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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."
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.
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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.
this is good since a lot of countries have laws prevent casinos and the like from dipping into the till. i wonder if us customers can sue and use these laws.
i wonder if us customers can sue and use these laws.
Remember, though, the IRS considers Bitcoin "property" not "money".
If you want news from today, you have to come back tomorrow.
It appears you don't know how bitcoins or casinos work.
...? That isn't what a Ponzi scheme is. That is just fraud.
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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? If bitcoins are property, then an exchange would be like a storage place, or maybe a consignment shop. If you put your physical items in any of those places and then one day the owner says "oops, your stuff is gone, sorry"(especially due to the actions/fault of the owner), you would be able to go after them for the loss of your assets. It should be the same case with bitcoins.
The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil
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.
Good luck proving your bitcoins. Even with storage facilities you have to have some form of value proof.
Taking most of the revenue for yourself while using the money of later investors to keep earlier investors sweet = Ponzi, bro.
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.
You know things are really screwy when Japanese cars are being imported from Britain to Japan.
Better known as 318230.
OK, now tell us how they differ :-)
Or, not understand, and think your comment makes no sense.
I have to agree. You don't seem to understand. Maybe you should fix that before doing that straw man thing again.
I guess this is the same sort of thing that is said about any political label. Maybe I should be pleased that people are discussing libertarianism with the same lack of seriousness that they'd give to any other major ideology.
Depends on the quality of the hookers and blow.
You are welcome on my lawn.
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.
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).
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. :-)
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.
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.
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
They same is true of any casino which lets you deposit money with them while providing you with a dealer to arbiter your poker games. You can use the deposited money to buy chips in the casino. And then you can sit at a table and have a casino-regulated gambling session with other players. It's not quite the same, but the fact that mining of bitcoins is largely a game of luck, means that the whole system is based on a very sophisticated gambling scenario. Bitcoins have not inherent value other than to indicate who won and who lost in the gamble. That proceeds of the gamble can be exchanged for real-world tangibles, but the same is true of casino chips. It's not exactly like poker. But poker is not the only game casinos offer. They offer many, sometimes newly introduced, games. This seems to operate like one of them.
Any guest worker system is indistinguishable from indentured servitude.
What? Casinos? How they offer from tangible exchanges? Any paper you buy on an exchange comes with some legal rights. Even stock gives you the legal right to vote in company board elections. Commodity contracts give obvious legal rights. Bonds give you a right to demand payment from a creditor, etc. Buying a bitcoin does not give you any legal right, so I still don't think it is appropriate to deem it to be a property. I suppose if you had a system for reselling casino winnings, then bitcoins would be identical (rather than similar) to it. But casinos do run different (sometime odd) games. This is just another gambling game.
Any guest worker system is indistinguishable from indentured servitude.
I was making a commentary about all the toxic paper passed off as financial instruments in the banking crisis and in what way it differs from betting on musical chairs.
Read the fucking summary: "a group of a half-dozen employees began to suspect client funds were being diverted to cover operating costs, which included Karpeles' toys"
Patents Drive Free Software as Hurricanes Drive Construction Industry
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.
Hookers, blow, and honda civics. Who the hell buys a Honda civic when they could buy anything? Who the hell gets one imported from the other side of the world?
If he was just a little bit competent he could have run a business that would have covered all his expenses legally and still run at a strong profit. The guy was well out of his depth. He needs to get jail time as a warning to others.
I really don't think MK is a sociopath. A sociopath would not damage their own company to the point of having to declare bankruptcy. Not when their own income depended on that company, not when that company had such high potential. Sociopaths are still pragmatic.
I think he was just utterly inept and far out of his depth. He literally didn't have a clue what he was doing. His stupidity and carelessness is no defense, he should face jailtime.
The European version of the Civic is actually a completely different car to the US version (you wouldn't recognise it as a Civic if you saw one and only know the US version). Even the low end current gen Civics in Europe have very sharp handling and are a lot of fun to drive. A European Civic with a big engine would be pretty awesome.
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You are making an assumption that a sociopath while willing to steal from clients, would not choose to go so far as to damage the company as a whole. That assumption in turn depends on 2 other assumptions
If Assumption 1 wasn't true he might decide to cut his loses, create some story about hackers stealing stuff and close the company while keeping the stuff he already has.
If assumption 2 was't true, he might damage the company past the point where the theft could be hidden. Sociopath only states that an individual feels no social or moral responsibility for his acts, it says nothing about their technical ability in any given field.
These comments are my personal opinions and do not necessarily reflect the opinions of the other voices in my head.
"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
I didn't say that there wasn't some diversion, but if he really did take and spend over $500 million, they would have been doing more than "suspecting".
And I was debunking your commentary by pointing out that all that paper was legally-binding contracts. The fact that some of it became worthless because the promisors became insolvent doesn't change the nature of the paper. Bitcoins do not have legal contracts behind them. So the difference there is quite fundamental.
Any guest worker system is indistinguishable from indentured servitude.
Actually since much of it was fraudulent in the first place, and based on the behavior of some who were involved they knew it, it was really more like fiat poker chips. It was perfectly obvious to anyone not willfully blind that it was all going to go bust at some point. They were playing so fast and loose that, in fact, in many cases the contracts were missing in action and nobody cared (at least until a judge came up with what was the apparently astonishing notion that you need to show you actually own a mortgage before you can foreclose).
It was bad policy, not fraud. If it were fraud it would be easy to prosecute. No one has been prosecuted because not only were there very few instances of laws being broken, but because most of the excessive lending was actually government-mandated (which is why otherwise-prudent people made so many imprudent decisions -- it's nearly impossible to oppose a government policy even if it is a bad policy). Regardless of "who started it" or why they did it, the papers which were traded did have legally-binding obligations behind them. They are all forms of contracts. And bitcoin is not. The whole foreclosure business had nothing to do with it. That was just rush to resolve the steaming pile of garbage after the collapse. It happened from trying to do things faster than they could be done in a responsible manner. I don't want relitigate the whole banking crisis. The frame of mind of the participants who traded the contracts is irrelevant. The fact that they traded legally-binding papers vs the lack of any kind of legally-binding support for the bitcoins remains a fact.
Any guest worker system is indistinguishable from indentured servitude.
None of those loans were government mandated. They knew damned well the papers weren't AAA and could never be AAA. You drank the cool aid.
Not to mention the robo-signing.
Not to mention the robo-signing.
Like I mentioned, this happened after the crises in a rush to resolve a huge foreclosure backlog. Yes, computer programs written in a hurry have bugs. Edge-cases get missed and not accounted for in checking for validity of ownership. This has nothing to do with what happened in the run-up to the crises.
None of those loans were government mandated. They knew damned well the papers weren't AAA and could never be AAA. You drank the cool aid.
Yes, I am also a witch. Because you know, if I agree with you, I am right, if I know of facts which make you wrong, I am a witch. Must be really easy to live such a world. HInt: you are hyped up on adrenaline and are not able to see reason. That's what causes the one-sided of mind and makes it enjoyable to hate. You just happened to have picked a target that is politically correct to hate. It's not because your decision is based on facts, it's because you enjoy it. But that is not enough to make it right.
They knew damned well the papers weren't AAA and could never be AAA
And "they" didn't assign the ratings. The ratings agencies happily assigned the ratings because it meant more revenues for them. The banks sold the paper. Were they happy to get it out the door at a higher price because the ratings agencies gave them AAA? Sure. Every salesman will happily charge higher price if they can. But you have to tell a lie before you can be guilty of fraud. Accurately reporting ratings assigned ratings agencies is not lying. Governments mandated use of rating agencies' ratings as a legal requirement for many pension funds. Did the banks commit fraud when the government made this requirement? Did the banks commit fraud when the ratings agencies inflated the ratings? Did the banks commit fraud when the pension funds had to, by law, use the ratings agencies' ratings instead of other qualified opinions? You wanna scream with the screamers because it makes you feel good? Don't accuse others of drinking the kool aid, then. I am really, really sick of people who are obviously visceral and who think that they have a right to claim being on the side of reason just because others have told them that they are.
As for this:
None of those loans were government mandated.
it's an outright lie. That's I am 100% certain that you say this even though you know it's not true. And that makes it a lie.
Not sure if you are trying to change the subject, but just in case you are, I'll reiterate the point. All financial papers sold by exchanges are legal contracts and, therefore, are backed by law. Bitcoin is not. Bitcoin is a gentlemens' agreement on a principle, which is not the same thing as a legally-binding contract.
Any guest worker system is indistinguishable from indentured servitude.
it's an outright lie.
I hereby challenge you find any statute or regulation that required talking a naive buyer into buying a McMansion they could never in a million years afford rather than an affordable starter home.
And in case you forgot, I was implying that the funny paper was indistinguishable from gambling on musical chairs.
I hereby challenge you find any statute or regulation that required talking a naive buyer into buying a McMansion they could never in a million years afford rather than an affordable starter home.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Legislative_changes_1989
Here's an excerpt:
"...According to Ben Bernanke, this law greatly increased the ability of advocacy groups, researchers, and other analysts to "perform more-sophisticated, quantitative analyses of banks' records", thereby influencing the lending policies of banks. Over time, community groups and nonprofit organizations established "more-formalized and more-productive partnerships with banks..."
Arbitrarily enforced regulations do tend to cause panics from inability to understand what is acceptable behavior. Panics tend to cause overreactions. Forcing banks to prioritize 3rd party relationships over creditworthiness is, in effect, forcing them to (on occasion) lend to those who would not be able to pay. No one said that all mortgages were bad. But I am sure you understand that increasing demand on the lower end of the price scale pushes up scarcity up the price scale and creates increased demand at all positions on the scale as well. Eventually this misalignment of priorities lead to this:
"...In a 2002 study exploring the relationship between the CRA and lending looked at as predatory, Kathleen C. Engel and Patricia A. McCoy noted that banks could receive CRA credit by lending or brokering loans in lower-income areas that would be considered a risk for ordinary lending practices...."
But it was already a panicked reaction on behalf of the banks to inability to operate within the narrow parameters of due diligence. They now had to consider other priorities. And due diligence did suffer as a result.
Any guest worker system is indistinguishable from indentured servitude.
And in case you forgot, I was implying that the funny paper was indistinguishable from gambling on musical chairs.
There are point of fact, and there are points of law. Consider a situation A: a car runs over a pedestrian because the pedestrian ran in front of it and the driver couldn't possibly stop. Now consider a situation B: a drunk driver runs over a pedestrian crossing on a green light. In fact, from the perspective of the pedestrian, they suffered the same fate. But from the point of view of the law, they didn't. Your argument amounts to saying that because two situations are similar in fact, they are identical. But they are not identical because even if they were similar in fact, they would still be different in law because exchanges trade legally-binding contracts and bitcoins are not legally binding.
Any guest worker system is indistinguishable from indentured servitude.
I see nothing there about requiring huge loans that can never be paid off. Not one single thing. Just a bit of "quit being racists" and "people may be watching" Certainly there was nothing mandating that they set the loans up to fail with built in time bombs (the balloon) and definitely nothing about claiming they were a AAA investment and getting rid of them like a hot potato.
Meanwhile, there were credible warnings that it was all going to blow up a couple years in advance. They were thoroughly ignored because to many banks were making money hand over fist.
No, I am arguing that getting hammered and then playing slalom with pedestrians is close enough to homicide that there is little point in drawing a distinction. The law agrees.
I see nothing there about requiring huge loans that can never be paid off.
Don't need to require it. It's enough to create a market place in which banks that don't do that can't stay competitive. Not everything government-created situation is do-or-die. It's not an order every time. If the government makes all banks in Column A play by one set of rules and all the banks in Column B play by a much more beneficial set of rules, it's not forcing the banks in column A into anything harsh. But bank in column B simply push banks in A out of the market place. And in that situation it is the result of the policy that all the banks (at least all the ones who stayed around to be in business) played by the "preferred" rules. So the policy 100% at fault. Even if on the surface of it, nothing was ever required. Of course, if you don't see that the policy was actually more coercive than that, you really just don't understand what you reading. The phrase "I see nothing there" is not a statement about what is there. It's a statement about you.
Any guest worker system is indistinguishable from indentured servitude.
No, I am arguing that getting hammered and then playing slalom with pedestrians is close enough to homicide that there is little point in drawing a distinction. The law agrees.
Right and that has nothing to do with it. The driving was not an analogy. It was an example that demonstrated clearly the distinction between points of fact and points of law. Financial instruments, even if one buys your drool about them, maybe similar to bitcoin in fact, but they are still different in law. You want to ignore the legal distinction, but you can't. It's just there. You can't ignore their being contracts which the courts can enforce as opposed to bitcoins which are not contracts which the courts can enforce. You can argue the similarity in fact until you are blue in the face, but the distinct element that bitcoin is not legally enforceable will remain. You may want to argue that it is irrelevant for all practical purposes, but that doesn't matter. For legal purposes that distinction remains. If you take anyone to court for a non-performance of a contract, you may lose, but you will not get a blank stare that you would if you tried it with bitcoin. Again, it doesn't matter if it's almost the same, in your opinion. It wouldn't matter if it were the same in fact (and not only in your fantasy). Because, in law, the distinction would still exist.
Any guest worker system is indistinguishable from indentured servitude.
Since my argument was one of practicality, what's your point? The courts enforced nothing so any legal distinction is moot.
Don't need to require it. It's enough to create a market place in which banks that don't do that can't stay competitive.
Since the market was there government or no, you don't get to blame the government. It was just banks foolishly grabbing for cash using the thinnest of excuses. A very few banks (like RBC) chose to behave like responsible adults, so they were never in trouble. The other banks could have done the same but they freely chose not to.
You failed completely to address the fact that the loans were structured such that foreclosure was nearly inevitable.
The phrase "I see nothing there" is a polite way to say "you are hallucinating or delusional, I'm not sure which".
Unfortunately, since Mt. Gox was not regulated as a financial institution under Japanese law
And to point out that bitcoin was entirely based on chance and provided no contractual obligation. Financial instruments do derive their value, at least in part (non-zero part unlike bitcoin), from legal contractual obligations. Thefore, treating of trading of bitcoins the same way that the financial instrument exchanges are treated would be less straight-forward than the summary implied.
Any guest worker system is indistinguishable from indentured servitude.
Since the market was there government or no, you don't get to blame the government.
Yes, you do when the government policy directly changes the market. The fact that the government used one form of influence over another form of influence speaks of their methods. But it doesn't absolve them of responsibility for their accomoplished results. Their followed a policy which created encouraged self-destructive behavior among banks. How do you let them have pass on that just because the banks were already there to begin with?
The phrase "I see nothing there" is a polite way to say "you are hallucinating or delusional, I'm not sure which".
No, it's not. It's a subtle way to pretend that you understand more than you really do by insinuating that familiarity without providing any evidence of it.
Any guest worker system is indistinguishable from indentured servitude.
The European Civic doesn't share a single body panel with the Japanese or US ones either (it wouldn't entirely surprise me if it shared not a single common part number). It's not just about the engine size, it's about what the car looks like and the design of the suspension. They aren't the same cars despite both being called "Civic".
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