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New Clues About Why Mt. Gox Failed (thedailybeast.com)

Posted by EditorDavid on from the missing-millions dept.

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."

4 of 50 comments (clear)

  1. illegal money laundering... obviously by Anonymous Coward · · Score: 3, Insightful

    Mt Gox was used for illegal money laundering. This whole topic is like asking, "Why did the mafia get arrested?" ... well, duh.

    1. Re:illegal money laundering... obviously by Anonymous Coward · · Score: 5, Insightful

      I understand that even paper money doesn't have any actual value beyond what we as society place on it

      People may intellectually realize this is the case, but they don't really believe it on an emotional level, which is why they're unable to accept there's no real difference between Bitcoin and the US dollar.

      That's like saying there's no real difference between my inept artistic endeavors and Da Vinci's Last Supper because they are all images painted on flat surfaces. The US dollar is backed by the world's largest market economy, a powerful government of a sovereign state and a sophisticated financial system capable of processing huge numbers of complex transactions a day (for example annual USD/EUR FX transactions are running at about $1,300 billion (gross) per day). Bitcoin is based on an arbitrary choice to follow one particular genesis block, can't do more than 3 tps due to inherent limitations, and is backed by people who keep writing extremely buggy software in PHP and Javascript and other people who make a living as drug dealers, rip-off merchants and ransomware shits. Pretending these are equivalent is not sensible.

  2. Not a Mountain by freeze128 · · Score: 4, Informative

    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.

  3. Re:It failed for the same reason it succeeded. by Anonymous Coward · · Score: 3, Insightful

    A lot of the history of BTC-related efforts read like people unaccustomed to financial regulation finding out - the hard way - why it exists. It turns out it's not all a con by the state.