US Court Freezes Assets of Mt. Gox CEO

jfruh writes "Mt. Gox has managed to enter court-protected bankruptcy in the United States, but Gregory Greene, who lost $25,000 in the bitcoin company's collapse, has convinced a court in Chicago to freeze the assets of Mt. Gox CEO Mark Karpeles and two companies associated with him. 'Money is moving around as we speak, bitcoins are moving around accounts associated with Mt. Gox,' said Greene's lawyer. 'Something is not right so we urgently need to get to the bottom of this quickly.'" The Mt Gox stole the missing bitcoins theory.

Comments

Interesting parallel

[Anonymous Coward]

In Japan, MtGox is not liable because bitcoins aren't money (i.e. nothing real was lost).

Re:Interesting parallel

[Anonymous Coward]

But in America, if it has value, it can be seized.

Re:Interesting parallel

[Lendrick]

It would be a delicious irony if people were able to recover some of their lost value due to government regulations.

Re:Interesting parallel

[ron_ivi]

In Japan, MtGox is not liable because bitcoins aren't money (i.e. nothing real was lost).

Couldn't one say the same about most any fiat currency (backed by nothing but the whims of some private company (the Federal Reserve Bank) - not unlike how WoW gold is backed by nothing but the whims of Bilzzard)? And also the same about any currency with lenders that get to do fractional reserve banking (they essentially get to make money on whims by loaning out more than they have)?

Seems Bitcoins aren't that different than Zimbabwe Dollars.

Re:Interesting parallel

[Sockatume]

Japan doesn't think Bitcoin is a currency and subsequently has no idea how to deal with MtGox's liabilities, but they most certainly have not obviated them.

Re:Interesting parallel

[pla]

In Japan, MtGox is not liable because bitcoins aren't money (i.e. nothing real was lost).

MtGox tracked account balances in both BTC and USD. Bitcoins may have no legal value, but wouldn't Gox remain on the hook for the dollar-denominated balances in their care?

Re:Interesting parallel

[Sockatume]

Japanese law begs to differ; it does distinguish between currency (however they define it) and other tokens.

Re:Interesting parallel

[JDG1980]

In Japan, MtGox is not liable because bitcoins aren't money (i.e. nothing real was lost).

Whether or not bitcoins are "money" should be irrelevant. What matters is that they are a thing of value. How do we know they are a thing of value? Because someone is willing to pay for them. Therefore they are an asset, just as (say) a collection of classic cars or rare Atari 2600 games would be an asset. None of them are official currency, but they are things of value, and that value can be defined with a reasonable amount of precision by looking at what people are paying for these items on various markets.

Re:Interesting parallel

[JDG1980]

Japan doesn't think Bitcoin is a currency and subsequently has no idea how to deal with MtGox's liabilities, but they most certainly have not obviated them.

How does Japan deal with other insolvent companies that owe liabilities in-kind rather than in raw cash? How would they deal, for instance, with an insolvent grain elevator where the customers' grain went missing? Why not just apply the same principle here?

Re:Interesting parallel

[lgw]

It's funny when the financial press mistakes MtGOX (Magic the Gathering Online Exchange, lest we forget) for "Mt. Gox", like it was a mountain or something.

It's pathetic when TFS makes the same mistake. C'mon, there are two bitcoin stories a day, we could at least get that right in TFS!

Re:Interesting parallel

[SydShamino]

WoW gold also has value, can be sold (someone is willing to pay for it), etc. However Blizzard could stop renewing subscriptions and then shut off the servers, and people with gold balances would have no legal recourse, even in the U.S. where assets are more loosely defined the way you think they should be. The same would be true, for example, for Magic: The Gathering online cards and currency, which could be easily shut off in bankruptcy without legal resource to card or currency holders.

In Japan, law related to assets is a little more strict, and digital currency not backed by a world government simply doesn't count under any circumstances, whether you agreed to its value via EULA or not.

Re:Interesting parallel

[bluehenbear]

Bitcoin may not be a currency, but it is certainly could be considered property. See this article: http://www.nakedcapitalism.com...

Re:Interesting parallel

[PRMan]

And their logo is a chart in the shape of mountains. They have adopted Mt. Gox as their official name long ago.

Re:Interesting parallel

[JcMorin]

The government did seize twice 5 millions in cash from Mt. Gox banks account. Giving back this money would be a good start.

Re:Interesting parallel

[lgw]

Slashdot is supposed to be the place where we discuss the tech and ignore the marketing spin. While we maybe don't reach that bar often enough, we can at least make the effort, no? Especially in story submissions.

Re:Interesting parallel

[Anonymous Coward]

In Japan, MtGox is not liable because bitcoins aren't money (i.e. nothing real was lost).

Couldn't one say the same about most any fiat currency (backed by nothing but the whims of some private company (the Federal Reserve Bank) - not unlike how WoW gold is backed by nothing but the whims of Bilzzard)? And also the same about any currency with lenders that get to do fractional reserve banking (they essentially get to make money on whims by loaning out more than they have)?

Seems Bitcoins aren't that different than Zimbabwe Dollars.

You could say it.

But you would be completely wrong.

Re:Interesting parallel

[Bob9113]

It's funny when the financial press mistakes MtGOX (Magic the Gathering Online Exchange, lest we forget) for "Mt. Gox", like it was a mountain or something.

It's funny when pretentious Slashdot posters trot out some half-understood fact to sound important. Mt. Gox has gone by "Mt. Gox" for quite some time on mtgox.com, on Wikipedia, and on Bitcoin Charts -- as well as in common use in Bitcoin forums.

Re:Interesting parallel

[Aighearach]

The good news their is that since anything of value has value in the US, this can still mostly be dealt with in the US courts. For Japanese people who were living and working in Japan, and transferring money to/from other Japanese, they'll be in the cold. But I expect US and European customers to get back at least 10% after arrests are made.

Re:Interesting parallel

[ackthpt]

But in America, if it has value, it can be seized.

If it has value it can be embezzled.

Re:Interesting parallel

[squiggleslash]

In Japan, MtGox is not liable because bitcoins aren't money

Couldn't one say the same about most any fiat currency

No. One couldn't. You see, a fiat currency, that is, a currency by fiat, is money by law. In fact, "currency by fiat" and "money by law" consist of a sequence "X by Y" where X is represented by synonyms of the same concept ("money", "currency") and Y is represented by synonyms of the same concept ("fiat", "law")

Re:Interesting parallel

[Impy the Impiuos Imp]

Wouldn't they be a commodity though? Traded like any other thing?

Originally, money i.e. pieces of precious metal people wanted, was that, too.

Re:Interesting parallel

[arth1]

Slashdot is supposed to be the place where we discuss the tech and ignore the marketing spin. While we maybe don't reach that bar often enough, we can at least make the effort, no? Especially in story submissions.

Don't you mean " Chips & Dips is supposed to be..."?

Re:Interesting parallel

[BasilBrush]

No. Each country has an official currency that the government use for accounting, to tax, and to pay. In the USA that is the US dollar. These official currencies are unique and irreplaceable for that reason. The government could choose to change to another currency, but you as an individual or company can't.

When you are taxed, you can't do it with bitcoin. You will be taxed on the official currency equivalent, and will have to pay in actual US dollars.

You libertarians are too hooked on the gold standard. The major fiat currencies are more stable. Take a look at a chart of the value of gold.

Re:Interesting parallel

[Shoten]

It would be a delicious irony if people were able to recover some of their lost value due to government regulations.

You mean like what would have happened if they were regulated like a real bank?

Just a few months ago, when there was talk of regulating exchanges like these, there was an uproar. I didn't think that the reasons for regulatory oversight would have made themselves apparent so quickly, to be honest. Just the fact that nobody can be sure whether Mt. Gox got ripped off or ripped people off is one reason alone.

I totally get that there are benefits to a truly untraceable, anonymous currency. But to those who oppose regulation for the simple fact that it's the government getting involved, I would advise taking a look at what happened to the banking industry back in the 1920s and early 1930s before making claims that it's all bad.

Re:Interesting parallel

[TWX]

I totally get that there are benefits to a truly untraceable, anonymous currency. But to those who oppose regulation for the simple fact that it's the government getting involved, I would advise taking a look at what happened to the banking industry back in the 1920s and early 1930s before making claims that it's all bad.

Yep. Rules and regulations are usually a byproduct of previous experience. Wildcat banks often issued their own scrip, supposedly based on currency on-deposit, but often that currency was either other wildcat banks' scrip, or was so incredibly over-leveraged that they had really almost nothing on deposit to support their outstanding currency.

These banks could either go under due to bank runs or could just close up shop overnight, leaving the local employees stuck holding the bag while the owners ran off with what real money actually was on deposit. If other banks had this bank's scrip, that scrip was now valueless and that other bank was likely to have its own problems.

Re:Interesting parallel

[Cruciform]

As you can see from the Wikipedia article it was only used for MtG for a short time, then the domain name was repurposed.
It's been Mt. Gox for a few years.

Re:Interesting parallel

[Cajun Hell]

It would be a delicious irony if people were able to recover some of their lost value due to government regulations.

The most delicious irony would be if his funds were frozen, and then he used "unfreezable" funds to hire a lawyer to argue in court to get his fiat funds unfrozen. Part of the point (I admit, there's a lot more to it than that) of asset freezing is to prevent justice so that suspects have a harder time defending themselves from abusive use of power. Bitcoin is one of the proposed solutions. But of course that means that Bitcoins thieves can't necessarily be fought the way you fight other types of thieves. What an interesting problem to have.

Re:Interesting parallel

[Applehu Akbar]

Having once lived in Japan, i've been kicking myself for not having climbed Mt. Gox before those tourists trampled all over it.

Re:Interesting parallel

[lgw]

The evidence is in: giving this exchange the credibility due to a Magic card trading site was the correct move.

Re:Interesting parallel

[petermgreen]

Makes me wonder why people in say, EVE, aren't held liable or arrested for sweeping in and taking over an entire faction and claiming everything as their own.

Eve online is a game, participents in the game knew or should have known that anything in the game is subject to the rules of the game and the whims of the games owners. They also knew or should have known that they were forbidden from exchanging those in-game "assets" for anything outside the game.

MT gox traders on the other hand have put their money and bitcoins in trust with the exchange so they can trade them with each other more easilly. The exchange has broken that trust either by stealing the bitcoins themselves or by incompetently allowing large scale heists.

Re:Interesting parallel

[infinitelink]

In Japan, MtGox is not liable because bitcoins aren't money (i.e. nothing real was lost).

["Verifiable" citation needed.] Ty for not asserting something on your own authority making it necessary for everyone else to go check if they want to engage you...oh right, an AC. Dang it. :(

Re:Interesting parallel

[pepty]

If the prosecutor proved to the judge that you hid assets and used them to pay the lawyer things might get hinky. Might get hinky for the lawyer too since presumably he should have known about the order to freeze assets. I think the "unfreezable" will stay in quotes, at least as far as payments for traceable goods and services go.

Re:Interesting parallel

[rahvin112]

It's always interesting that those that advocate for gold always pick arbitrary dates for comparison. The only valid comparison with gold's value is common commodity purchasing value and does so against a VERY long time period. Picking some arbitrary time period allows you to emphasize one of the periods where market fundamentals have allowed gold to appreciate while at the same time selecting different periods in time will demonstrate anywhere from small appreciation in value to negative appreciation.

Gold has and is traditionally the worst investment you could ever make for long term investing. And just like times past when quantitative easing has stopped and the US economy has recovered gold prices will crater, just like they have every other time people have sheltered in gold.

Other than the relatively small industrial uses of gold it's primary value is as Jewelry. This is actually a very small market as testament to the fact that 95% of the worlds gold supply is sitting in government owned vaults in brick form gathering dust. A single country with several tons of bullion could crash the price of gold in almost no time. And in fact all it takes is a government in need of hard currency to start dumping bullion on the market and crash the price because there is almost no elasticity in the market demand. This is what happened in the early 80's as the Soviet economy was collapsing and they started dumping their gold stocks to purchase hard currency. This could easily happen again to a nation like Venezuela that is suffering from hard currency shortages.

X tons of gold are needed every year to satisfy the demand for gold from the worlds expanding population. All of this expanding demand is satisfied by mining because as I noted most of the worlds gold sits in government vaults. The higher the price of gold the more mining. For the last 10 years because of the investors sheltering money in gold it's value has been 5-10x times higher than the supply/demand curve balance because investors are hoarding bullion. As a result the amount of extracted gold has gone up an equal amount relative to the price. When the investors decide that gold isn't providing the returns, (which is going to be very soon, probably within 2 years as it's already started the bouncing collapse). All that excess mined gold is going to flood the market, a market who's only demand is jewelery. By the time the price crash comes the amount of extra extracted bullion (sitting in investor vaults) available to satisfy the luxury demand is going to be probably a decades worth of demand. And just like the housing market collapse when you flood the market with 10 years of demand prices will crater and crater hard. With that much excess bullion in the pipeline I'd imagine prices will drop so bad that almost all mining will halt until the excess gold is consumed by the luxury market. The low price will accelerate purchases but ultimately there is only so much luxury demand for gold. In the end we'll probably see gold prices below $200 an ounce before the end of the decade and sustained until excess production is consumed.

The only people that make long term money on gold are the people that sell it to others, often with the promise that it has some intrinsic value (it doesn't). Just like the 80's when the economy recovered from the Regan recession, gold's price will crash, all the little investors (less than several million invested) will lose their shirts and the middle men will walk away with billions of dollars. This has happened so many times in history it's amazing anyone is dumb enough to consider investments in gold anything other than straight up gambling with only slightly lower risks than betting on the roulette wheel in Vegas. Yea if you get lucky on the timing you can make a bundle, but if you get it wrong you'll lose everything. Gold is already bubble that's already started to pop.

Re:Interesting parallel

[redlemming]

These official currencies are unique and irreplaceable for that reason.

Many countries (or cities, or towns, or other organizations) throughout history have had no official currency, and others have used shared currencies. In the USA, the Spanish dollar and Mexican peso remained legal tender until 1857. At least six countries today use the US dollar as their official currency.

Even when an official currency existed at a national level, unofficial currencies often could be and were used by governmental or other entities below the national level (for example, look up the Worgl Experiment).

There is nothing in principle that prevents a country from accepting tax payments in forms other than its official currency, or issuing payments in the form of precious metals.

As such, "official currencies" are not unique, and are quite replaceable.

Further, non-official money (i.e. items that economics consider equivalent to money) has a long history. Even in the USA today, there are active local currencies (as economists define such things), such as the "Ithaca Hour" or the "Piedmont Plenty".

good move

[globaljustin]

MtGox has had this coming. They need to provide answers.

I don't see this as anything other than routing criminal proceedings.

Re:good move

[Registered Coward v2]

MtGox has had this coming. They need to provide answers.

I don't see this as anything other than routing criminal proceedings.

Actually, it's a civil suit so the judge froze assets to prevent them from disappearing while the suit sorts itself out. It doesn't cover all the entities since some are in bankruptcy proceedings; once discovery starts it will be interesting to see what is revealed.

Re:good move

[PRMan]

Karpeles has 200,000 BTC in an address that he has proven he has control over in the past. There's nothing to wonder about. He stole the coins (at least 200,000 of them).

Re:good move

[Comrade Ogilvy]

Or perhaps he "lucked out" and his account with Mt. Gox came out whole with a clean transfer to the outside, while everyone else's bitcoin "disappeared" with the sinking ship. It has the whiff of fraud, even if we do not know without more details.

Re:good move

[JDG1980]

Or perhaps he "lucked out" and his account with Mt. Gox came out whole with a clean transfer to the outside, while everyone else's bitcoin "disappeared" with the sinking ship.

Under bankruptcy law, this would be known as "fraudulent conveyance". Courts don't look upon this kindly.

Parallels!

[Thanshin]

So they printed fake money, convinced people it was real, got the people's money, said they lost it, but actually were stealing it, and now they are saying they don't have money while moving money to private accounts?

If they had a flag they'd be a government.

Re:Parallels!

[Sockatume]

And if they were a government they'd have collapsed and taken down their entire economy. The proof of the pudding is in the eating.

Re:Parallels!

[Flammon]

Oh, it's coming. http://www.usdebtclock.org/

Re:Parallels!

[UnknownSoldier]

Wait, were you talking about the American government again?

Oh So NOW you want regulation eh?

[bobbied]

So, let me get this straight. You want the government to order that the CEO of Mt Gox not have access to his assets? Yea, good luck with that.

If he was the one who took all the BitCoin from their depositors, what's to keep him from trading them? Nothing, really. Remember that BitCoin is unregulated by design.

Give it a rest, you lost your money and nobody can prove where it went. Oh the joys of an unregulated currency.

Re:Oh So NOW you want regulation eh?

[Sockatume]

Err, pretty much the only thing the Bitcoin network does is "prove where [bitcoins] went". Outside the network is another matter. The issue isn't unregulated Bitcoin; the issue is unregulated Bitcoin exchanges.

Re:Oh So NOW you want regulation eh?

[DarkOx]

Give it a rest, you lost your money and nobody can prove where it went. Oh the joys of an unregulated currency.

Give it a rest, you gave your money to Madoff. He lost it and nobody can prove where it went. Oh the joys of a regulated currency.

Good news though you also got to caught up a bunch of money in Taxation to support the SEC that didn't save you...

Re:Oh So NOW you want regulation eh?

[PRMan]

And anybody that left large sums of money on an exchange where they weren't paying out in dollars for 6 months should have known better.

Re:Oh So NOW you want regulation eh?

[Aighearach]

You don't good luck for a court order. You just need the order.

Re:Oh So NOW you want regulation eh?

[bobbied]

Madoff wasn't running a "regulated" business either, his was a Ponzi scheme too. The difference here is that the SEC ended it, once they found out what it was.

Re:Oh So NOW you want regulation eh?

[cheesybagel]

The NSA taps into all Internet communications. Do you honestly think they don't have a substantial copy of the whole Bitcoin transaction record? IPs et al?

They may not have names in that database but they can certainly connect both if they want to.

Re:Oh So NOW you want regulation eh?

[bobbied]

Problem with this is that it is totally impossible to collect ALL traffic, even for the NSA. There has to be some kind of filtering between where they tap into the network and where they store the information they collect. Not to mention that they are not Santa Claus, they don't have 100% coverage of all internet traffic.

With that in mind, tell me why the NSA would be interested in watching Mt Gox? Because that's what you are really saying, that the NSA was specifically targeting Mt Gox and/or BitCoin transactions, which may or may not show up where their probes can see it. I don't think the NSA cares, and was/is not in a position to monitor all BitCoin transactions.

Re:Oh So NOW you want regulation eh?

[DarkOx]

No he was very much running a regulated business. Was he violating regulations, yes, but there is the point it isn't as if something being against the rules creates some magic inviolate barrier to doing it.

Yes the SEC shut him down, just like the bankruptcy court is going to be shutting down Mt.Gox. In both cases after much of the money is long gone.

A cheat is a cheat, using Dollars or Bitcoins. Getting conned sucks for the victim and a slightly longer list of criminal complaints against the conman, beyond say simple Fraud, does not make it suck less.

A test of the principles

[Rinisari]

So this is actually a test of the one of the attractive principles of Bitcoin: no one can separate you from your money, assuming that you control your private keys. Karpeles isn't a complete idiot, so I'm certain the keys to what balance he himself maintains are safely stored somewhere only he knows (brain wallet?). So, assuming that he has substantial holdings in bitcoin, then what good does the asset freeze do? He is free to spend bitcoin, unless the asset freeze also prevents businesses from accepting money of any kind from him.

Same holds for the two companies, but they are much more likely to have a larger USD balance that is actually affected by the freeze.

Re:A test of the principles

[JDG1980]

So, assuming that he has substantial holdings in bitcoin, then what good does the asset freeze do? He is free to spend bitcoin, unless the asset freeze also prevents businesses from accepting money of any kind from him.

If he violates the court order, it would be treated the same way as if he violated any other court order: he could be held in contempt and sent to jail.

Re:A test of the principles

[HornWumpus]

You assume the feds know which wallet is his? That the feds know all the wallets he controls?

Re:A test of the principles

[Rich0]

What's he going to spend his bitcoins on? Also, the government can just order him to hand over the keys to his wallet and hold him in contempt (in jail) until he complies.

Anything tangible he owns can be seized, as can he. Courts aren't as easy to bamboozle as his customers. The only way to avoid a court is to shelter all your assets and your person in a jurisdiction that won't hand you over and can't be forced to hand you over.

Re:I don't think for a second that Karpelès s

[JDG1980]

Wake up. Karpeles is a con artist and a sociopath. He'll say anything to string along the suckers for a bit longer. Not a word coming out of his mouth (or from his Twitter feed or whatever) can be believed.

The U.S. government loves to trumpet its drug/laundering asset seizures. Look at Silk Road. This thing was not done in a corner. Nor was the house arrest of Charlie Shrem for alleged Bitcoin-related money laundering covered up in any way.

The only way the government would demand everything stay on the q.t. would be if there was still an ongoing investigation. But if that was the case, then the messy public shutdown of Mt. Gox would have already ruined that. If the government was surveilling Mt. Gox customers and wanted Karpeles to keep his mouth shut, they would have told him to carry on business as usual so no one would be alerted, and Mt. Gox would still be running.

ROFL

[benjfowler]

I see that Mr Karpeles would tell anybody who would listen, just how clever he was, and how he is a member of MENSA.

Yet he presided over this utter, complete fuckup.

So who's clever now??

Re:ROFL

[Anonymous Coward]

He's the same sort of clever that the banker smart guys used to cause the 2008 crash, for which precisely ZERO of them ended up in jail.

We live in a scam culture. Fraud is the only way to do business today. The honesty in the system has been driven out, since dishonesty earned too much of the money. In other words, the bad money drove out the good.

There's only one option, then, for the common man: OPT OUT. Opt out before these entrenched fraud systems take you for every last dime (or bitdime) you have.

banking system in php. lol

[Anonymous Coward]

Karpeles is a php developer.

He probably wrote the entire exchange in php and mysql.

If only

[TsuruchiBrian]

If only his assets were all in bitcoins, then the US government wouldn't be able to freeze them.

Re:I don't think for a second that Karpelès s

[Aighearach]

You've still never seen The Godfather?! O M F G

He does favors so people will owe him something. For example, the bitcoins of theirs he just stole. How can he steal all their bitcoins if some smaller exchange sours them cryptocurrency? No, he can pay it for them, out of the goodness of his heart, and his love for the crypto neighborhood.

It's all in the accounting

[sjbe]

Bitcoins may have no legal value, but wouldn't Gox remain on the hook for the dollar-denominated balances in their care?

Not necessarily. Depends on the nature of the custodial agreement and how the accounting was handled. Local laws play a role too. Remember that we we aren't talking about a regulated bank here so the usual rules regarding currency and banking don't necessarily apply.

And the bitcoins have a legal value, they just aren't considered currency by Japan. Big difference. They're still an asset, just legally speaking they are a different kind of asset. It's a distinction that in the end probably doesn't matter all that much.

Re:It's all in the accounting

[Rich0]

Depends on the nature of the custodial agreement and how the accounting was handled.

Only to a degree.

If we agree to trade 5 sheep for $500, and I give you 5 sheep, and you don't give me $500, a court is going to frown on that. Just about anything we agree to on paper isn't going to change that a great deal. Maybe if we agree that you don't have to pay me for six months then the court will give you six months.

If you argue that the piece of paper really says that you can take my sheep and only give me $500 if you feel like it, then a court is just going to ignore the paper.

Now, if we were talking about an investment of some kind where I stood to both gain and lose, then a court would treat it as such.

Bottom line is that you can't use legal arguments to claim that a contract should be construed in a one-sided way. Contracts have to involve some kind of consideration. If you take my sheep, then you owe me money, or at the very least you owe me my sheep back.

routine

[globaljustin]

heh...usually typos don't matter but in this case...

I don't see this as anything other than **routing** criminal proceedings.

routine...I meant to type "routine" not "routing"

afaik none of the MtGOX ppl are accused of any kind of crime & in general all currencies are used for "routing criminal" stuff...so you can't arrest BTC people just b/c its used in illegal transactions

Re:routine

[bberens]

No, but you can arrest bankers at HSBC for assisting in money laundering for drug cartels... oh wait.

His thinking is transparent

[Martin S.]

"the US govt. doesn't want us to talk about it",

Translates to : Blame the government and all the libertarian patsies will rush to our defence.

What makes bitcoins so special?

[westlake]

If only his assets were all in bitcoins, then the US government wouldn't be able to freeze them.

What makes bitcoins different from any other asset, real or intangible, that can be converted into cash?

Re:What makes bitcoins so special?

[TsuruchiBrian]

Bitcoins are not different from every other asset that can be converted to cash (for this case). Bitcoins are different than money in a bank account in terms of the ability of a government with regulatory power over a bank to freeze a persons assets.

The government can't call up a bank somewhere and pressure them into taking away your bitcoins. Like cash in your physical possession, if the government wants it, they have to come and get it from you (or hack into your computer).

Re:What makes bitcoins so special?

[HornWumpus]

Unless you tell someone the id of your wallet(s) the government has no way of knowing what you own.

Re:What makes bitcoins so special?

[david_thornley]

Sure. Same as a suitcase of cash. However, if the government ever finds you transferred bitcoins or cash that were legally frozen, you're in deep trouble. At least cash they can't trace back to a suitcase and prove you owned the suitcase. Do it with bitcoins and there's a permanent audit trail if they can ever show that wallet was yours.

Re:What makes bitcoins so special?

[TsuruchiBrian]

I'm pretty sure you can trace cash if you really wanted to. I think it's probably harder in some ways than tracing bitcoin, but it's easier in other ways. With bitcoin it's trivially easy to create new wallets and transfer money between them. Trying to figure out who owns which wallet might be possible in a lot of circumstances, but you can exchange money between different wallets orders of magnitude more time with bitcoin than would be practical with real money.

You could sell 20 bitcoins on an exchange and use that money to buy 20 new bitcoins under a different wallet. This would be pretty hard for the FBI to trace because the $1000 that temporarily existed in your escrow account may have never really existed except as an IOU from the exchange. And now you have 20 different bitcoins in a different wallet, that is untraceable by anyone looking only at the blockchain.

Re:What makes bitcoins so special?

[david_thornley]

Sure. Then the FBI manages to pin the original wallet on you, and finds you spent 20 bitcoins of frozen assets, because if they have the wallet info they can tell what was spent when (correct me if I'm wrong). Cash is potentially traceable, but you aren't going to leave a possible eternal audit trail.

Re:What makes bitcoins so special?

[TsuruchiBrian]

If you sell 20 bitcoins and use the money to buy 20 new bitcoins, I think this is untraceable from the info in the blockchain. That's because there is no link between the old bitcoins, the virtual dollars that existed (only in IOU form), and the new bitcoins (in the new wallet). The exchange has this information, but the exchange might not be in the jurisdiction of the FBI.

Re:I don't think for a second that Karpelès s

[Comrade Ogilvy]

There has been a suspicious whiff coming from Mt. Gox for about a year. That suggests (but does not prove) that Mt. Gox was aware they were leaking bitcoin. There most likely was a point in time when Mt. Gox still held substantial bitcoin, yet they kept the problem mum, rather than shutter their doors and figure out how to partially compensate their account holders. Even nice guys can be sorely tempted to back their little white lies with bigger lies and their big lies with things that might be fraud, when the ship is sinking.

When did bitcoin become money?

[mmell]

One of the powers traditionally reserved to governments is the ability to mint and coin legal tender - lucre, coin of the realm, payola, greenbacks, cash . . . money.

I've been able to write checks throughout my adult life. Bitcoin (no matter the technical underpinnings) is more like issuing drafts (checks) - their value is not defined by any reasonable currency; the reverse however is true (bitcoin has an arbitrary or not-so-arbitrary value in currency, but the value of the US Dollar/British Pound/Euro/etc. is not defined as having value relative to bitcoin).

Is anybody here still naive enough to confuse my (personal crypto) check for cash? I assert that the check in my hand is worth $100.00 - who'll give me $95.00 for it? I promise it's good . . .

Re:When did bitcoin become money?

[codebonobo]

the reverse however is true (bitcoin has an arbitrary or not-so-arbitrary value in currency, but the value of the US Dollar/British Pound/Euro/etc. is not defined as having value relative to bitcoin).

Is anybody here still naive enough to confuse my (personal crypto) check for cash? I assert that the check in my hand is worth $100.00 - who'll give me $95.00 for it? I promise it's good . . .

USD Fiat has no legal enforcement as currency outside of the US either. Exchanges, Companies, Governments or Individuals can choose to accept them or not. They place a value on them dynamically by what they perceive they are valued at in reference to their currency.

This is exactly the same with Bitcoin.

Additionally, many judges and governments have indeed declared Bitcoin a currency. One example : http://www.courthousenews.com/...

Re:When did bitcoin become money?

[mmell]

Nice try - but it still isn't legal tender. Here in the USA there is a legal definition that US money is legal tender and must be accepted for payment of all debts, public and private. Says it right on the money. Any country on the Earth with a functioning government makes the same assertion about their money within their borders. It's one of the basic sovereign powers which any world government is able to exercise (if they're truly a national government).

So . . . no, Republic Credits are no good here. I can buy stuff at the corner grocery store with money. I can pay my rent with money. I can buy gasoline with money. How's that bitcoin workin' for ya?

Re:When did bitcoin become money?

[codebonobo]

Nice try - but it still isn't legal tender. Here in the USA there is a legal definition that US money is legal tender and must be accepted for payment of all debts, public and private. Says it right on the money. Any country on the Earth with a functioning government makes the same assertion about their money within their borders. It's one of the basic sovereign powers which any world government is able to exercise (if they're truly a national government).

So . . . no, Republic Credits are no good here. I can buy stuff at the corner grocery store with money. I can pay my rent with money. I can buy gasoline with money. How's that bitcoin workin' for ya?

Nice try sidestepping my comment. Read it again:

USD Fiat has no legal enforcement as currency outside of the US either.. Bitcoin is merely a competing currency like any other.

Additionally, USD fiat is legal tender to pay all debts. There is no enforceability for accepting USD as payment for a good or service. All businesses and individuals can choose how they wish to be paid and who their potential clients are. Businesses within the US can choose to turn away people paying in USD and do so all the time. This is why an individual can pay taxes and debts in thousands of pennies in protest and businesses turn away clients all the time for this type of nonsense when a protestor does so with a new transaction.

Bitcoin isn't legal tender, but it is a form of money with the same rights and privileges as foreign currency in the US. This is why thieves are prosecuted in the US for stealing bitcoin, because its recognized as a valuable form of money.

Re:hahaha...

[Shakrai]

Have fun serving an indefinite sentence in Federal prison for contempt of court if you're ordered to turn over your bitcoin and decline to do so.

Re:hahaha...

[mmell]

What cryptocoin?

Re:hahaha...

[Shakrai]

Bitcoins are just an asset, like any other, and if you think the US Attorney's Office can't build an asset paper trail you're in for a rude surprise.

Re:hahaha...

[mmell]

Sure. You got me (maybe. Maybe the bitcoins were in memory and were absolutely destroyed when the police seized my computers, I dunno).

About those (maybe existing, maybe not existing) bitcoins - how many have been seized to date? I mean, Silkroad was sure using the hell out of Bitcoin. Was all that money recovered?

Maybe I've got it wrong. Maybe troves of bitcoin have been seized worldwide. Could somebody site an example? To date, I haven't heard of any sizeable seizures of bitcoin.

Re:hahaha...

[mmell]

Poorly worded. The FBI did seize a ton of bitcoin.

Does it have a monetary value to the FBI? If so, bitcoin is fundamentally flawed.

Re:hahaha...

[Shakrai]

You may want to familiarize yourself with the concept of rubber hose cryptography.

Granted, the United States Federal Government won't literally beat you with a hose, but they will take away your freedom until you comply with the lawful orders of the courts. The Government will go over your finances with a fine toothed comb, accounting for any and all assets you currently or previously owned, including bitcoin. If you obtained any of those assets via fraud you're going to be on the hook for repayment, plus criminal and civil penalties on top of the fraudulent earnings.

Want to play the "I lost them" card? You can try, but you're still going to be on the hook for the full amount Uncle Sam thinks you owe your victims, plus the aforementioned penalties, and you're not wiping any of that away with a bankruptcy. It will follow you until the day you die.

Bitcoin doesn't spend at the prison commissary, nor am I aware of any reputable criminal defense attorneys that accept payment in bitcoin.

Re:I don't think for a second that Karpelès s

[glasshole]

Why isn't this modded Funny, it must be sarcasm.

Nothing at all like regulating them.

[pavon]

It would be a delicious irony if people were able to recover some of their lost value due to government regulations.

You mean like what would have happened if they were regulated like a real bank?

This has nothing to do with applying banking regulations to Mt Gox. It is about applying laws about fraud and theft. The difference is that regulations put a burden on innocent and guilty alike but potentially prevent problems before they occur, whereas laws simply attempt to punish the guilty and compensate the victims after the fact. If people do in fact recover any money as a result of this, it won't be particularly ironic since libertarians fully support laws on fraud, just not banking regulations, and complete federal control of currency.

Re:banking system in php. lol

[HornWumpus]

Except for the broken code that resent the transaction when they changed it's ID.

Of course all languages can have bugs written in them. PHP just makes it easy to be a hack. Not unlike MS access.

The bigger issue is no accounting checks. They were apparently out of balance for a year or more. Which tells me they were far below the level of a bank. They apparently didn't have a comptroller (or the Japanese equivalent).

Re:hahaha...

[Eunuchswear]

Granted, the United States Federal Government won't literally beat you with a hose,

No, they traditionaly prefer simulated drowning, sleep deprivation and stress positions.

Promissory estoppel

[sjbe]

Now, if we were talking about an investment of some kind where I stood to both gain and lose, then a court would treat it as such.

In all likelihood that is what we have here. People who stashed their bitcoins there take the risk of them going up or down like a stock. Best case they might be eligible to receive the current market value of what is stored there (basically be "made whole") and worst case the court might consider the bitcoins to be worthless. I think the former is more likely but I could see either happening. Hard to predict here especially since there are a lot of facts still unknown.

Bottom line is that you can't use legal arguments to claim that a contract should be construed in a one-sided way.

Agreed and I'm certainly not arguing that. However contracts do not have to be particularly fair to be enforceable. You are allowed to make a bad deal, there just has to be some form of consideration but in many cases it doesn't have to be equitable as long as both parties agreed to it without duress. Actually the more likely legal argument here is promissory estoppel. Promises were made that were relied upon by those who stored their bitcoins.