Due to inherent problems
within the exchange mechanism used to trade the Bitcoin crypto-currency, the
Mt. Gox exchange has closed up shop and filed for bankruptcy. Some
$473,000,000 worth of BTC has simply vanished in what could be one of the
largest digital heists in history. Investigators in Japan are inquiring into
the unregulated exchange and the U.S. Federal government is also looking into
it, but because of the nature of Bitcoin itself the money is, for all intents
and purposes, gone. The operator of the exchange Mark Karpelès, who may
or may not be involved in the disappearance of user funds
has apologized for “causing trouble.”
If you don’t hold it in
your hand, there is always the possibility of counter party risk, as is
clearly the case with the Mt. Gox Bitcoin debacle.
Thus, we urge readers to
take steps to, at the very least, diversify their personal portfolios
into some form of physical goods, be it food, gold, productive real estate or
other assets that will maintain some semblance of value in the midst of a
crisis, lest you end up facing this:
(Watch at Youtube)
The following report
surrounding the collapse of Mt. Gox originally appeared at Zero Hedge
For a case study of a
blistering rise and an absolutely epic fall of an exchange that i) was named after Magic: the Gathering and ii)
transacted in a digital currency which many have speculated was conceived by
the NSA nearly
two decades ago and was used as a honeypot to trap the gullible, look no
further than Mt.Gox which after halting withdrawals
for the second (and final time) has finally done the honorable thing, and
filed for bankruptcy. As the WSJ reports, “Bitcoin exchange Mt. Gox said
Friday it was filing for bankruptcy protection after losing almost 750,000 of
its customers’ bitcoins, marking the collapse of a marketplace that once
dominated trading in the virtual currency. The company said it also lost
around 100,000 of its own bitcoins. Together, the lost bitcoins would be
worth approximately $473 million at market prices charted by the CoinDesk
bitcoin index, although the price of Mt. Gox bitcoin had fallen well below
that index after it stopped bitcoin withdrawals in early February.”
The punchline: speaking
to reporters at Tokyo District Court Friday after the bankruptcy filing, Mt.
Gox owner Mark Karpelès said technical issues had opened the way for
fraudulent withdrawals, and he apologized to customers.
“There was some
weakness in the system, and the bitcoins have disappeared. I apologize for
causing trouble”
So $473 million Bitcoins
disappear just like that? But you heard the man – he is sorry. So all is well
– and why not: it works for the TBTF banks every day.
What is amazing is that
at the time of filing Mt. Gox had outstanding debt of about ¥6.5 billion
($63.6 million), and just as amazing is that it actually had assets worth
¥3.84 billion.
Elsewhere, prices on the
CoinDesk index, which tracks the Bitstamp and BTC-e bitcoin exchanges, fell
slightly after the announcement but appeared to stave off a larger drop.
Mr. Karpelès, wearing a
gray suit and a blue tie, appeared calm while his lawyer did most of the
talking, but he appeared to have difficulty finding words when reporters
asked him to send a message to his investors, just repeating his apology.
Computer geeks who were
hoping to ride the momentum train to riches, and apparently had never heard
of gold, were unhappy:
“It is disappointing they
hid so much for so long,” said Jonathan Waller, a 30-year-old game developer
who said he had had 211 bitcoin in Mt. Gox. “I hope they manage to become a
fully-functioning exchange again, but their reputation is so damaged it may
not be possible,” he said.
Over the past month,
customers from as far away as the U.K. and Australia had come to air their
complaints outside the company’s Tokyo offices. One of them, Londoner Kolin
Burges, figured in news photos around the world holding a sign saying, “MT
GOX—WHERE IS OUR MONEY.”
William Banks, a website
developer in Australia, said he lost about 100 bitcoins in Mt. Gox. He had
been using the platform since the end of 2012, when he bought some bitcoins
at $40 each. Recently, he bought more at about $800 a pop as he became more
confident in the virtual currency. He said he has contacted a Japan-based
lawyer to look into legal action.
About Mt. Gox’s loss of
bitcoins, he said, “That seems impossible to me. It’s just such an
astronomical amount of coins to lose.”
Only when redenominated
in USD. Remember: BTC is its own currency so why fret? As for the collapse of
this latest Ponzi scheme: if things appear too good to be true (wink wink
S&P 500), they usually are.
This report
originally appeared at Zero Hedge
