 @10:59AM (#46367403) Homepage Journal

    It is a Bitcoin issue.

    If this were a normal bank, exchanging dollars for dollars, it would face regulation and insurance requirements that would make failure much more difficult. Attempts by hackers to redirect large sums of money, even electronically, would face much higher hurdles with legally mandated stronger security controls, and a much stronger paper trail. If the actual underlying cause is fraud within Mt Gox, again, the fraudsters would face higher hurdles, having to deal with external auditors at every move.

    And if all of those controls failed (and they do occasionally), the controllers of the currency, the government, would be in a position to rescue the victims of the collapse. And we've seen them do this too.

    Bitcoin doesn't have these protections because its entire reason for its existence is to avoid government. It treats government control as a bug, not a feature. It treats regulation as a terrible thing. Bitcoin exchanges cannot reliably be audited, because any Bitcoin exchange can claim anything about itself with impunity. Bitcoin exchanges cannot be regulated in real time. Insofar as fraudsters face consequences, it happens well after the fact, with investigations for fraud and breach of contract, and requires more efforts to prove.

    It's interesting that every Bitcoin advocate is now claiming they saw Mt Gox's troubles coming and anyone who lost money was stupid. In fact, part of the problem here is up until six months ago, Mt Gox was widely praised, recommended, and considered part of the backbone of the Bitcoin system. By the time Bitcoin's "I told you so" crowd started to notice a problem, it was essentially too late. Anyone can notice that an exchange suddenly is having problems paying out deposits. What would have been more impressive is if Bitcoins fans had predicted problems in advance. What would have been even more impressive would have been if Bitcoin's fans predicted the possibility of such problems happening and had implemented an infrastructure where the effects of such problems were mitigated.

    The reality is very few Bitcoin advocates saw this coming. If they had, you wouldn't have waited until after Mt Gox started to collapse to claim it was a bad investment. If they had, real efforts would have been made to protect the currency.

    Bitcoin is not just some mathematics. It's a function of who uses it. You guys failed. Miserably. And Bitcoin is damaged as a result. Not that I'm upset or anything, it's a currency designed by people who know the price of everything and the value of nothing. It's a currency, essentially, designed by people who don't understand money. It needs to go. So it's a good thing the gaping holes are being revealed.

    But if you disagree with me on whether Bitcoins are a good thing, and want it to be a success, do not, do not for a single second, sit there while the most famous and, until the start of the collapse six months ago, most respected exchange collapses, and act like nothing's wrong.

  • Re:"some weakness" (Score:5, Insightful)

    by Anon-Admin (443764) on Friday February 28, 2014 @11:20AM (#46367545) Journal

    It tells me they were not following accounting principals and balancing the books at the end of the month. (Which I suspected long ago when I closed my account with them)

    Any company that I question the accounting practices on is one that I run from screaming. Stocks, jobs, bitcoins, does not matter.

  • Re:Ha ha (Score:5, Insightful)

    by Opportunist (166417) on Friday February 28, 2014 @11:22AM (#46367565)

    And as soon as someone dares to sell oil for anything but USDs, it will become obvious.

    The irony about it all is that it's probably going to be China that props the US up, considering that they have maybe the most to lose (right after the US themselves, of course) if the USD bubble pops.

  • Re:Ha ha (Score:5, Insightful)

    by stinerman (812158) <nathan,stine&gmail,com> on Friday February 28, 2014 @11:25AM (#46367591) Homepage

    My toaster isn't worth as much as it was when I bought it, either.

    Money is supposed to be a medium of exchange, not an investment. If you believe that a zero inflation rate is a good thing, I suggest you take an introductory course in economics.

  • Re:Who are they? (Score:2, Insightful)

    by Anonymous Coward on Friday February 28, 2014 @11:30AM (#46367635)

    "Well, there’s a fair amount of privilege built directly into the currency: In order to buy the sometimes wildly expensive currency, Bitcoin users need to be wealthy."

    It was hard to pick the stupidest sentence from that article, but I think I managed.

  • Re:"some weakness" (Score:5, Insightful)

    by Opportunist (166417) on Friday February 28, 2014 @11:43AM (#46367737)

    Actually, no money today "just works". Yes, the old coins did. They were minted out of precious metals and because of that they had some value. You could essentially cut off parts of it and sell those parts if you felt like it. That actually did happen.

    Roman coins are actually a rather bad example because they, at least for some of them, already had the same effect money has today. The value is less the intrinsic value of the coin itself (made of bronze they were not that valuable), but because of the trust people had into the issuing entity (the Roman senate, or later the emperor). In early medieval times, people returned to the system of intrinsic value because there was no entity that you could (or rather would) really rely on that could say that copper in your bag is worth more than the metal is worth. That only came into existence again when countries were strong enough to give money its symbolic value again. And that's where we are today.

    The coin (or bill, for that matter) itself isn't that valuable, but its symbolic value is what gives it its value. It represents something. When I hand you a dollar bill, it's worth one dollar. Why? Certainly not because the paper with the funny print on it is worth a buck. The material value of a dollar is negligible. And it gets even more absurd with a 100 dollar bill.

    The value of modern currency is in the trust the person receiving it has in it. If you allow me to buy something worth 100 bucks with a 100 dollar bill, you trust that bill to be worth those 100 dollars (ok, you might want to check whether it's genuine because you do not trust me, but if it's genuine and the Fed printed it, you trust that bill), you rely on getting something worth 100 dollars again with that bill.

    Why do you do that? Because you trust the entity issuing the bill that they can back it up with something. In case of the US, probably you trust it because you rely on the US' economy to produce enough to prop up the bill's value.

    That our current currency has zero intrinsic value can easily be seen when states start to fail. Take most of the European countries after the war. The money bills were essentially worthless. They printed insane denominations on them (up to a billion, and with a hint of luck you could probably get a loaf of bread with it), but they still lost value pretty much by the second simply because nobody trusted the money anymore.

    So essentially, the value of contemporary currency is in the trust people put into it. The trust that they will get something in exchange for it. As long as that trust applies universally, a currency will continue to work. When that trust is lost, the currency becomes pretty much worthless.

  • by DaveV1.0 (203135) on Friday February 28, 2014 @12:03PM (#46367869) Journal

    2) Joe Public now knows about BitCoin ("no such thing as bad PR" and all that); and

    There is such a thing as bad PR. It is when the first impression is negative. Joe Public is learning about BitCoin in the context of "million of dollars have been lost because BitCoins have been stolen". The general public now knows about BitCoin as "That thing that people keep losing their money in because it is always getting stolen". People don't want to lose money.

  • Re:Who are they? (Score:5, Insightful)

    by BasilBrush (643681) on Friday February 28, 2014 @12:13PM (#46367947)

    Is there some script or something that we could run that would scan for commenters that reference pyramid or ponzi in a bitcoin article and just automatically band them from future comments on bitcoin?

    No. Slashdot infrastructure isn't here to respond to your personal belief that Bitcoin isn't a pyramid scheme.

  • Re:Ha ha (Score:5, Insightful)

    by Dunbal (464142) * on Friday February 28, 2014 @12:19PM (#46368001)
    And we need growth because? Growth is sustainable forever right? How about you think about things instead of just parroting them? Those who benefit from growth are governments and monopolies, because then they can increase their budgets or offset future losses without having to do anything at all. It's the low hanging fruit and that is all it is. One day, you run out of easy fruit and have to do work. Debauching the entire system in order to fool yourself that there is more easy fruit will soon bring the whole tree down on top of you. We are fast approaching population sizes and technological levels where exponential growth is no longer possible (or even desired). Why should our economics not reflect this?
  • by Alomex (148003) on Friday February 28, 2014 @01:31PM (#46368663) Homepage

    cry for more government, more regulation and more fascism.

    Measured amounts of government regulation is what separates us from Lord of the Flies scenarios. There is simply no basis in fact to equate reasonable bank regulation meant to prevent outright fraud with fascism.

  • by dj245 (732906) on Friday February 28, 2014 @02:09PM (#46368969) Homepage

    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.

    In accounting, generally deposit accounts with customer money are considered liabilities. If a depositor shows up and asks for their money, you are obligated to give it to them. You seem to be confusing legal liability (a "duty of care" to do or not do something) with financial liability (an obligation which must be paid back).

    Mt. Gox didn't have storage boxes without knowledge of what was inside them (safe deposit box analogy). They had computerized accounts for each customer, with money in each account. Regardless of whether they were a "bank" they were holding money for other people and that money is a liability in the financial sense.

There is hardly a thing in the world that some man can not make a little worse and sell a little cheaper.

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