Japanese Police Arrest Mount Gox CEO Mark Karpeles

McGruber writes with the news as carried (paywalled) by the Wall Street Journal that Mark Karpeles, who headed bitcoin exchange Mt. Gox, has been arrested by Japanese police: In February 2014, Mount Gox filed for bankruptcy, saying it had lost 750,000 of its customers' bitcoins as well as 100,000 of its own, worth some $500 million at the time. A police spokesman said Mr. Karpelès is suspected of manipulating his own account at the company by making it appear that $1 million was added to it. The BBC reports the arrest as well, and notes that the coins missing from Mt. Gox represent 7% of all Bitcoins in circulation.

Comments

Note to self

[fustakrakich]

Don't trust private currencies from hucksters such as these guys. Their business is based on pure FUD. Play it safe with the government of your choice, one that has its millions of citizens ready and willing to back it up.

Re:Note to self

[TWX]

The bitcoin attitude has amused me. Sure, I get that some people don't believe in, don't trust, or don't like their government and as such want to avoid using fiat currency issued by their government, but since the use of third-party intermediaries seems to have become the de-facto standard for using Bitcoin, one has all of the downsides of a fiat currency (ie, no natural value of its own) without any of the normal advantages associated with a government interested in the security of a currency or the ability of a government to correct issues associated with that currency. It's also possible to lose or destroy wealth simply through the loss of information due to the specific nature of Bitcoin, so wealth lost cannot be regained.

Re:Note to self

[murdocj]

It's so weird... I go to the bank, I get cash, I buy stuff. I use my credit card, I buy stuff. I send checks to pay bills. All with this worthless fiat currency that you rant about. Remind me, what's wrong here? The fact that what it can buy tomorrow may be different from what it can buy today? If you can point me to ANYTHING whose worth hasn't changed over time, I'd love to see it.

Re:Note to self

[Fire_Wraith]

People who rant about fiat currency tend to miss the point about what money is. Money isn't something of absolute inherent value, it's a representation of productive capacity, that lets people establish relative values of radically different commodities and services, as well as to easily store and transport that value. If I'm a farmer, I don't want to carry a sheaf of wheat around with me to pay for a drink if I get thirsty while I'm in town. Better to use money to represent that, which I can trade to the blacksmith or the carpenter or whomever for what I need, and they can use that same money to come buy wheat from me later.

Gold/silver/etc are certainly traditional forms of money, because they were easily recognizeable in the ancient world as such. The problem with using them as such today is that you can't tailor the supply of money to the amount of production going on. Why do you need to do this? Well, because having it off by too much is bad. Imagine a village where there's 1000 pounds of gold in use as money. Someone comes back from an expedition, having found another 1000 pounds - and causes an immediate 50% inflation because you have 2x the money representing the same amount of production. The reverse is true as well, if production increases by 5% each year, but the amount of gold stays the same - except this time you get deflation, where gold is worth more (so people tend to hoard it to spend later, not now, which in a modern economy is very very bad).

Re:Found?

[Anonymous Coward]

Who would leave $116m to be just found?
Given the mass incompetence of how Gox was run, that's the least surprising thing. They had paper wallets scattered around the city that that only Mark knew the password to.

The fishy part has always been that the theft occurred from offline, "cold storage" wallets, and that they rarely/never reconciled the money they had on hand with the debts they owed to customers. The latter is just business 101 for a business that holds other peoples assets. For MtGox that should match 100% as Gox was an exchange, not a bank, and didn't loan out money. Even for a bank the assets have to match the liabilities, and they have to reconcile the books. Gox didn't do that, which is criminally negligent.

Re:Found?

[lgw]

Given the mass incompetence of how Gox was run, that's the least surprising thing. They had paper wallets scattered around the city that that only Mark knew the password to.

So, you're telling me that Magic the Gathering Online Exchange stored its assets by printing them on paper cards? I never saw that coming. I hope they were at least kept in protective sleeves!

Re:Found?

[DanielRavenNest]

> The fishy part has always been that the theft occurred from offline, "cold storage" wallets,

According to a Reddit AMA today from a former Mt. Gox employee (he had kept silent until the arrest, because his testimony was part of the investigation), there were no cold storage wallets. It was total amateur hour on Karpeles' part: no proper security, no proper accounting, customer funds used for business and personal expenses, etc. The likely situation is the "missing" bitcoins never actually existed. Customer accounts were credited with fake coins to cover the fact that their funds were being used for other things. Eventually customer demands for cash or sending out their bitcoins elsewhere could not be met, and they declared bankruptcy.