MtGox.com
February 26th 2014
Dear MtGox Customers,
As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.
Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.
Sincerely,
Mark Karpeles
$500 mn Bitcoin loss prompts
MtGox to seek court protection
MtGox accepted new customers JUST DAYS before collapse
Sincerely,
Mark Karpeles
$500 mn Bitcoin loss prompts
MtGox to seek court protection
Tokyo
(AFP) - The troubled MtGox Bitcoin exchange filed for bankruptcy protection in
Japan Friday, with its chief executive saying it had lost nearly half a billion
dollars worth of the digital currency in a possible theft.
Mark
Karpeles, who has not been seen in public for several days, re-emerged to tell
a press conference that his firm's digital vaults had been almost completely
emptied.
"We
have lost Bitcoins due to weaknesses in the system," French-born Karpeles
said in Japanese.
"We
are really sorry for causing trouble to all the people concerned," he
said, before bowing deeply.
The
company's lawyer said 750,000 Bitcoins belonging to customers had gone, along
with MtGox's own store of the currency, which she said was around 100,000
units.
That
number of Bitcoins would be worth around $477 million dollars, calculated
against the price on the Coindesk exchange at 1030 GMT.
Karpeles
said MtGox had liabilities of 6.5 billion yen ($64 million) and that around a
million users had been affected when hackers broke into the exchange in early
February.
The
global virtual currency community was shaken this week by the shuttering of
MtGox, which had frozen withdrawals earlier this month because of what the firm
said was a bug in the software underpinning Bitcoin that allowed hackers to
pilfer them.
Supporters
rallied round, insisting that the Bitcoin itself is sound and the problems lay
with MtGox, which they said was badly-managed and unable to cope with the
burgeoning popularity of the young currency.
Kolin
Burges, an investor who has kept vigil outside the Tokyo offices of MtGox for
several weeks, said on Twitter on Friday that he would be packing up.
"Karpeles
in Tokyo says MtGox is bankrupt. 750,000 customer bitcoins stolen & 120,000
company bitcoins stolen. None left " he tweeted.
He
later added: "Packed up for the last time and did leaving interview with
Asahi TV. It's been a wild ride!"
The
admission that such a huge amount of the crypto-currency has disappeared could
add to calls for regulation of an industry that has taken regulators and
bankers by surprise.
-
'No authority' -
Japan's
finance minister said earlier Friday he had always thought Bitcoin was suspect
and said the country might take action following the MtGox debacle.
Taro
Aso's comments came as Vietnam said it was banning banks from using the unit
and after chief US central banker Janet Yellen said the Federal Reserve had no
powers to control it.
Aso,
who also serves as deputy prime minister, said he had foreseen difficulties for
the crypto-currency, which is generated by complex chains of interaction among
a huge network of computers around the planet.
"I
was thinking that this sort of thing won't last long," said Aso, 73. "I was thinking it would collapse
sometime."
"Japan
is overwhelmingly advanced in this field. In this sense, I was thinking since
before that we might face a situation where Japan has to act, but I'd say it
came earlier than I thought."
His
comments come after Yellen told a Senate hearing that banks under the Fed's
regulatory purview were not involved with Bitcoin, and so it had no powers in
the matter.
"This
is a payment innovation that is taking place entirely outside of the banking
industry," she said.
"The
Fed doesn't have authority with respect to Bitcoin."
Yellen
pointed to other US regulators, including the Treasury, watching the Bitcoin
sector for potential money laundering and other criminal uses of the digital
currency.
However,
she stressed, "it's not so easy to regulate Bitcoin" because it is
used outside the banking system, and has no centralised authority behind, as do
regular fiat currencies.
Vietnam
banned its banks from handling Bitcoin, with the State Bank of Vietnam
cautioning: "The ownership, trading and use of Bitcoin and other virtual
money as an asset carries potential risks for users."
Source: http://news.yahoo.com/mtgox-bitcoin-exchange-files-bankruptcy-protection-095204460.html
MtGox and Bitcoin: where has £251m gone?
The world’s largest bitcoin exchange has suspended trading amid rumours of the theft of 744,000 BTC - worth around £251m. Did thousands of users just lose their investments and, if so, where has the money gone?
The world’s largest bitcoin exchange has suspended trading as rumours suggest that 744,000 BTC - six per cent of all the coins in circulation, worth around £251m - have been stolen. Did thousands of users just lose their investments and, if so, where has the money gone?
It’s often reported, with a derisive tone, that MtGox started life as a trading website for a card game called ”Magic: The Gathering” and was then bought by current chief executive Mark Karpeles and modified into a bitcoin exchange. But there’s little to back this version of events up.
The few records that exist of the history of the www.mtgox.com domainshow no evidence of a functional trading website, and there have been long periods when nothing was hosted there at all. What is certain is that in February 2011 the website as we know it today sprang up, offering a way to buy and sell bitcoins, and that it soon became the largest exchange in the world as it piggybacked the enormous bitcoin bubble of recent years.
What has now happened to the site is hard to say. In November last year people were having problems withdrawing cash, sometimes encountering delays of several weeks. Then, on February 7, the site officially stopped all withdrawals and claimed that it needed time to “obtain a clear technical view of the currency processes”.
Many people at the time had large amounts of money in MtGox. Although bitcoins, like cash, can be stored outside of any institution, lots of users had bought coins through the service and left them in its safekeeping. Others had reserves at the exchanges as they were trading on bitcoin’s volatility.
The world’s largest bitcoin exchange has suspended trading as rumours suggest that 744,000 BTC - six per cent of all the coins in circulation, worth around £251m - have been stolen. Did thousands of users just lose their investments and, if so, where has the money gone?
It’s often reported, with a derisive tone, that MtGox started life as a trading website for a card game called ”Magic: The Gathering” and was then bought by current chief executive Mark Karpeles and modified into a bitcoin exchange. But there’s little to back this version of events up.
The few records that exist of the history of the www.mtgox.com domainshow no evidence of a functional trading website, and there have been long periods when nothing was hosted there at all. What is certain is that in February 2011 the website as we know it today sprang up, offering a way to buy and sell bitcoins, and that it soon became the largest exchange in the world as it piggybacked the enormous bitcoin bubble of recent years.
What has now happened to the site is hard to say. In November last year people were having problems withdrawing cash, sometimes encountering delays of several weeks. Then, on February 7, the site officially stopped all withdrawals and claimed that it needed time to “obtain a clear technical view of the currency processes”.
Many people at the time had large amounts of money in MtGox. Although bitcoins, like cash, can be stored outside of any institution, lots of users had bought coins through the service and left them in its safekeeping. Others had reserves at the exchanges as they were trading on bitcoin’s volatility.
On February 10 it issued a statement claiming that it had a problem with “transaction malleability” - in essence, somebody could withdraw cash and then alter the ID of the transaction to make it appear that it had never occurred, then request it again. It called this a “bug in the bitcoin software” but bitcoin’s developer community pointed out that the issue had been known about for some time already, and that it was less a bug and more something which needed to be taken into account by developers when creating an exchange service. Other exchanges popped up to say that they were unaffected.
With information and withdrawals both unforthcoming, bitcoins held by MtGox were being bought and sold on a secondary market for less than 20 per cent of the going price. Optimism was not high that the site could resolve its issues.
Yesterday the exchange suddenly stopped all trading and Karpeles told Reuters that the company was at a “turning point”.
A document circulating online purporting to be from MtGox suggested that 744,000 bitcoins had been stolen using the “transaction malleability” flaw, but there has been no confirmation from the exchange - owned and operated by Tokyo-based Tibanne - over its authenticity. This afternoon nobody was answering the phone at the company.
If true, this would mean that someone, somewhere, has stolen six per cent of the 12.4 million bitcoins currently in circulation worldwide.
The MtGox Twitter account has been emptied of all tweets and the website has been pulled down and replaced with a statement saying that it has been suspended “to protect the site and our users”.
A statement from Karpeles says: “As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.
“Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information.”
Karpeles has also stepped down from the board of the Bitcoin Foundation, which oversees development of the currency’s infrastructure.
What happens now is unclear. The Wall Street Journal is reporting today that the exchange has been subpoenaed by the US Attorney’s office in New York. Meanwhile, online forums are rife with conversation and rumour about what has happened to the funds. Because all bitcoin transactions are public there is a vast amount of scrutiny - especially from those whose funds are at risk - watching for large movements of money that could shed light on the whereabouts of investors’ money.
Some are already resigned to their losses. One Reddit user calledfountainmass wrote that he had lost over 10.5BTC: “Like many, I had repeatedly tried to get my coins out, even before the issues were ‘official’.
“Support requests seemed to fall on deaf ears. All I could do was try, and try again. In the end, all I really had left was hope - the sort of hope that bloody-minded people have when they refuse to believe the reality of the situation. Now, the only hope I have is naive and childish.”
Marc Warne, founder of UK-based bitcoin sales site Bittylicious, said that buyers have been preparing for bad news since withdrawals were initially stopped.
“MtGox has been somewhat irrelevant for a few months now. Fiat withdrawals have been suspended or at least delayed by weeks for a very long time, which instantly puts into question whether MtGox could be classified as a full exchange. Its volume seems to mostly be down to automated trading bots fighting it out.
“It is unfortunate that many people had left money, both Bitcoins and fiat, on MtGox and I believe this is largely down to convenience and inertia. A lot of the money left there was possibly ‘old money’ which had been there for a while as most traders left MtGox for other platforms a long time ago.”
One thing is certain, MtGox is just one exchange: if it fails, although people will have lost money, bitcoin will continue. In fact, it would be almost impossible to stop bitcoin, even if there was a concerted effort, as it is a peer-to-peer network with no central control.
Whether or not there is any hope of investors getting their money back, given the unregulated nature of crypto-currencies, that’s one of the dangers of being a guinea pig in one of the largest economic experiments ever conducted.
source: http://www.telegraph.co.uk/technology/news/10662749/MtGox-and-Bitcoin-where-has-251m-gone.html
On February 10 it issued a statement claiming that it had a problem with “transaction malleability” - in essence, somebody could withdraw cash and then alter the ID of the transaction to make it appear that it had never occurred, then request it again. It called this a “bug in the bitcoin software” but bitcoin’s developer community pointed out that the issue had been known about for some time already, and that it was less a bug and more something which needed to be taken into account by developers when creating an exchange service. Other exchanges popped up to say that they were unaffected.
With information and withdrawals both unforthcoming, bitcoins held by MtGox were being bought and sold on a secondary market for less than 20 per cent of the going price. Optimism was not high that the site could resolve its issues.
Yesterday the exchange suddenly stopped all trading and Karpeles told Reuters that the company was at a “turning point”.
A document circulating online purporting to be from MtGox suggested that 744,000 bitcoins had been stolen using the “transaction malleability” flaw, but there has been no confirmation from the exchange - owned and operated by Tokyo-based Tibanne - over its authenticity. This afternoon nobody was answering the phone at the company.
If true, this would mean that someone, somewhere, has stolen six per cent of the 12.4 million bitcoins currently in circulation worldwide.
The MtGox Twitter account has been emptied of all tweets and the website has been pulled down and replaced with a statement saying that it has been suspended “to protect the site and our users”.
A statement from Karpeles says: “As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.
“Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information.”
Karpeles has also stepped down from the board of the Bitcoin Foundation, which oversees development of the currency’s infrastructure.
What happens now is unclear. The Wall Street Journal is reporting today that the exchange has been subpoenaed by the US Attorney’s office in New York. Meanwhile, online forums are rife with conversation and rumour about what has happened to the funds. Because all bitcoin transactions are public there is a vast amount of scrutiny - especially from those whose funds are at risk - watching for large movements of money that could shed light on the whereabouts of investors’ money.
Some are already resigned to their losses. One Reddit user calledfountainmass wrote that he had lost over 10.5BTC: “Like many, I had repeatedly tried to get my coins out, even before the issues were ‘official’.
“Support requests seemed to fall on deaf ears. All I could do was try, and try again. In the end, all I really had left was hope - the sort of hope that bloody-minded people have when they refuse to believe the reality of the situation. Now, the only hope I have is naive and childish.”
Marc Warne, founder of UK-based bitcoin sales site Bittylicious, said that buyers have been preparing for bad news since withdrawals were initially stopped.
“MtGox has been somewhat irrelevant for a few months now. Fiat withdrawals have been suspended or at least delayed by weeks for a very long time, which instantly puts into question whether MtGox could be classified as a full exchange. Its volume seems to mostly be down to automated trading bots fighting it out.
“It is unfortunate that many people had left money, both Bitcoins and fiat, on MtGox and I believe this is largely down to convenience and inertia. A lot of the money left there was possibly ‘old money’ which had been there for a while as most traders left MtGox for other platforms a long time ago.”
One thing is certain, MtGox is just one exchange: if it fails, although people will have lost money, bitcoin will continue. In fact, it would be almost impossible to stop bitcoin, even if there was a concerted effort, as it is a peer-to-peer network with no central control.
Whether or not there is any hope of investors getting their money back, given the unregulated nature of crypto-currencies, that’s one of the dangers of being a guinea pig in one of the largest economic experiments ever conducted.
source: http://www.telegraph.co.uk/technology/news/10662749/MtGox-and-Bitcoin-where-has-251m-gone.html
REFILE-Japan authorities looking into closure of Mt. Gox bitcoin exchange
(Corrects to state Kuroda was referring to the central bank's interest not bitcoin)
Feb 26 (Reuters) - Japanese authorities are looking into the abrupt closure of Mt. Gox, the top government spokesman said on Wednesday in Tokyo's first official reaction to the turmoil at what was the world's biggest exchange for bitcoin virtual currency.
"At this stage the relevant financial authorities, the police, the Finance Ministry and others are gathering information on the case," Chief Cabinet Secretary Yoshihide Suga told a regular news conference when asked about Tuesday's shutdown of the Tokyo-based exchange.
Speaking shortly after The Wall Street Journal reported that Mt. Gox had received a subpoena from federal prosecutors in New York, Suga declined further comment.
Japan's Financial Services Agency and Finance Ministry told Reuters on Tuesday that they do not have jurisdiction over Mt. Gox after the exchange's website went down and efforts to reach company officials failed. The Bank of Japan said it had nothing to add to a comment by Governor Haruhiko Kuroda that the central bank was "very interested" in bitcoin.
Mt. Gox later posted a statement on its site saying it had halted "all transactions for the time being in order to protect the site and our users."
Mt. Gox CEO Mark Karpeles told Reuters in an email: "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." He did not elaborate on the details or give his location. (Reporting by Kazuhiko Tamaki; Writing by William Mallard; Editing by Dominic Lau)
Source: http://in.reuters.com/article/2014/02/26/bitcoin-mtgox-japan-idINT9N0LP00020140226
25 February 2014 Last
updated at 16:15
Source:
http://www.bbc.co.uk/news/technology-26333661
Top Bitcoin exchange MtGox goes offline
The exchange has been hit by technical issues and
recently halted all customer withdrawals of the digital currency after it
spotted what it called "unusual activity".
The move is a setback for backers of Bitcoin, who have
been pushing for greater adoption of the currency.
Meanwhile, six other major Bitcoin exchanges issued a
joint statement distancing themselves from MtGox.
The move by MtGox to halt withdrawals had resulted in
a sharp decline in the value of Bitcoin.
A statement was posted on the MtGox website on Tuesday
afternoon.
"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 said.
The closure of the site did not "reflect the
resilience or value of Bitcoin", said a statement from representatives of
several other Bitcoin exchanges, including Coinbase and BTC China.
"This tragic violation of the trust of users of
MtGox was the result of one company's actions.
"As with any new industry, there are certain bad
actors that need to be weeded out, and that is what we are seeing today.
"We are confident, however, that strong Bitcoin
companies, led by highly competent teams and backed by credible investors, will
continue to thrive, and to fulfil the promise that Bitcoin offers as the future
of payment in the internet age," they added.
Lost Bitcoins?
MtGox halted transfers of the digital currency to
external addresses on 7 February.
The Tokyo-based firm said it had found a loophole that
thieves could use to fool the transaction process into sending double the
correct number of Bitcoins.
The issue also left it vulnerable to attacks, which
slowed down the rate at which coins could be bought and sold.
The loophole was also thought to have been exploited
by thieves, who stole about $2.7m in Bitcoins from the Silk Road 2 website
earlier this month.
However, last week, the exchange said that customers
would be able to starts withdrawals "soon".
One report claimed on Monday that the
exchange had become "insolvent" after losing 744,408 Bitcoins - worth
about $350m (£210m) at Monday's trading prices.
The chief executive of MtGox, Mark Karpeles, told Reuters in an email on Tuesday:
"We are currently at a turning point for the business. I can't tell you
much more for now, as this also involves other parties."
'Re-establish
trust'
Unlike real currencies, Bitcoins are not regulated by
any central bank or government financial institutions.
They are created as part of a technique called
"mining", which is used to process transactions.
With only a limited number or Bitcoins in circulation,
their price has risen significantly in recent months driven by a variety of
factors.
Some have been betting that the digital currency may
get the backing of regulators as a legitimate financial service and have been
investing in it.
Their popularity has also been driven in part by it
being difficult to trace transactions carried out using Bitcoins, and the
currency has been linked to illegal activity online.
Its growing popularity has seen backers of the
currency push for greater mainstream adoption. They have had some success with
a few firms starting to accept Bitcoins as a form of payment.
However, there have also been concerns over the
currency's long-term future, not least due to a lack of proper regulation and
laws.
At the same time, some have warned that the rapid
surge in Bitcoin's price was merely due to speculation and was not sustainable.
The latest development with MtGox is likely to trigger
fresh concerns over the digital currency.
However, other Bitcoin backers said they were working
together to "re-establish" trust among users and were "committed
to the future of Bitcoin".
They said they "will be coordinating efforts over
the coming days to publicly reassure customers and the general public that all
funds continue to be held in a safe and secure manner".
Mt.Gox
site disappears, Bitcoin future in doubt
Mt.Gox CEO Mark Karpeles has resigned
from the Bitcoin Foundation, the currency's top advocacy group.
NEW YORK (CNNMoney)
What was once the
world's largest trading platform for bitcoins is now a blank page.
The Bitcoin-trading website Mt.Gox was
taken offline late Monday, putting at risk millions of dollars put there by
investors who gambled on the digital currency. The exchange alsodeleted all of its tweets, and Mt.Gox CEO Mark Karpeles resigned from the Bitcoin Foundation's board of
directors on Sunday.
The news frightened Bitcoin investors
elsewhere, knocking the price down about 3% to $490 -- its lowest level since
November.
For now, there's no telling what's
behind the shutdown. Mt.Gox did not respond to requests for comment.
However, an unverified document called
"Crisis Strategy Draft" that is being circulated online claims Mt.Gox
has lost 744,408 of its users' bitcoins, worth nearly $367 million. It also
claims Mt.Gox is planning to rebrand itself as Gox.
Mt.Gox has been mired
in problems ever since Feb. 7, when it halted withdrawals from its trading
accounts. The company's computer programmers hadn't accounted for a quirk in the way
Bitcoin works, allowing cyber attackers to dupe
Mt.Gox with a scheme resembling receipt fraud. When Mt.Gox discovered it was
under attack, it stopped any investors from pulling their money out of their
trading platform -- but it has yet to allow them access to their money.
By the time trading at Mt.Gox was halted
entirely late Monday, the price of a Bitcoin there had dropped significantly,
to $130. Meanwhile it was trading for more than four times that on other
exchanges.
Late on Monday, several other Bitcoin
exchanges sought to reassure investors and took a harder line with
Mt. Gox.
"This tragic violation of the trust
of users of Mt.Gox was the result of one company's abhorrent actions and does
not reflect the resilience or value of Bitcoin and the digital currency
industry," the groups said in a statement.
The executives who signed the joint
statement cast Mt.Gox's downfall as the typical industry evolution that weeds
out bad actors.
Trading
bitcoins the old-fashioned way
Although Mt.Gox's shutdown was
unexpected, its piling troubles were no surprise.
Evan Rose, president of Bitcoin ATM
company Genesis, said that the kinds
of problems seen at Mt.Gox and other exchanges show that Bitcoin is in flux.
"The people running the systems
right now are not necessarily business men," Rose said. "For the most
part, they're people who came into this digital project without grasping the
value or risk of it. The ecosystem is maturing, but it's a little scary for everyone
involved."
-- Charles Riley contributed reporting
from Hong Kong. 
Source:
http://money.cnn.com/2014/02/25/technology/security/mtgox-bitcoin/
Disappearance of bitcoin exchange Mt. Gox adds to mistrust over cryptocurrency
Raphael Satter and Yuriko Nagano, The Associated Press
Published Tuesday, February 25, 2014 7:46AM EST
Last Updated Tuesday, February 25, 2014 11:32PM EST
Published Tuesday, February 25, 2014 7:46AM EST
Last Updated Tuesday, February 25, 2014 11:32PM EST
TOKYO -- The sudden disappearance of one of the largest bitcoin exchanges only adds to the mystery and mistrust surrounding the virtual currency, which was just beginning to gain legitimacy beyond the technology enthusiasts and adventurous investors who created it.
Prominent bitcoin supporters said the apparent collapse of the Tokyo-based Mt. Gox exchange was an isolated case of mismanagement that will weed out "bad actors." But the setback raised serious questions about bitcoin's tenuous status and even more tenuous future. At least one supporter said the blow could be fatal to bitcoin's quest for acceptance by the public.
A coalition of virtual currency companies said Mt. Gox went under after secretly racking up catastrophic losses. The exchange had imposed a ban on withdrawals earlier this month.
By Tuesday, its website returned only a blank page. The collapse followed the resignation Sunday of CEO Mark Karpeles from the board of the Bitcoin Foundation, a group seeking wider use of the exotic currency.
Mt. Gox's origins are rooted in fantasy instead of finance. The service originally specialized in trading colorful cards featuring mythical wizards and derives its name from a game. The initials stand for, "Magic: The Gathering Online Exchange."
San Francisco-based wallet service Coinbase and Chinese exchange BTC China sought to shore up confidence in the currency by saying the Mt. Gox's situation was isolated and the result of abusing users' trust. They offered no details.
"As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today," the statement said.
Since its creation in 2009, bitcoin has become popular among tech enthusiasts, libertarians and risk-seeking investors because it allows people to make one-to-one transactions, buy goods and services and exchange money across borders without involving banks, credit card issuers or other third parties. Criminals like bitcoin for the same reasons.
For various technical reasons, it's hard to know just how many people worldwide own bitcoins, but the currency attracted outsize media attention and the fascination of millions as an increasing number of large retailers such as Overstock.com began to accept it.
Speculative investors have jumped into the bitcoin fray, too, sending the currency's value fluctuating wildly in recent months. In December, the value of a single bitcoin hit an all-time high of $1,200. In the aftermath of the Mt. Gox collapse Tuesday, one bitcoin stood at around $470.
Central banks across the globe have been hesitant to recognize bitcoin as a form of money, and Tuesday's vanishing act isn't helping.
Japanese government officials at the Finance Ministry and the Fiscal Services Agency said Wednesday that a virtual currency like bitcoin was not under their jurisdiction. Japanese Tokyo police declined comment.
Mt. Gox "reminds us of the downside of decentralized, unregulated currencies," said Campbell Harvey, a professor at the Duke University Fuqua School of Business who specializes in financial markets and global risk management. "There is no Federal Reserve or IMF to come to the rescue. There is no deposit insurance."
However, Campbell said, Mt. Gox's disappearance "doesn't mean the end of the road" for bitcoin and other virtual currencies.
The collapse "might represent the end of the 'wild west,' where anyone can set up shop and deal in crypto-currencies," he said. But "increasingly sophisticated investors" are funding serious ventures that will "raise both quality and confidence."
Peter Leeds, a publisher of newsletter focused on risky investments, doubts bitcoin will recover from the Mt. Gox collapse. He expects the currency to plunge below $300.
"It's more likely that someone getting involved in bitcoin at this point of the game is going to lose," Leed said. "There are all sorts of problems inherent with bitcoin that are just now coming to light."
Documents purportedly leaked from Mt. Gox lay out the scale of the problem. An 11-page "crisis strategy draft" published on the blog of entrepreneur and bitcoin enthusiast Ryan Selkis said that 740,000 bitcoins were missing from Mt. Gox. That represents roughly 6 per cent of the estimated 12 million bitcoins that have been created so far, translating into hundreds of millions of dollars' worth of losses, although figures are fuzzy given the currency's extreme volatility.
"At the risk of appearing hyperbolic, this could be the end of bitcoin, at least for most of the public," the draft said.
In a post to his blog, Selkis said that the document was handed to him by a "reliable source" and that several people close to the company had confirmed the figures. Reached by phone, he declined to comment further. The Japanese government has not announced any formal investigation.
The scandal may cost customers dearly.
At the Tokyo office building housing Mt. Gox, bitcoin trader Kolin Burges said he had picketed outside since Feb. 14 after travelling from London in an effort to get back $320,000 he has tied up in bitcoins with Mt. Gox.
"I may have lost all of my money," said Burgess, next to placards asking if Mt. Gox is bankrupt. "It hasn't shaken my trust in bitcoin, but it has shaken my trust in bitcoin exchanges."
Mt. Gox CEO Karpeles did not immediately return several messages seeking comment. A security officer at the office building said no one from Mt. Gox was inside. Tibbane, an Internet company that Karpeles is CEO of, still has its name listed on the building's directory.
"I have no idea" where they are, said Burges, the trader. "I'm both annoyed and worried."
Bitcoin's boosters say the currency's design makes it impossible to counterfeit and difficult to manipulate. But it has struggled to shake off its associations with criminality, particularly its role in powering the now-defunct online drug marketplace Silk Road. Only last month, another member of the Bitcoin Foundation, Vice Chairman Charlie Shrem, was arrested at New York's Kennedy Airport on charges of money laundering.
Authorities have been taking an increasingly hard look at bitcoin and related virtual currencies, including Litecoin, Namecoin, Ripple and countless others. Some countries, including Russia, have effectively banned the currency. In other jurisdictions, authorities are weighing whether to try to tame the marketplace through licenses or other mechanisms.
Even if Mt. Gox doesn't drag bitcoin down with it, there's fear that the exchange's demise will push financial regulators to take an even more skeptical stance.
"I think this is disastrous from a (regulatory) standpoint," Selkis said in a message posted to Twitter. "The hammer will now come down hard."