Feeds

MtGox has VANISHED. So where have all the Bitcoins gone?

Rumours swirl of buyout, 750,000 AWOL BTC...

Securing Web Applications Made Simple and Scalable

Almost one in 10 of the world's Bitcoins disappeared during the collapse of MtGox, it has been claimed.

The allegations were made in what was purported to be an "internal MtGox crisis presentation". The sloppily written briefing claimed that 744,408 Bitcoin were stolen over a period of several years. There are currently about 12,500,000 Bitcoins in existence.

However, CEO Mark Karpeles seemed upbeat when he told Reuters just before the publication of this story:

We should have an official announcement ready soon-ish. We are currently at a turning point for the business. I can't tell much more for now as this also involves other parties.

Protesters have gathered outside the offices of MtGox in Tokyo and the home of its CEO, Mark Karpeles, who quit the board of the Bitcoin Foundation late yesterday.

In the absence of any facts, wild rumours began to circulate, including links to the unverified document circulating on the internet suggesting the troubled Bitcoin exchange had collapsed due to a "theft which went unnoticed for several years".

Just minutes later, the announcement appeared on the website:

Dear MtGox Customers, In the event of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

It did not comment on the deletion of its Twitter account nor did it respond to allegations that surfaced relating to the supposed "internal document".

The halt to trading was officially blamed on a “transaction malleability” bug, which MtGox previously said was the reason it stopped Bitcoin transactions earlier this month.

Last week, MtGox said it did have a fix ready, but said that testing and implementing it would take time. No firm date was given for when Bitcoin withdrawals would resume.

Since then, the website was wiped clean (prior to the recent appearance of the statement) and the company's Twitter account also appeared to have been cleared.

Crisis strategy?

Ever since Bitcoin advocate Ryan Selkis published the document, a debate has raged about whether it is real or not. Selkis insisted he had verified the document with several insiders at MtGox.

"This is catastrophic, and I am sorry to share this," Selkis wrote. "I do believe that this is one of the existential threats to bitcoin that many have feared and have personally sold all of my bitcoin holdings through Coinbase."

The document he leaked was written in poor English, leading many people in the Bitcoin community to question its veracity. It featured redacted figures which can easily be seen by downloading the file and opening it.

These optimistic numbers predicted that MtGox's net income was set to skyrocket in the coming years, from $286k in 2012/2013 to $39m in 2015/2016.

"Regardless of malleability and regulatory issues, MtGox's main problems are massive robbery and poor Bitcoin accounting," the document alleged. "However, the business as an exchange is highly profitable and healthy when run properly."

This claim was apparently contradicted elsewhere in the document.

"The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company," the briefing continued. "However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public."

Many observers believe the document is fake. On Reddit, one forum member said: "This person is citing a supposed 'leaked document' that looks like it was written by a six year old running a lemonade stand. New[s] sources have quote it without valid reason too [sic]. It's nonsense."

Bitcoin community rallies around ... hang on

Digital wallet Coinbase, rival exchanges Bitstamp.net and China BTC as well as other players in the Bitcoin community released a joint statement, cryptically referring to a "tragic violation of trust" performed by "bad actors" whom they did not name.

This tragic violation of the trust of users of Mt.Gox was the result of one company’s actions and does not reflect the resilience or value of bitcoin and the digital currency industry. There are hundreds of trustworthy and responsible companies involved in bitcoin. These companies will continue to build the future of money by making bitcoin more secure and easy to use for consumers and merchants. As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. Mtgox has confirmed its issues in private discussions with other members of the bitcoin community

Buyout?

Some people have suggested that MtGox is set to be sold to an undisclosed buyer, a theory supported by the source code of its homepage on Tuesday morning:

Mt Gox homepage source

"put announce for mtgox acq here"

This would appear to be borne out by the recent statement from Karpeles, with his statement to Reuters mentioning that "this also involves other parties".

Reddit detectives found a record on the blockchain showing a series of transactions stretching back several years, which amounted to a total of more than 750,000 Bitcoins.

Although this looks suspicious, there is no way of telling whether this is actually MtGox's Bitcoin wallet.

"This is the beauty of the beauty of Bitcoin," wrote another Reddit user. "It could be anything or anyone. There's no real way to know. It's totally public and open, yet still pretty anonymous."

Other observers speculated the collapse was a "social engineering" stunt, designed to send the price of Bitcoin tumbling. Whoever devised this plan would then snap up the cheaper funny money and sell it off again when the price buoyed upwards.

From the language of the CEO's statement, we gather the real story is not quite so dramatic. We'll update when we know more. ®

Build a business case: developing custom apps

More from The Register

next story
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
Airbus promises Wi-Fi – yay – and 3D movies (meh) in new A330
If the person in front reclines their seat, this could get interesting
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
UK Parliament rubber-stamps EMERGENCY data grab 'n' keep bill
Just 49 MPs oppose Drip's rushed timetable
Want to beat Verizon's slow Netflix? Get a VPN
Exec finds stream speed climbs when smuggled out
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Mobile application security vulnerability report
The alarming realities regarding the sheer number of applications vulnerable to attack, and the most common and easily addressable vulnerability errors.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.