Mt. Gox gets fleeced and closes its door due to a $350M 5-finger discount…
Virtual currencies are very fragile. Well, I shouldn’t say fragile. I should really say, volatile. The currency fluctuates so violently its hard to determine what its value will be from one day to the next. The one thing that’s brought the fledgling currency the most stability has been the largest bitcoin exchange in the world – Mt. Gox. Unfortunately, Mt. Gox is no more.
Bitcoin’s run may be at an end.
Mt. Gox, apparently now insolvent, lost 744,408 bitcoins worth about $350M at the time of the initial report, which was Monday 2014-02-24. Mt. Gox, like any other commodity exchange, can go belly-up at any moment. Its simply the nature of commodity trading. Markets can tip bearish or bullish on a whim, and its not easy to figure out which way the wind is blowing. However, this wasn’t the result of a glut in trading or from any other trading action. Mt. Gox was hacked, plain and simple.
Described as the worst run business in history, Gox initially got itself in trouble with US authorities I 2013. They seized $5M in US-based assets as a result of Gox’s failure to obtain the necessary money transferring permits. Since then, the news has been rife with reports of customers waiting months and months to withdrawal bitcoins as US dollars. Early in February 2014. Mt. Gox suspended all withdrawals, indicating a bitcoin wallet bug as the culprit.
Instead, it appears that the exchange has been the victim of a two year long hack where both its hot (online) and cold (off line) wallets have been emptied. How does an organization that deals in money transfers and in the trading of any kind of commodity NOT know if its having its coffers fleeced?!
What’s worse is that Charlie Shrem, the CEO of U.S. bitcoin exchange Bitinstant, was arrested on money laundering charges. Both Shrem and Gox CEO Mark Karpeles sat on the board of the Bitcoin Foundation, a lobbying agency and software development organization for bitcoin. Both men have stepped down from their seats. Unfortunately, with Gox’s closure and the scandal at Bitinstant, its unclear if this digital commodity will be able to recover.
According to the Mt. Gox website, the organization states that Karpeles is still in Japan and is working hard to resolve the issue. They ask that no one asks the Mt. Gox staff any questions, as they aren’t authorized to speak for the organization. You can also read the original message which explains that the organization has shuttered its doors. The site instructs users and those interested to check back periodically to insure that they have the latest information, which will be posted on that page.