MtGox was still accepting new customers right up until the eve of its shutdown, The Reg has learned. A Reg reader has told us he was able to open a verified account just days before the Bitcoin exchange collapsed. This suggests that the MtGox authorities were caught by surprise, rather than planning for the shutdown. Eddie, a …
"caught by surprise"
"This suggests that the MtGox authorities were caught by surprise, rather than planning for the shutdown."
Or else they *were* fully aware of the situation, had been for years, and did nothing about it and continued to trade illegally with their clients money.
Re: "caught by surprise"
Ponzi schemes also trade right up until the last moment in order to squeeze every last ounce of capital out.
Re: "caught by surprise"
I agree with the alternative answer.
I went about opening an account there the other week, after they announced the fix it seemed possible it would still stay afloat.
Still I didn't like the way the wind was blowing, so never verified the account or even logged in.
"This suggests that the MtGox authorities were caught by surprise, rather than planning for the shutdown."
That's one theory. It's just as likely that they were planning for the shutdown and wanted to keep real money flowing into the company, possibly to stave off bankruptcy (and save themselves from being knee-capped) or to syphon off as much as possible into their own pockets before the crash.
Apparently the theft has been going on for several years. The accounting practices at the company were either singularly crap, or there was insider collusion hiding the theft. Either way, it seems very hard to see how anyone will trust them with their money ever again.
"it seems very hard to see how anyone will trust them with their money ever again."
The amazing thing is that anyone was willing to trust the Magic: the Gathering Online Exchange with their money in the first place.
You can create a bank called The Pink Fluffy Rabbit if you want - once you have proven yourself to be reliable and professional, the name doesn't really count.
Of course, getting the customers to allow you to prove your reliability might be an issue at the start.
The reverse is true as well - your company can have a perfectly honourable name but still be shunned because of shady accounting practices or PR disasters of the past. I'm sure you can find some examples yourself.
Incompetent or criminal?
Can I have 'both', please?
"Either way, it seems very hard to see how anyone will trust them with their money ever again."
It is simple really, just change the name. This is business 101 and is done all of the time.
Indeed. Name changes for reputation reasons happen all the time. Blackwater Security are now Xi, PhillipMorris are something vaguely Latin-sounding (I can't be arsed to look it up), and RBS are contemplating trading under Williams and Glyn's for at least part of their business to name just three.
Cant help the tin foil hatter in me thinking that there is a financial consortium desperately trying to kill bitcoin et-al as they ultimately, have no control over it.
Banks and governments don't like anonymous transactions.
Banks love transactions - anonymous or not
Banks have no trouble with virtual currencies, proof being that BitCoin has a market value. Virtual currencies may be virtual, as soon as real money is traded for something, banks take a cut of the transaction - it's what they live for.
If banks really has an aversion to virtual currencies, you simply wouldn't be able to exchange real money for WhateverCoin and there would be no market value to speak of. Then I would believe your words.
Commercial banks have no problem with anything they can get a cut of.
State-operated banks, on the other hand, probably have issues with this new market thingy - until they read up on the latest vCoin scandal and laugh quietly before turning to the latest money-laundering scheme they are in charge of.
Why assume the corruption of government and big corporations, when the corruption of individuals is equally likely?
It looks pretty easy to set up in Bitcoin-land, and pretty easy to steal. It's the digital Wild West after all. And many of the users like it that way. But I suspect that's because they haven't thought too hard about the implications of getting out from under the yoke of government.
No government = no law = no police = no courts = no binding contracts = theft and fraud as well as the sex and drugs and rock 'n' roll some ar after.
We may find out soon how much law applies. Given Mt.Gox was seemingly playing with serious cash. If they've really managed to lose 6% of all Bitcoins in existence, then Bitcoin has serious problems - and is unworkable in its current form. However much its proponents may whine about narsty ebil gubbermint and fiat money / fractional reserve banking - neither of which any of them seem to comprehend the meaning of...
I think it's wrong to suggest that 6% of all bitcoins are now lost. They're not lost... they're just under the control of some new owners. It's like regular cash in some ways... when it gets nicked they don't just burn it - it gets used.
Ultimately the coins could be traced to a wallets, but ownership of the wallets could prove hard to find. And that's not to say that they've not been converted to fiat either. The duration of the robbery is also so long and painful that to be honest all bets are probably off.
Virtual currency - measured in the amount of tears it was inevitably going to end in.
You don't mind if I steal your idea do you, and launch BooHooCoin?
Or would Waaaaaa!Coin be better?
I don't want to accuse anyone of fraud. Particularly on someone else's website. But that caught by surprise thing is hard to believe.
To be fair, it's a difficult dilemma, when a business is in serious trouble. If you own up to how precarious things are, your customers and suppliers may all bugger off, putting the final nail in the coffin. But you can't just keep building up the credit, hope for the best, and screw everybody else who loses. Though many people do.
In this case, there are rumours that they were trading insolvently for ages. It would be interesting to know how much of that supposed internal document was real - given that they've confirmed some of it was.
I think I'm going to continue my comparison between EVE Online and Bitcoin. Most of the big disasters from various 'banks' in EVE weren't out-and-out fraud. Some people managed to be good for long enough to build a reputation, and then steal the lot - but that's hard to pull off. Some went down due to bad investments - because there was no way they could enforce loan re-payments, any more than their customers. Also a lot expanded, and the new people who came in to 'help', were only after what they could steal.
Seemingly in most cases, when the bank went down - they didn't honestly stop, or try to carry on trading and recover. They converted into Ponzi/pyramid schemes, traded on and hoped for the best - or they just said "sod it", closed down and kept whatever money was left.
Which is why no-one uses banks in EVE any more. Even the honest ones all ended up in thefts. It'll be interesting to see what legal comeback there is over Mt.Gox. I don't know Japanese business law, but the organisation was holding millions in cash, let alone the Bitcoin funny-money. And yet they had an ongoing fraud, and seemingly on checks, or proper auditing.
What the Bitcoin pushers forget, is that you can't have a free market without regulation. However many insults they throw at governments, without contract law markets just aren't sustainable. Once you have something valuable, you're guaranteed thieves and chancers.
@ I ain't Spartacus
"To be fair, it's a difficult dilemma, when a business is in serious trouble. If you own up to how precarious things are, your customers and suppliers may all bugger off, putting the final nail in the coffin."
I agree with this. MtGox had to carry on normally or completely shut down. I don't see that half-measures in this regard could have accomplished anything. (Not that I care that they went under, mind you.)
>It'll be interesting to see what legal comeback there is over Mt.Gox.
>I don't know Japanese business law, but the organisation was holding millions in cash,
I think there might be a few more things Mt. Gox might have to worry about aside from the issues with the missing money.. I wonder if the main guy will lose his visa and get booted out the door.
Just losing his visa probably isn't that much of a problem. Especially if he isn't one of the losers from the collapse of Mt.Gox.
The point is that for Bitcoins to work in the long term, there needs to be some sort of assurance that you can't just easily steal stuff and get away with it consequence free. Maybe they can come up with some web-of-trust way of doing this all digitally and online-y, without involving government. But I suspect regulation is the only way this is going to work.
Of course, regulation may kill Bitcoin anyway. Given that you have to pay exchanges to convert into it, and then out to real currency for whoever you're buying from, I don't really get the point of Bitcoin. Any legal transaction can be done just as easily and cheaply with PayPal or the right (no foreign currency loading) credit card. But then maybe people are trying to avoid government and operate illegally. I suspect that the libertarian / anarchist / tinfoil hat supporters of Bitcoin are just going to have to realise that they aren't a good fit with the more criminally minded ones.
Bitcoin has sounded like an EVE scam to me from the very start. When I read articles about it I almost check to see if I'm in Jita local. :p
PayPal has just as many problems as Bitcoin, of course.
Would you accept payment via Paypal to post me an expensive bit of kit knowing that I could say 'empty box' to Paypal and they will take the money out of your account and give it back to me? Without any proof that I was telling the truth? It's an absolutely endemic problem, especially with Apple gear for some reason.
At least there comes a point when you can be sure that a Bitcoin payment isn't going to be taken back... even if you're not sure what it will be worth in an hour's time.
" I don't really get the point of Bitcoin. Any legal transaction can be done just as easily and cheaply with PayPal or the right (no foreign currency loading) credit card. "
Bitcoin transactions incur little to no costs for parties involved in the bitcoin transaction.
Paypal doesn't charge when you pay someone else, but they do charge the recipient/seller. The same rule applies to credit cards (for which we normally pay a yearly fee). Merchants can pay as much as 4 % for a credit card transaction.
In a bitcoin transaction, you simply transfer money from your electronic wallet to theirs. This incurs no bank fees, no wire transfer charges, no currency conversion commissions, etc. With the current volatility of bitcoin exchange, it does incur some risk for private transactions, but merchants now have tools that allow them to convert bitcoin at the prevailing exchange rate to minimize that risk.
You can also quickly verify whether or not the bitcoin transaction went through (and when). The recipient can do the same. You just look at the block chain to see if it worked or is on its way.
Try to do that with an international bank transfer or by calling Visa when an online transaction has disappeared, gone awry or been trapped in the system.
The decentralized nature of the crypto-currency environment is both a weakness (because no one entity seems to control it, which causes concern, and leads to abuses) and a strength (because anyone who wants to can play at little cost).
The fact that the government has little to no involvement with bitcoin transactions is a mainstream-press sideshow that distracts the public from the true power of a bitcoin eco-system.
Fortunately for bitcoin and its users, nothing is more dangerous than a good idea.
The Silk Road bust has shown that the government can and will go after bad guys who use crypto currency for their nefarious deeds. Bitcoin is probably easier to trace then real cash.
Hence the reason cyber-crims are starting to make their own crypto coins and deserting bitcoin.
Bitcoin enables small (and large) businesses to save a lot by using it for online transactions. Essentially the middle man is gone. I would argue that the crypto-currency model is exactly what online payments and transfers would be using (think PayPal 2.0) , if they had been designed correctly from the beginning, instead of being bolted onto existing payment physical systems.
Any bitcoin regulation will most likely come from the bitcoin community.
In this respect, bitcoin works a lot like any open source software project.
So when will El Reg get a bitcoin icon? Or better yet, a bitcoin donation button?
Manhattan US Attorney Preet Bharara has sent subpoenas
If I were Karpeles, I think I'd be less worried about the US sending subpoenas and more about what (or who) some of the less reputable and legal people with money in MtGox might be sending his way if their money has gone AWOL...
If Hollywood is anything to go by, if he were in America all he would need to worry about is his car or house exploding when he got in, whereas in Japan, that adorable schoolgirl that just walked by may right this instant be turning around while taking out some weighted chains from her handbag to bash his unwary skull in.
Which is probably why he doesn't walk the streets any more. So it'll be barbed crossbow bolt through the eye socket at 3 A.M. from the building roof across the street then. And shadowy figure vanishing in the night without a sound.
In the good old days of castles, wasn't one of the favourite tricks of your common-or-garden ninja to pop up through the toilet in order to get to the target?
I suppose that's not really possible with modern plumbing. You'd need to very small ninjas to get through the pipes, perhaps you'd call them a thingja?
Standard Business Practice
Keep up the appearance of normal trading, right up to the moment the administrators come hammering on the door. For example
To be fair, to do anything else would probably precipitate the kind of collapse a genuine business would be trying to avoid. But how is the punter supposed to tell the difference between a company trying to stay in business or a scam trying to fleece all it can?
Because the honest company trying to stay in business does not have rumors of bad dealings trailing along with it ?
> Because the honest company trying to stay in business does not have rumors of bad dealings trailing along with it ?
You obviously don't read El Reg comments. If you did you would know that every business is run by evil bastards who are just out to screw Joe Public and their own workers. If they make a profit then they are profiteering pond scum and if they go bust then its because evil management stripped the company of its assets.
they were intending to keep the operations going it seems.
New customers bring new liquidity, additional trading fees, etc...
Maybe they were hoping for enough influx of cash that they could at least sustain operations
(while limiting any capital drain, i.e. withdrawals) to a bare minimum.
in other words: deliberate delay of insolveny/bancruptcy (depending on the jurisdiction you're under this may be a criminal offense).
Re: they were intending to keep the operations going it seems.
"New customers bring new liquidity, additional trading fees, etc.."
Yes, there's a name for it - it's called a Ponzi Scheme.
Any reason to give the operators of MtGoX the benefit of the doubt?
Because to me it seems like yet another bitcoin exchange caught with both hands in the cookie jar.
i understand all the schadenfreude surrounding MtGox and the feelings of superiority that even bitcoiners feel because they were too sensible to use it, but lets be clear - all the crypto exchanges are operating on very shaky ground.
There isn't a country in the world that has welcomed bitcoin and several look like being 2 steps away from outright bans. The US is using the same tactic it used against the poker sites and accusing everyone within reach of money laundering and scaring people into submission.
It is unsafe to leave large amounts online anywhere currently and pretty risky leaving it on a PC that is connected to the Internet. So other than not being able to use it safely, bitcoin is great.
MtGox CEO Mark Karpeles issued a statement in the form of a picture yesterday in which he insisted he had not done a runner.
Love this take on it
Entertaining writeup of the whole fiasco from a bitcoinista here:
Not all of us were accepted :-)
Monday 17/2/14 02:59
We regret to inform you that the identification documentation you have submitted has been reviewed, and your request has been temporarily denied.
1- Only complete view on residence proof documentation may be accepted.
Please Submit a better quality of your residency proof.
2- Submitted photographic identification must be valid, clear and legible, and must be in colour.
ID must be in 300 dpi resolution.
We sincerely apologize for any inconvenience this may cause, but it would be greatly appreciated if you could resubmit/reupload to your MtGox account the requested clarification(s) above. (Please refrain documents attached to mails.
Thank you for your help in this matter,
At least you can cry all the way to the bank :)
I keep my own wallet
I was going to open a Mt Gox account, I even got my account verified a month or two ago. However I felt slight unease that comes with putting money into an overseas account, and even more unease just looking at the website, something just didn't sit right with me.
Then I looked for alternatives, Coinfloor looks promising, but not open yet. So I thought what the heck - I should really own my own wallet, and used Bitcoin Wallet on Android app store, that allows to to back up your keys in an encrypted file. I have it shared between my mobile and my tablet.
As for all the media stating Bitcoin itself is at risk from the Mt Gox crash, well it's a bit like saying fiat currency was at risk when the banking crisis happened.
Was accepting new investments up until the day before things fell apart.
I'll bet Mt Gox knew about this for a while, and only said something AFTER the friends of those in the know got their money out, and word starting escaping. But in the meantime, sure why not take other people's deposits so there is more for them to take out before it all falls apart.
Even in the US, the board of a bank couldn't get away with this without jail time. In a world populated by a lot of criminal types, I expect Bitcoin's CEO will just disappear one day and it won't be the "escaped with his cash" kind of disappear, but the "Jimmy Hoffa" type of disappear.
Banks do have an aversion to bit coin, I know of one company who had to stop dealing in it as their bank threatened to withdraw banking services from the company
The funniest part of all this was watching Huw Edwards on the BBC 10 o'clock news say 'Mount Gox'.
"MtGox was still accepting new customers right up until the eve of its shutdown, The Reg has learned."
Err, of course it was. Had it stopped trading earlier there would have been an earlier date for the shutdown. If you stop doing something, you must have been doing it right up till when you stop.
Ironic way to store your bitcoin
Bitcoin owners find safe place for digital currency: on paper http://www.cnbc.com/id/101454480
Save your ecash by printing it on old media.
recycling the bitcoins?
From what I understand, the problem was that you could double your withdrawals?
So it's possible someone worked this out, then emptied his MtGox wallet. Then had to put something back in, to be able to do the same hack again..... But it's a crypto currency, so the same coins weren't being recycled - makes your brain hurt.
BtC Bank for theWorld
It's a great opportunity for Japan. If the gov't were to bail-out and nationalize MTGOX, then Japan would have a good shot at being the top central BtC bank/exchange/counting-house for the world. If the Bank of Japan made good on all MTGOX deposits, and MTGOX were subsequently operated as a Japanese NGO, then I'd be happy to deposit my BtC there. How could they pass-up a chance like this? For less than a billion (USD value) they can essentially buy one of the three or four global reserve banks for BtC. After which the value of a BtC would skyrocket, since it would be defacto backed by the BOJ.
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