Mt. Gox Knew It Was Selling Phantom Bitcoin 2 Weeks Before Collapse

An anonymous reader writes "Mt. Gox CEO Mark Karpeles wrote in a sworn declaration in the company's U.S. bankruptcy filing he suspected hundreds of thousands of bitcoins were missing on Feb. 7, more than two weeks before it finally halted trading. That means Mt. Gox allowed its customers to continue trading, knowing that its bitcoin stash was wiped out and collecting as much as US$900,000 in trading fees. Since Mt. Gox said it was also missing $27.3 million in cash from customer deposits, it raises the possibility that customers — despite seeing a cash balance displayed in their account — might have actually been buying bitcoins that did not exist, with cash that was already long gone."

Comments

Re:Bitcoin

[interkin3tic]

Yeah, those fools should have definitely given their money to the pros.

You know what, that's too much sarcasm for me to fart out at once. This sounds essentially like the subprime mortgage crisis. And a lot of other banking crises. It doesn't seem totally insane to me to trust your friend Joe in a trailer over the banking industry: when he runs off with my money, at least he might go to jail rather than getting millions in rewards.

Suspected =/= knew

[DaveV1.0]

In the first sentence, Karpeles is reported to have said he "suspected hundreds of thousands of bitcoins were missing". In the second sentence, the submitter, and by extension Timothy the editor, turn this suspicion of into "knowing that its bitcoin stash was wiped out". Let me demonstrate the problem with this:

A person suspects Timothy of being a murderer and panning a second murder thus that person knows that Timothy is a murderer and will be killing again and thus can kill Timothy and claim defense of another based solely on that suspicion.

Re:Bitcoin

[DarkOx]

^^ This what all the "see you do need regulations, I told you so" crowd does not get.

A cheat is a cheat is a cheat and they will cheat you using unregulated BitCoins, just the same way they will cheat you using regulated dollars.

It isn't as if regulations create some magical inviolate barrier. Madoff ran a ponsi scheme masquerading as a hedge fund with SEC reporting requirements and everything. Much of the monies were never recovered. The subprime crisis is another example the brokers just faked all the paperwork and wrote the liar loans.

The only differences in the end is possibly if someone goes to jail or not. FRAUD however is still a crime even if there are no specific securities statues that apply to BitCoin. So these guys certainly could be charged as criminals too. This has NOTHING to do with regulations.