Mt. Gox Files For US Bankruptcy Protection — Bitcoin News Roundup

Will halt U.S. legal action against the Bitcoin exchange

The latest news on Bitcoin: Mt. Gox has filed for U.S. bankruptcy protection, a move that will stop U.S. legal action against the Bitcoin exchange, which is based in Japan.  

Previous news on Bitcoin: 

Hackers who targeted the CEO of Mt. Gox, a Japanese bitcoin exchange that claimed to have lost hundreds of millions of dollars in bitcoin, say they're convinced the CEO is hoarding the bitcoins the company says are stolen.

The man Newsweek identified as the creator of Bitcoin, Satoshi Nakamoto, is now trying to avoid the press while denying that he is the currency's founder.

American Autumn Radtke, CEO of a virtual currency exchange called First Meta, was found dead at the end of February in Singapore but not widely reported until March. Police do not suspect foul play.

Newsweek reports on the search for Satoshi Nakamoto, which it says is a 64-year old Japanese-American living in San Bernardino named Satoshi Nakamoto.

Bitcoin bank Flexcoin has shut down following a March 2 hacking that robbed it of all its virtual currency.

A Mt. Gox customer filed suit in Chicago February 28 against the Japanese exchange, attempting to start a class action claim for all American customers who lost money.

The Bitcoin exchange Mt. Gox filed for bankruptcy and blamed hackers for the loss of hundreds of millions of dollars worth of the digital currency. 

West Virginia Senator Joe Manchin is calling on financial regulators to ban the virtual currency, calling it a tool for laundering money and a threat to the U.S. economy.

According to a "crisis strategy draft" plan said to have been created by Mt. Gox, the Bitcoin exchange has lost around $350 million worth in Bitcoin after a years-long hacking campaign.

Wired is reporting that "Bitcoin insiders" had been preparing for bad news from Mt. Gox for weeks, although the scale of the theft took many by surprise.

Responding to the news, bitcoin wallet-makers Coinbase and Blockchain released a joint statement saying, "There are hundreds of trustworthy and responsible companies involved in bitcoin."

From Wired:

The hacking attack is detailed in a leaked "crisis strategy draft" plan, apparently created by Gox and published Monday by Ryan Selkis, a bitcoin entrepreneur and blogger (see below). According to the document, the exchange is insolvent after losing 744,408 bitcoins — worth about $350 million at Monday's trading prices. The plan paints a bleak picture of the exchange's finances and outlines an arbitrage scheme to restore the exchange to solvency. "The reality is that Mt. Gox can go bankrupt at any moment, and certainly deserves to as a company," the document states.

CNN is reporting that Mt.Gox CEO Mark Karpeles resigned from the Bitcoin Foundation's board of directors last weekend.

The Mercatus Center's Jerry Brito breifly mentioned the slow implosion of Mt. Gox in his article for Reason.com yesterday titled "Is Bitcoin the Key to Digital Copyright?"

More from Reason.com on Bitcoin here.

Comments

[prattleon]

Bitcoin sure does have an air of ponzi scheme, whether intended or not.

[Jingo]

This is why I never bought Bitcoin. I always assumed things like this would happen. However, I do have to say I am awfully tempted to buy some Bitcoin RIGHT NOW.

Why? Because when a price plummets the way Bitcoin did and then flattens out, it's usually a great time to buy it. But I wouldn't HOLD it, I'd buy right now, wait for it to go back up to 950 or so and then sell it as soon as it does (probably 3-6 weeks in my guess).

[prattleon]

Therein lies the problem. I don't disagree with your strategy, but it highlights the unsuitability of bitcoin as a stable currency. It's far too speculative, at least right now. But who knows.

[SweatingGin]

Realize that at this point, the market is thin. There just isn't a huge volume of them traded daily, so you end up with wild swings. As they get used for more purchases, it'll get more stable.

Plus, options and futures trading will be much more reasonable soon. Those should smooth things out a bit.

[bassjoe]

Bitcoin is nothing but a software protocol. Kind of like calling the Internet a Ponzi scheme.

[sasob]

Bitcoin sure does have an air of ponzi scheme, whether intended or not.

Unlike all those Federal Reserve funny money notes whose purchasing power and value is controlled by the central bank and federal legal tender laws.

[albo]

Don't worry. Your bitcoin deposits are fully insured in amounts up to $250,000 by the Federal Depository Insurance Corporation of Some Dude on the Internet.

[SweatingGin]

Leaked doc. It's a pretty damning read, if accurate.

Bitcoin is not Mt. Gox. This is just one exchange. At this time last year, it was 80% of the market. Before this it was more like 25%. Now it's zero.

There's other exchanges that are solvent, and much more competently run.

Don't leave coins on an exchange unless you're trading them. There's no reason to if you aren't trading them.

[~Knarf Yenrab~]

That's about 6% of circulating BTC. I won't miss Mt. Gox, but I wonder if a state has devised a strategy to steal and horde BTC until they hit 51% of the market, or at least enough to make everyone aware of what's going on and abandon Bitcoin in favor of gold. Or some relatively stable state currency.

Fiat currency has everything to fear if the powers that be aren't completely sold on the idea of the deflationary death spiral, so destroying Bitcoin would be a necessity. Though it could be just a bunch of thieves who are interested in spending the money, improved security has to be a growing concern for present and future BTC exchanges and the next generation of cryptocurrencies.

[RFID]

That wouldn't work. You can't really hurt bitcoin by hoarding it or destroying it. Even if all bitcoins save a single one (or a fraction of a single one) were lost, it would still be as usable as it is now, as bitcoin is divisible up to 8 decimal places, with the possibility of extending that to 16 decimal places.

[~Knarf Yenrab~]

Yeah, just realized that I misunderstood the nature of the 51% attack.

[bassjoe]

Uh... pretty sure the bankruptcy stays all actions against MtGox. Anyways, not entirely sure why you'd sue MtGox in the US; it has no assets here (unless they are thinking of going after the assets seized by the feds last year).

[Stimpy's Invention]

I love it. Anarchists purchase Bitcoin -- the "Fuck the State!" currency -- and when it goes bust, they sue...in a state court! This is called having your cake and eating it too.

[ArbutusJoe]

It would only be hypocritical for an anarcho-libertarian to use the state's system of adjudication if there were alternatives available. But if you are familiar with most of the literature on ancap, you would be aware that the state is *defined* as the monopoly over just these services. So when the necessity of seeking redress must happen within a statist context, that can be the fault of those seeking justice.

[ArbutusJoe]

"that cannot"

[Brian]

Exactly. Libertarians aren't hypocrites for using the roads they're forced to pay for, either.

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[MarkinLA]

If you ask me bitcoin was invented by the FBI or interpol to put the best minds out there devising frauds so they would be able to recognize them in the future when real money is at stake.

I just thought we had a garden variety repeat of the stock scams of the 1920s where wealthy people collude to buy up the stock of a company and trade it among themselves to drive the price up and dump it on the suckers. The beauty of internet technology is you don't even need other people you can trade it between sock puppets and you can create fake trades on your exchange.

Never would I have thought of the arbitrage fraud to get hesitant suckers in the game and buying bitcoin. Instead of having one exchange, you create two with a differential in price large enough that it brings in people who want to make a quick buck. Of course you can buy all the bitcoin you want. Getting money back is not quite as easy. A roach motel for money. What brilliance.

The best thing about bitcoin is sitting back and watching these people without any street smarts like uber=nerds and ultra libertarian types continually fall for this nonsense, defend it, and get screwed again and again. Some comedian should make a movie. As it is I just sit back with my popcorn and watch the real show.

[MarkinLA]

I don't know why he wouldn't want to be identified. He would be right there in the fraud hall of fame with Charles Ponzi. Who wouldn't want that fame?

[space junk]

If you want Ponzi schemes, look at Social Security. Furthermore, no one has told people they must purchase Bitcoins under threat of force (the gun to the head thing) or incarceration (the government socialist control thing).

The way I see Mt. Gox is that they had no real experience in accounting. Especially for the way that Bitcoin transactions work.

Some exchanges may need some more checks for integrity and fraud prevention built into them. Other exchanges may not. I haven't seen the proprietary code behind those systems. Furthermore, when an 'altcoin bank' is not insured by a reputable entity, it is a really stupid ass idea to leave your coins in the exchange. You can create a unique address for each payment (which should be a standard built into all 'altcoin' style trading software in my opinion). Then someone can only bang that account address for exactly what you have authorized it for.

Moral of the story, don't jump in feet first when you haven't done much research.

And stop blaming libertarians for dumbfucks doing dumb shit! Use your brain or stay with your FDIC insured bank!

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[Jull]

Due to the fact that Bitcoin attracts everybody's attention recently and a lot of fuss is concentrated around it, plus all those strange losses mentioned in the article makes me think this cryptocurrency was deliberately created for some kind of a scam. We have a lot of financial products online, but seems bitcoin news is the most scandalous lately.