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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.

    • Re:Ha ha (Score:5, Funny)

      by Anonymous Coward on Friday February 28, 2014 @09:56AM (#46366869)

      A little too soon son...
      As far as I know, the US dollar hasn't died yet.

    • 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) * <mojo@@@world3...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.

        • I don't think there is any clear conversion of liability in dollars to liability in bitcoins.

          They are liable for Bitcoins that they don't have, they will likely never pay those back, just like their shortfall on the dollar side.

          As any rabid Bitcoin user will tell you - conversion to dollars is irrelevant, the value is intrinsic. (Surpass any mint-stick, Or marshmallow mouthful you munch.)

        • by Talderas (1212466)

          They don't owe depositors anything unless the contracts they signed said they would guarantee X amount or value of bitcoin. The $60m in liabilities might somehow be related to their own loss of bitcoins since the value of 100,000 BTC is just shy of $60m.

        • Re:Ha ha (Score:5, Interesting)

          by Anonymous Coward on Friday February 28, 2014 @10:27AM (#46367113)

          For a start, I doubt you understand what FUD means.

          I also fear you didn't actually read the article, just summary borked by Slashdot "editing".

          I'm uncertain what they meant to say, but I guess they meant either "Bitcoin Foundation" (Karpeles was one of board members there and now resigned) or "Bitcoin exchange" (i.e. MtGox).

          • Re:Ha ha (Score:5, Funny)

            by nitehawk214 (222219) on Friday February 28, 2014 @10:39AM (#46367211)

            For a start, I doubt you understand what FUD means.

            I also fear you didn't actually read the article, just summary borked by Slashdot "editing".

            I'm uncertain what they meant to say, but I guess they meant either "Bitcoin Foundation" (Karpeles was one of board members there and now resigned) or "Bitcoin exchange" (i.e. MtGox).

            Well done sir.

        • Or, the submitter (and editor) are bad at the english language and actually meant to say that MtGoX held the impromptu press conference.

          At least, that's how I interpreted it, since it's unlikely that a random Bitcoin guy could speak authoritatively regarding the financial mess that is MtGoX.

        • by Guppy06 (410832)

          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.

          Creditors owed in Japanese Yen will only accept payment in Japanese Yen. Debts owed in Bitcoin will probably be cloaked by an SEP field as far as Japanese financial and bankruptcy law is concerned.

        • by tsqr (808554)

          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.

          It's the summary that screwed up the press conference reference (what a shock). According to the WSJ article, the press conference was held by Mark Karpelès and his team of lawyers.

      • Re: (Score:3, Insightful)

        by X.25 (255792)

        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 PopeRatzo (965947)

        the True Believers

        White, young, male and privileged.

        I'll just leave this here:

        http://thinkprogress.org/econo... [thinkprogress.org]

        • Re: (Score:2, Insightful)

          by Anonymous Coward

          "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.

        • so because "white, libertarian men" decide they want to support something, does that automatically make it bad or wrong?

          I'm trying to understand what difference does it make...for example, if 95% of "black men" vote democratic (making them liberal), which according to polling data they do, does that mean the Democratic party is now to be demonized?

    • Do you regulate money? If not I don't see the source of your happiness.
    • Re: (Score:3, Insightful)

      by Anonymous Coward

      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

    • Surely this will just make the other exchanges tighten their security. Wouldn't be surprised if some of them temporarily suspended BitCoin but it's not the end for BitCoin.
    • 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.

    • "And so the libertarian unregulated money dream dies."

      WTF?

      (A) Bitcoin is no more "Libertarian" than cash is. Do you have something against cash?

      (B) Bitcoin is not "unregulated". In fact, it's regulated a lot more than cash, which is also "anonymous". Surprise!

      Where did this whole BS idea come from?

  • by Anonymous Coward on Friday February 28, 2014 @09:53AM (#46366843)
    Owner Mark Karpeles said, 'I'm a bad widdle boy', then jumped in his solid gold flying Lamborghini and flew to to his 50 acre estate in Barbados.
  • by mkg (40510) on Friday February 28, 2014 @09:55AM (#46366853)

    This debacle should only help legitimize bitcoin, as corruption surrounding the currency is now a public matter.

    • According to Janet Yellen [thehill.com]

      The Federal Reserve simply does not have authority to supervise or regulate bitcoin in any way

      After all, it's not a legitimate currency, is it? So no reason for the Feds to get involved! Which is also what her Japanese counterpart is saying.

    • For sure. Just like when the banks blew apart and we had to prop them up with our money, we made sure with tight regulation and strict laws that something like that can never ever happen again.

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

      by Sockatume (732728) on Friday February 28, 2014 @10:07AM (#46366955)

      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: (Score:2, Insightful)

        by BitZtream (692029)

        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 ha

        • Re: (Score:2, Interesting)

          by pla (258480)
          Half a billion dollars worth of bit coins just disappeared, well, was just publicly announced as disappeared.

          No, they didn't. Every single Bitcoin in MtGox still exists, you can track them down in the block chain, and in this specific case, someone even still has access to them .

          MtGox didn't lose BTC, they lost transactions (or rather, double-counted them in one direction) due to a flaw in their implementation. MtGox "lost" nothing more than an imaginary number on their balance sheet. Doesn't matter
        • by Sockatume (732728)

          It's a Bitcoin Exchange issue, not a systematic issue with the underlying Bitcoin network itself. It is, however, Bitcoin's problem, in that exchanges are how everyone interfaces with it.

      • 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.

        • by Sockatume (732728)

          It's a Bitcoin exchange problem, not a problem with Bitcoin itself. In much the same way that the current economic crisis is a banking problem, and not a dollars problem.

  • by davecb (6526) <davec-b@rogers.com> on Friday February 28, 2014 @10:04AM (#46366919) Homepage Journal
    The Gox Crater: Crowd Detectives Reveal Billion-Dollar Heist As Inside Job [falkvinge.net]
    Thousands of volunteering and self-organizing detectives have been meticulously laying a puzzle that reveals the Gox billion-dollar heist as an inside job. As smoke clears on the implosion of the Empty Gox bitcoin exchange, thousands of people in the community committed to revealing the truth behind the stonewalling exchange. What was claimed first to be a technical problem, then an outside theft, has been conclusively determined that the MtGox management knew too much, too long ago, to have this be an ordinary case of theft.
    • by MitchDev (2526834)

      Since these are Digital "coins" don't they have some unique property that can be identfied and tracked?

      • by Anonymous Coward

        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.

      • by PopeRatzo (965947)

        Since these are Digital "coins" don't they have some unique property that can be identfied and tracked?

        Yes, the smell of testosterone.

        http://suitpossum.blogspot.com... [blogspot.com]

      • Bitcoin "addresses" are unique. They are derived from several rounds of hashing functions on the private key of of a public-key encryption pair. Addresses hold some bitcoin balance amount, which is recorded to 8 decimal places. Bitcoin transactions move some amount of balance from one or more input addresses to one or more output addresses. The private key is required to digitally sign a transaction, so whoever knows that key, can spend the coins they control. Bitcoin "wallets" are files that contain a

    • is this the same as the other self organizing investigation that tracked the silk road bitcoins to bitstamp?

  • by rmdingler (1955220) on Friday February 28, 2014 @10:11AM (#46366983)
    Sure. Alright. That's all the folks who lost Bitcoins could ask for is a heartfelt apology.

    Your stewardship of Mt Gox resulted in a fairly significant black eye for the very currency you've plundered and/or allowed to be plundered.

    I find your lack of remorse disturbing.

  • 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 Guppy06 (410832)

      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.

      Yeah: they'll keep their money in Yankee dollars instead.

    • 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.

      • Re: (Score:3, Informative)

        by Anonymous Coward

        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

    • 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.

  • Not at all at this point. Hard to believe this went on for so long. If they had fixed it earlier, even a 5 or 10% loss would be a problem but, it would be something they could recover from. Down by half?

    I mean, a 1% discrepancy in the books...shit, something is wrong, but you almost expect something like that now and again; hell my grandfather had an exta 10k in his account, and when he reported it to the bank they thanked him cuz they had been looking for where it was but couldn't find it....and 10k isn't

  • You give me your real money and I give you this number. Annnnnd it's gone. http://www.youtube.com/watch?v... [youtube.com]
  • Here's the thread on bicointalk [bitcointalk.org] where Mt Gox announced their first attempts at providing some operational/financial data to the bitcoin marketplace.

    Surprise! They never followed through with their commitment. :-(

  • by JoeyRox (2711699) on Friday February 28, 2014 @10:34AM (#46367177)
    When they lost $500M in Bit Coins, most of which belonged to their customers? Are they not treating customer deposits as a liability? Shouldn't that interest be represented in the bankruptcy proceeding?
    • by kthreadd (1558445)

      No. When handled correctly a bank or other type of financial institution should _never_ mix their own funds with their customers. They are completely separate entities.

    • by Sockatume (732728)

      I imagine that'll come up in due time; Bitcoin users account for almost all of MtGox's creditors.

  • MtGox (Score:2, Informative)

    by pitchpipe (708843)
    I, for one, am shocked that MtGox (Magic the Gathering: online exchange) has failed at handling huge sums of money.

    Ht Charles Stross [antipope.org]

  • by wiredog (43288) on Friday February 28, 2014 @10:35AM (#46367183) Journal

    From the AP Story [washingtonpost.com]

    a weakness in the exchange's systems was behind a massive loss of the virtual currency involving 750,000 bitcoins from users and 100,000 of the company's own bitcoins. That would amount to about $425 million at recent prices.

    The reactions of the various Japanese government officials are interesting. Essentially, there was no "theft" because Bitcoin is not a "real" currency. Which is an interesting attack. Anyone can steal your bitcoins and you have no recourse to the law because it isn't actually theft.

    • If it's government-protected currency, it's government-regulated currency. Bitcoin owners have been crowing for a while that Bitcoin's raison d'etre was to be independent of governments, and I'd say that I'm pretty comfortable with the JP government going "you don't want to play in the financial industry sandbox? You don't get to come in when your sandbox is wet."

    • The reactions of the various Japanese government officials are interesting. Essentially, there was no "theft" because Bitcoin is not a "real" currency. Which is an interesting attack. Anyone can steal your bitcoins and you have no recourse to the law because it isn't actually theft.

      That's what I've been telling people for years - Bitcoin isn't a currency. Even the fiat currencies of the world have the economies of the countries issuing them behind them, Bitcoin has nothing. Bitcoin a trade token on par wi

  • by jfengel (409917) on Friday February 28, 2014 @10:52AM (#46367339) Homepage Journal

    Yeah, yeah, millions in bitcoins, but what about the Magic the Gathering Online Exchange? I keep all my wealth in Moxes. How will I exchange them now?

  • So basically someone ginned up what they thought was a banking system only to discover they were grossly incompetent to run it and hadn't implemented anything resembling security?

    Or did someone just manage to scam everyone out of bitcoins?

    From the sounds of it someone just threw something together which was woefully insecure and allowed for a rather large scale theft.

    Real banks have been at this for decades, and even they have problems. Trusting someone who just built one over the last year strikes me as a

  • I guess I'll never be able to withdraw that Shivan Dragon now...
  • wtf. 500 mil is not just 'causing trouble' and something you can simply dismiss with an apology. Time for a public hanging.

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