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Sifting Mt. Gox's Logs Reveals Suspicious Trading Patterns
This analysis of trading logs from the Mt. Gox Bitcoin exchange analyzes a subset of the transactions that took place there prior to the exchange's collapse, and makes the case that two bots (the writer calls them "Willy," and "Markus") were making suspicious transactions which may have been used to intentionally manipulate the trading price, and which can explain the loss of Bitcoin inventory on which the exchange's failure was blamed.
The author of the analysis says "[T]here is more than plenty of evidence to suspect that what happened at Mt. Gox may have been an inside job. What I hope to achieve by releasing this analysis into the wild is for the public to learn the truth behind what happened at Mt. Gox, how it affected the Bitcoin price, and hopefully for the individuals responsible for the massive fraud that occurred at Mt. Gox to be put to justice. Although the evidence shown in this report is far from conclusive, it can hopefully spur a more rigorous investigation into Mt. Gox’s accounting data, both by the public (using the leaked data) and the authorities (forensic investigation on the actual data)."
First we hear how BitCoin rules because it side steps those evil governments and their rules and regulations. Now that people have lost money due to dishonest behavior (which was 100% predictable given the nature of BitCoin) people are howling for the "individuals responsible for the massive fraud that occurred at Mt. Gox to be put to justice".
HAHAHAHAHAHAHAHA
What buffoons. First its "The government is evil! We rule because we are outside their jurisdiction". Then when the completely obvious consequence of having an unregulated and anonymous system for monetary transactions happens its "Hey, what the ???? Someone has stolen our money! Quick! Call the police! Government, come save us!".
HAHAHAHAHAHAHAHAHA
A virtual Internet-based currency is subject to electronic flim-flammery? Color me shocked.
I want to delete my account but Slashdot doesn't allow it.
Many people have opined about the suspicious behavior of the bot known as "Karpeles" ... More recently, this bot has been very quiet.
If you want news from today, you have to come back tomorrow.
No matter what the price is, a correctly operated exchange should pair buyers with sellers, and only perform the transactions when the buyers offer more than the sellers demand (exchange gets the difference). That's what it means to be an exchange: you facilitate trades. Some price manipulation shouldn't hurt them: it's just more trades and thus more profit.
If you want to add some extra damping there and capture some profits from the changing prices, you can either screw with the profit margin size dynamically, or you can become a user of your own exchange (become an investor in multiple currencies, and shift between them on your own exchange). Investing like that is a separate thing, and if they mixed that up with the operating of the exchange part, then they really screwed up: if you botch separation on concerns, one screw up wrecks everything. Well, we know they really screwed up in lots of ways, and with no proper separation of concerns, they totally wrecked everything in lots of ways. No partial failure support + fail horribly at something = oops, no more company.
"Inside job," I said...
(Actually I said I thought it "probably" was.)
The less people will care. The less people will remember their lost money, and the less people will be able to do about it. I think we're close to that point where those who lost have accepted it and those who followed the story stopped, no lessons learned, look at all the thriving bitcoin exchanges & online wallets. Like school shootings, we're about over it til the next big one hits.
If only they would have made it simpler by either stealing a lot more, or a lot less.
Look where all this talking got us, baby.
It's not like they had better security than an actual bank and even then, banks are also subject to inside jobs often.
Bitcoin was doomed to fail from the get-go. No sane person would ever invest anything in it, yet we saw many insane people during the one year period where bitcoin reigned. Lock 'em all up I say.
Find Kevin Bacon.
What do Mt Gox and slashdot have in common? They accidentally the whole thing.
Well-done article. Read it top to bottom. Congrats.
Religous speak to God. Insane are spoken to by God. When all shut up, one can finally hear Shostakovich in peace
"[T]here is more than plenty of evidence to suspect that what happened at Mt. Gox may have been an inside job."
Or, in other words, evidence to suspect what pretty much everyone has suspected all along.
No matter what the price is, a correctly operated exchange should pair buyers with sellers ...
Virtual coin exchanges are typically online wallets as well, they store coins. So they are more like an exchange and an online brokerage combined.
BitCoin is not "money".
Even if true, bitcoin would still be a very useful payment system. It may not replace the US Dollar but it may very well replace PayPal.
By definition, BitCoin is money. Troll more elsewhere. "any article or substance used as a medium of exchange, measure of wealth, or means of payment, as checks on demand deposit or cowrie."
It currently fails as a stable measure of wealth (alternatively described as a store of value), its a bit too volatile. Although it is currently a good medium of exchange.
As evidence for the proceeding notice the growing popularity of exchange merchant services where merchants who accepts bitcoins as payments (from the customer's perspective) never in fact sees or "touches" a bitcoin. They specify a price to the echange in fiat, the exchange provides the equivalent price in bitcoins and provides a payment address. The bitcoin payment in fact goes to the exchange which immediately converts to fiat and credits/pays the merchant.
I think the US government is genuinely confused.
I think the US government doesn't care. Its the Japanese government that cares, Mt Gox is in Japan. :-)
I think the government would be more interested if it could ... regulate it ...
The US government does regulate it with respect to taxation. Mining is taxed. Increases in value are taxed. Although it is considered a asset not a currency. Google the IRS's virtual currency notice.
Face it, a government could "outlaw" it and effectively prevent its use among mainstream merchants. Relegate it to underground only use.
Great, now I have a website called WillyReport in my work computer's history.
Makes it sound like some male only HotOrNot!
"hopefully for the individuals responsible for the massive fraud that occurred at Mt. Gox to be put to justice"
Since bitcoin's only value is what some people put on it, and only hand full of governments even recognize it as legit currency, Stealing bitcoins amounts to nothing more then stealing someone gold in WoW, guildewars2, diablo3, etc.
LOL, MtGox greedy scumbags used margin trading & fractional reserve banking. Same scam is pulled every day but there are some rules, that keep this scam in a narrower corridor. Scammer Karpeles had no margin limits nor minimal equity requirements so he did what he wanted. :)
Fast margin trading, derivatives and fractional reserve banking are not your friends. Do you remember those hundreds of billions of dollars of taxpayers money, Obama and his team of banksters handed over to commercial privately held banks?
Really good analysis.
To make bitcoin secure, we need to think @ these problems before ahead.
I realized the whole purpose of Bitcoin the other day:
It is nothing more than a massive energy sink designed to burn as many CPU-watts as possible to drive up the cost and use of electricity.
The other shoe dropping is when an EMP occurs (natural or otherwise) destroying both the Bitcoins themselves, and also the infrastructure to drive the technology itself.
Prove me wrong
.... Do you remember those hundreds of billions of dollars of taxpayers money, Obama and his team of banksters handed over to commercial privately held banks?
Not quite. Not quite.
Personally, I recall the $700 billion dollar TARP program advocated by Henry Paulson and signed into law by George W. Bush. Can you provide us with links describing the Obama bailout program you refer to? (Don't worry, I'm not holding my breath).
I also recall Obama announcing that the banks had paid back their loans with interest, such that the government made a profit on TARP.
In summary, you are entitled to your own opinion, but not to your own facts!
--- Often in error; never in doubt!
Oh dear, better give up on that "correcting people" idea, huh?
transactions -- Not a verb, as used in GP
grammar -- yes with two As
nazis -- plural, not apostrophe
transactions which may have been used to intentionally manipulate the trading price
Isn't that exactly what trading is all about?
The difference between banks and MTGox is that while banks also use fraction reserve, the full liabilities are backed by assets in the form of loans they have handed out, and security on the assets of the borrowers such as property. At the time of the financial crisis, those assets and collateral were not sufficient to cover the fractional reserve liabilities, but at least they had something, unlike MTGox which had nothing to back the fractional reserve liabilities.
herpala derpala
don't worry, the GOP will definitely save you from the scary black socialist
You need to stop watching Fox News until you realize that they are full of shit most of the time.
And when you realize that, you will find that Fox News is this incredible piece of performance art.
I mean really, just about every woman on there is younger, with a push up bra and LOTS of cleavage, hooker heels, lots of makeup, and slit slutty dresses.
Their target demographic is: old, white, conservative, men. The same goes for talk radio. (I know this because I was in on a programming meeting at a station.)
So, they cater to the old whit conservative guy World view and tell them what they want to see and hear - regardless of the truth: that they are the only ones working hard and everyone else is sponging off of them and the World is filled with cheap slutty women with push-up bras.
Everyone else watching is just gravy.
I tell you, the programming people there think you and your kind are stupid. And the way they can manipulate you people just makes me think they are right.
Every time Hannity says that Talk Radio listeners are smarter than everyone else, I just have to wonder how he keeps from breaking into hysterical laughter.
Should we be surprised this fucked up with potheads at the wheel?
Obama effectively wrote checks for over $2 trillion in the bailout mess.
As if Democratic-flavored fuck-ups taste any better than Republican ones. It's practically funny watching two groups argue while both of them shove shit in their mouths purporting theirs tastes far better.
When we can start talking about how the next asshole-in-charge won't write even more checks instead of pointing fingers, then perhaps I'll start giving a shit as to who's name is on the signature line.
I thought Obama was supposed to be better than Bush. You are clearly equating the two, thus Obama is no better than Bush by your own post.
Just to be precise about the situation, Candidates McCain and Obama were invited to the meetings where TARP was agreed upon. They weren't directly responsible, but neither did either object.
sPh
There is no question that the financial structure of the United States, and mostly likely the world as a result, was in danger in the 2008 time frame. President Bush and Secretary Poulson took the responsible course of action, deflected those whose advice was to let it all burn on principle, put together a bailout plan, invited the presidential candidates to review it, and got it signed into law. IMHO the only competent thing that W did during his entire Presidency.
What President Obama can be held responsible for is not following up TARP with detailed investigations into violations of civil and criminal law, including prosecutions where appropriate. Particularly investigations into the utterly illegal shadow mortgage documentation "registry" that the financial industry apparently created around 2000. This was the first major financial crisis in the history of the United States that did not generate a strong investigatory response. There are undoubtedly reasons why that didn't happen, reasons noble, neutral, and craven, but the lack of _any_ investigation or prosecution is an utter failure of President Obama and his Administration.
sPh
Spot-on. Of course the major Western money center banks and financial institutions also had the backing of the full faith and credit of major, stable governments including both the maligned US Federal Reserve and ultimately the US Treasury. While bitcoin has the full faith and backing of... Satoshi I guess.
sPh
I wouldn't assume he would have fled someplace under a new name. There are a number of recent cases where people who should have fled did not. Bernie Madoff surprised me that he didn't run, the Silk Road founder still living in the states was also surprising. I guess it's part of the mentality of 'they'll never catch me'
CloudFlare had all the encryption keys and what not from MtGox, to be able to provide a distributed service. They are a man in the middle based in USA and will do what NSA and gov asks of them.
And Congress. Both the Senate and the House could have done their own hearings and upon finding wrong doing formally report it to the DoJ and/or SEC. demanding justice.
putting the 'B' in LGBTQ+
Just to be precise about the situation, Candidates McCain and Obama were invited to the meetings where TARP was agreed upon. They weren't directly responsible, but neither did either object.
A more accurate writeup.
Please proceed, Senator from Arizona.
sPh
(I was trying to be reasonably neutral - after all, the nation's financial stability was at risk)
How does fractional reserve work with Bitcoin? If they loan out some deposited coins, fair enough, but if the original owner draws on it they cryptographically need that exact coin, not some other random one.
Or do depositors hand over the coins to the exchange for a virtual account, destroying the signed-ownership benefit of Bitcoin and replacing it with trust in an institution?
You can't have fractional reserve banking without people trusting the bank. Bitcoins are like cash: good for transactions, possibly useful as a store of value or speculation, but you can't get interest in them without lending them to somebody you can trust.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
People deposited fiat money with MT Gox in exchange for Bitcoins, however MT Gox did not have enough Bitcoins in stock to give them out to all the people that bought them, so the Bitcoin denominated account balances at MT Gox were liabilities with limited assets to back them. They relied on the fact that most people would not withdraw their Bitcoins, therefore it was a fractional reserve system.