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Mt. Gox Questioned By Employees For At Least 2 Years Before Crisis
Rambo Tribble (1273454) writes "Reuters reports that Mt. Gox employees began to question the handling of funds at least two years ago. Although only CEO Mark Karpeles had full access to financial records, a group of a half-dozen employees began to suspect client funds were being diverted to cover operating costs, which included Karpeles' toys, such as a 'racing version of the Honda Civic imported from Britain.' Employees confronted Karpeles in early 2012, only to be given vague assurances with a 'pay no attention to the man behind the curtain' ring. Unfortunately, since Mt. Gox was not regulated as a financial institution under Japanese law, it is unclear what recourse might be gained in pursuing this question."
Let's see how much Karpeles spent these past few years.
I wouldn't want to be Mark Karpeles at all. He's going to have annoyed a lot of dodgy characters who want their money back. I think he'll be looking over his shoulder for the rest of of his life.
Get your own free personal location tracker
Technically speaking, bitcoins are not financial instruments. Producing a bitcoin is effectively a gamble. So entirely bitcoin system is a gambling institution. And exchanges act as token brokers. In gambling terms, they are the house. I don't think casinos are treated as financial institutions though. And for anyone actually looking to regulate bitcoins, casinos are probably a better model. People can exchange chips among themselves anonymously. But if they want to exchange them at an "established" location, then they have to do it through a cashier acting as a broker. This is what exchanges are.
Any guest worker system is indistinguishable from indentured servitude.
Now that ex-employees are talking to the press and the cops, we'll find out what was going on.
The Reuters article makes it clear that Karpeles had exclusive personal control over Mt. Gox's cash. That probably means he'll be the one going to jail. I've been writing for months (ever since Mt. Gox suspended US dollar withdrawals last summer) that Mt. Gox was either incompetent, broke, or crooked. Now it looks like all of the above.
Why would Karpeles import a Honda Accord R from the UK to Japan? They're made in Japan.
...? That isn't what a Ponzi scheme is. That is just fraud.
while(1) attack(People.Sandy);
Anyone knows what really happened with CoinEx.pw?
Get free satoshi (Bitcoin) and Dogecoins
Never ever work for a company where only the CEO has access to the financial records.
https://www.youtube.com/watch?...
systemd is Roko's Basilisk.
> Libertarianism is basically about minimal government necessary for society not minimal society. But I guess you don't care.
Or, not understand, and think your comment makes no sense. To these people, society IS government. When they say "we should help people who need it", that in no way suggests that they would EVER consider buying diapers and milk for the struggling young mother in line behind them. To them, "we" means "Washington", so "we should help" means "Washington power brokers should take your money and give it to whomever". They really and truly don't know any distinction between Washington bullying vs. ethical behavior. Personal responsibility does not exist, so society=ruling class, to them.
Taking most of the revenue for yourself while using the money of later investors to keep earlier investors sweet = Ponzi, bro.
You know things are really screwy when Japanese cars are being imported from Britain to Japan.
Better known as 318230.
It'll fix itself because the fairy hand of the market provide perfect knowledge to the worthy. The unworthy ones got what they deserved by not seeing in their crystal ball that Gox was an unsafe place to put their bitcoins. Soon, the unworthy ones won't have any more money to lose and only the worthy ones (the ones with irresistible grace) will have bitcoins and since the worthy ones never make any mistakes, only honest bitcoins exchange will remain. Not that stealing unworthy ones that lack irresistible grace is dishonest anyway, after all people without the irresistible grace are not really people.
Technically speaking, bitcoins are not financial instruments. Producing a bitcoin is effectively a gamble. So entirely bitcoin system is a gambling institution. And exchanges act as token brokers. In gambling terms, they are the house. I don't think casinos are treated as financial institutions though. And for anyone actually looking to regulate bitcoins, casinos are probably a better model. People can exchange chips among themselves anonymously. But if they want to exchange them at an "established" location, then they have to do it through a cashier acting as a broker. This is what exchanges are.
Except that they have "accounts" where they hold your money and do whatever they want with it in the meantime. It makes them much more like banks. Of course they go to great lengths to dispel that, since it would mean regulation and oversight.
Sounds an awful lot like Paypal...
You can feed the world with a garbage dump. That sums it up in one big lump!
That's exactly what a Ponzi scheme is. Fraud, claiming that you are making money when you aren't, and paying out people from the money contributed by new investors.
09F91102 no, 455FE104 nope, F190A1E8 uh-uh, 7A5F8A09 that's not it, C87294CE no. Ah! 452F6E403CDF10714E41DFAA257D313F.
Taking most of the revenue for yourself while using the money of later investors to keep earlier investors sweet = Ponzi, bro.
Your REALLY need to read what happened.
You should also probably look up Ponzi's as well, it is not some generic term you can trough at any sort of fraud it is a specific type of fraud that does not apply here (MtGOX never returned a percentage per day/week/month/year as interest).
That's exactly what a Ponzi scheme is. Fraud, claiming that you are making money when you aren't, and paying out people from the money contributed by new investors.
As I have mentioned elsewhere.
You should also probably look up Ponzi's as well, it is not some generic term you can trough at any sort of fraud. It is a specific type of fraud that does not apply here (MtGOX never returned a percentage per day/week/month/year as interest).
That's exactly what a Ponzi scheme is. Fraud, claiming that you are making money when you aren't, and paying out people from the money contributed by new investors.
These people aren't "investors" and there is no concept of "new investors", its a bank where people transfer money in and out all the time.
That's exactly what embezzlement is. Stealing money entrusted to you.
FTFY. I don't remember any exchanges (Bitcoin or otherwise) promising to "make money" for their customers.
This is plain old embezzlement - steal money, cook the books and hope to run away before too many people ask for their deposits back. Karpeles failed the last step.
MTGOX charged 1% fees (.5% from both sides of a trade) and had volumes in the 50 million range for many months. They often had earned a profit in the range of 500,000 every month. That should be close to the amount they were spending on all of this junk plus employees. I still do not see where all of the dough went even with the extravagances shown.
It has also been shown that they did not have large amounts of transaction malleability theft as well. Something else happened. Like the owner keeping the coins.
If you took your balance out of MtGOX, sure. But how many people had a cash or bitcoin balance held by them that didn't actually exist? A balance they now cannot recover? MtGOX is certainly negligent, but if they suspected that the cash didn't exist and ignored it while continuing to pay out, that's fraud and practically a Ponzi scheme.
09F91102 no, 455FE104 nope, F190A1E8 uh-uh, 7A5F8A09 that's not it, C87294CE no. Ah! 452F6E403CDF10714E41DFAA257D313F.
What the hell is a "racing version" of a Honda Civic.
For many, one with underbody LEDs. :-)
Securities fraud to be exact. When they opened a US branch they opened themselves to US law. The IRS just ruled that bitcoins are property not currency. As a result they fall under US securities laws. And amazingly the US fed's have been investigating them for a while.
The SEC is going to eat the CEO for lunch, just wait. It's going to take a little while to build the case depending on when they started the investigation but I'd wager within 2-3 years he's going to be charged with violations of US securities laws. I have no doubt whatsoever that he'll be convicted and go to jail for around a decade. That and the government will seize all his assets.
i wonder if us customers can sue and use these laws.
Remember, though, the IRS considers Bitcoin "property" not "money".
So sue/press charges on Mt. Gox for loss/theft of property?
US IRS notices don't have much weight in Japan. :-)
The basic Ponzi scheme involves a claim that you have a new way of making money (investments, floor cleaner, diet aids) that nobody else has thought of before
The first people in get their return based on the money that the second set of people bring in
This creates a sensation and a larger third set of people get in
The first and second sets of people get their return based on the money that the third set of people bring in
This cycle continues until the upper tiers take their money out and the whole thing collapses when there is no additional set of people to bring new money in
There is usually some legal action and furor over where the money all went, but billions of dollars can (and have) evaporated in the blink of an eye
walks like a duck, quacks like a duck, it is probably a duck
Guess what, drug addicts can't handle money. No surprise.
there are a number of exchanges that pay interest on your holdings on the exchange. They take a percentage of fees the exchange earns and give it to people with coins held there. The rationale is they want your coins sitting on the exchange as it'll encourage you to trade only on that exchange. One exchange, mcxnow, even posts a current interest rate based on the last 6 hour of fees.
The basic Ponzi scheme involves a claim that you have a new way of making money (investments, floor cleaner, diet aids) that nobody else has thought of before
Agreed
The first people in get their return based on the money that the second set of people bring in
Yep
This creates a sensation and a larger third set of people get in
Right
The first and second sets of people get their return based on the money that the third set of people bring in
OK
This cycle continues until the upper tiers take their money out and the whole thing collapses when there is no additional set of people to bring new money in
There is usually some legal action and furor over where the money all went, but billions of dollars can (and have) evaporated in the blink of an eye
Absolutely
walks like a duck, quacks like a duck, it is probably a duck
What do ducks have to do with it? You have described how a Ponzi works, OK you seem to know but applying it to a duck is meaningless you need to apply it to MtGOX (in this instance).
MtGOX took off with people property that they had been entrusted with, that is fraud.
MtGOX never said they will make money for them (bitcoin never said it either... but and idea never actually says anything). There were no first investors, second invests or even last investors, no potential returns nothing.
MtGOX took off with everyone's property, plain and simple.
that's fraud and practically a Ponzi scheme.
Yep, it is total fraud, but it is not "practically a Ponzi scheme", it is just plain old fraud.
mt gox does not so much describe 'Ponzi' as much as either
A. a mechanism to remove value from the Ponzi scheme in advance of its demise (it is very difficult to pull value out in open view, it tends to depress the market)
B. An overall weakness in the story behind the Ponzi scheme that could throw it into a premature tailspin
So, the Ponzi-like nature is more akin to that of bitcoin itself, that is the claim that you have a new way of making money and a rising popularity in the method that generates large sums of money as more people try to jump in on it. Of course the last thing that a Ponzi scheme would want would be to be labeled as such
Of course, the comparison comes up with ponzi schemes to the Stock Market and how popularity makes things seem like they have more value than they do (dotcom boom anybody?). Of course the stock markets have hideous amounts of regulation on them, thousands of SEC lawyers, limits to insider trading and even the amounts of stock that large holders can sell at any time. All of these things have come along over the decades to make the Sock Market less Ponzi-prone and more legitimate
bitcoin lacks any of that hideous regulation, and in fact attracts people who would regale at the lack of regulation, and as such is far more exposed to getting pumped in a boom and bust that leaves most of the people involved holding very little value. I'll grant you that the story has more than a few twists in it, and may even be writing its own book, scams make for compelling literature
A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.
https://en.wikipedia.org/wiki/Ponzi_scheme
If he has taking money from investors, and paying his debts with 'new money' it's a Ponzi scheme, even if it was BTCs instead of $s.
If this was happening two years ago it's more likely he spent them when they were worth a fraction of their current value.
j'ai découvert une démonstration vraiment admirable (de ce théorème général) que cette si
Japan also considers bitcoin a commodity.
j'ai découvert une démonstration vraiment admirable (de ce théorème général) que cette si
You guys are all idiots. Just stop arguring, the dude is right. It is in no way a ponzi scheme. Mt gox wasnt taking "ivestors" as clients, they were simply brokering a comoddity. Just admit you used a word without fully understanding what it meant. Sheesh.
that would imply that he was inflating market value of bitcoins just to get more people to buy bitcoins... which doesn't really sound plausible with the money he had.
world was created 5 seconds before this post as it is.
An asset bubble isn't a Ponzi scheme either, you goalpost moving fool.
Negreanu got goxed <- As Negreanu says, I wouldn't mind it if someone takes a baseball bat and smashes mark karpeles in the nuts with it.
"It is unclear how Japanese law would treat any such diversion of customer funds as Mt. Gox was not regulated as a financial institution. As a private firm in which Karpeles held an 88 percent stake with no declared debt, Mt. Gox was under no obligation to share any details on its finances."
The lack of regulation means that they cannot prosecute the *lack of disclosure* but the article makes it sound like it implies they cannot prosecute the fund diversion itself. Of course you can, it's embezzlement, there are laws on the book against it, and no you don't need to be "regulated" for these laws to apply.
Financial regulation is something that can make such frauds harder to perpetrate, it's not what makes is illegal. Sheesh.
\u262D = \u5350
He's in fucking JAPAN, not America and thus already had access to models of civic with as big or bigger engines than the euro spec models and usually FAR FAR FAR more highly tuned.
On the other hand for a wanna-be white boy in Japan, importing a Euro-spec car for the expense-factor and to try and look 'leet' with the big boys is a distinct possibility. Exactly the kind that could result in blowing your customer's finances in the expectation the market would continue booming and you could cover it up... Kinda like the bankers in the US did up to '08.