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New Clues About Why Mt. Gox Failed (thedailybeast.com)
An anonymous reader writes: The Daily Beast is investigating internal emails, contracts, and new information provided by a former accounting employee at Mt. Gox for clues about how and why the world's largest bitcoin exchange failed in 2014. They conclude that CEO Mark Karpeles "bought a company already missing tens of thousands of bitcoins" in 2011, leading to an email exchange a few months later where the previous owner suggested ways to make up the $800,000 shortfall. Unfortunately, Karpeles "had signed a non-disclosure agreement that left him unable to discuss the loss," and after a second larger hack, he moved the majority of bitcoins offline into "cold storage," leaving only enough online to complete transactions.
According to the article, former Mt. Gox employees "claim rogue U.S. government agents seized $5 million of Mt. Gox funds in summer 2013 in retaliation for Karpeles's refusal to cooperate with them. This seizure supposedly cut into the firm's operating reserves, which may have been the beginning of the end, at least according to the former Mt. Gox accountant."
While $450 million eventually disappeared, Thursday ZDNet reported that a class-action lawsuit brought against the bitcoin exchange by investors "has been dismissed."
According to the article, former Mt. Gox employees "claim rogue U.S. government agents seized $5 million of Mt. Gox funds in summer 2013 in retaliation for Karpeles's refusal to cooperate with them. This seizure supposedly cut into the firm's operating reserves, which may have been the beginning of the end, at least according to the former Mt. Gox accountant."
While $450 million eventually disappeared, Thursday ZDNet reported that a class-action lawsuit brought against the bitcoin exchange by investors "has been dismissed."
Mt Gox was used for illegal money laundering. This whole topic is like asking, "Why did the mafia get arrested?" ... well, duh.
Who else thought "NID" from the Stargate universe???
"I don't know, therefore Aliens" Wafflebox1
It's Magic the Gathering Online eXchange
Calling it "Mt. Gox" instead removes a very major clue as to why it failed. For some reason a hobby card swapping site turned out to be less than ideal for exchanging bitcoins with currency - who would have thought?
Bitcoin like anything else is spectrum. Over at one end of the spectrum there are people linked with criminal activity that want privacy in regards to currency because their transactions are illegal and governments would use the transactions themselves as a means of identifying criminal activity.
Over at the other end of the spectrum are economic experts who see it as a liberating exchange medium unencumbered by bureaucracy, unfettered by government interference.
Also it's better than cartels like Paypal.
The dangers of knowledge trigger emotional distress in human beings.
There's no way this would have been an enforceable contract. There can't be a "meeting of the minds" when one party is withholding the fact that nearly a million dollars is missing from the company.
IANAL but NDA's do not cover criminal activity and can't compel you to be complicit in covering up a criminal activity (and lying to customers about the state of their assets is a crime). You also can't indemnify someone against illegal activity they committed (from The Daily Beast article). This article almost feels like it placed by Karpeles lawyers because it doesn't even try to question any of these claims. There has to be something else going on here... If you buy a company and find out a substantial chunk of their stated assets are missing you sue the crap out of the original owners, you don't meekly shrug your shoulders and try to hide it. Either that or Karpeles is just a complete idiot (which may well be the case).
Doesn't matter if it's got a wonderfully elegant underlying structure, it's still a FUNGIBLE, TRADEABLE RESOURCE, with a set of mechanisms controlled by PEOPLE.
If a company town somewhere offered the perfect elegant scrip system, where demand is balanced against resources to ensure complete fairness in the system... if people are in control of it, they're going to find some way to exploit their position over others with that system.
Even though it was getting popular, it's still a niche currency, and it was going through a mania stage, like tulips did 300 years ago. It's very instability is an important key to reaching adoption, but also why it would be very difficult to reach large scale in its current form.
The problem is that it's a cryptocurrency - and like town scrips, anyone can invent one. And people are motivated to create them, in order to live at the vortex of managing a currency. But you can't stabilize a monetary system like that, since they're both cryptic and competing.
Even if a government were to create one, its very cryptic nature would make it feel very much like a 'McBuck', a secretly controlled game that feels fed by advertising as much as any real features. All currency is a form of shared manipulation, but cryptocurrencies are a different kind of artifice, in the same way computerized voting is flawed compared to paper voting.
Ryan Fenton
Wow, you have the lowest UID I've seen in a long time.
Mt Gox failed because bitcoins are a stupid idea and the people who have been pushing them have a childish view of money and finance.
You are welcome on my lawn.
It's MTGOX, not Mt. Gox.
The website was originally named because it was a trading site for "Magic the Gathering" cards. It's an acronym for "Magic The Gathering Online Exchange". It's not a mountain named Gox.
I'm sure of it.
It was an anti-establishment un-regulated bank for a rogue currency. That was a huge draw with a certain segment of society.
But it turns out that there are good reasons for bank regulations.
They eventually re-discover which parts of the establishment were actually pretty important.