Mt. Gox demise as told by a Bitcoin insider

https://www.bloomberg.com/news/articles/2021-01-31/-trillion-dollar-mt-gox-demise-as-told-by-a-bitcoin-insider

by lelf • 5 years ago

140 159 5 years ago

zhoujianfu• 5 years ago

FYI, this “Bitcoin Insider” (there should be no such thing in a decentralized currency?) apparently took $5M from mtgox, claiming he could get them through regulation in the U.S. (he did no such thing)... then sued them for $16B after they went bankrupt, holding the thousands of creditors hostage for years... so far.

And apparently now fortress will give him (CoinLab) $11M to move (slightly) out of the way.

wmf7• 5 years ago

Yeah, Vessenes is so far inside that he has a massive conflict of interest in this case. He's also acted in pretty bad faith. Here's the story from a knowledgeable outsider: https://blog.wizsec.jp/2019/04/coinlab-v-mtgox-imaginarium-o...

Even putting aside the Mt. Gox bankruptcy, the original contract with CoinLab looks pretty bad: https://www.courtlistener.com/recap/gov.uscourts.wawd.192566... They agreed on damages of $50M if either side breached the contract but neither party ever had nearly that much money and the deal was only worth less than $1M per year. IANAL but this seems like a dumb suicide pact.

slavik81• 5 years ago

IANAL but this seems like a dumb suicide pact.

IANAL either, but those sound like punitive damages, which are unenforceable. The court could accept the assessment in the contract, but if it's blatantly unreasonable, they are supposed to pick a value that more accurately matches the damage incurred due to the breach.

Not that I would want to be in a situation where you have to depend on that...

sjreese• 5 years ago

We know today the the FBI sought to destroy bitcoin as a policy objective. The double posting was used inside the trusted network. To undermine the core function, in the end FBI agents went to jail for their own criminal actions - MT Gox was useful for media purposes

vmception2• 5 years ago

This article starts off with an ambiguous premise. The SEC Enforcement Division asking about Mt Gox in early 2013 has nothing to do with Mt Gox being in securities trouble. It more likely means the SEC was following funds in a bitcoin transaction that were deposited or transferred to that exchange. Or fiat transferred by an investor following a securities promoter’s instruction on how to invest via bitcoin.

The article then switches to other issues about Mt Gox that also never involve the SEC or securities issues again.

There is a pervasive meme amongst cryptocurrency enthusiasts of the SEC being an all encompassing police. It is weird and counterproductive.

otoburb3• 5 years ago

>“It could’ve been a trillion-dollar company,” Vessenes said. “It’s so sad.” The current $16 billion CoinLab claim against Mt. Gox is based on what the company thinks their portion of Mt. Gox would be worth if it had been managed well, he said.

Quoting this part of the article to emphasize the absurdity of CoinLab's assertion.

>Peter Vessenes has spent years trying to recoup lost coins

This article byline is strange because the CoinLab claim is entirely for cash/fiat damages, and not for the remaining cryptocurrency that the estate holds. Creditors know this because CoinLab's claim is evidently still incurring delay and interest, which the Tokyo District Court only affords to monetary Mt. Gox claims.

wmf7• 5 years ago

If the US part of Mt. Gox was managed well it would today be... Coinbase? Which is soon to be worth $63B.

otoburb3• 5 years ago

Coinbase didn't need Mt. Gox to become what they are today. I'm not sure this line of reasoning holds much water.

Perhaps if we were to follow Vessennes' absurd chain of reasoning to its logical conclusion, CoinLab itself should be countersued by Mt. Gox creditors for failing to become as successful as Coinbase given their head start in the US.

perennate5• 5 years ago

The absurd hypothetical that CoinLab could have been Coinbase in some strange parallel universe should not take priority in the bankruptcy/insolvency proceedings over the claims of Mt. Gox users who held actual dollar/cryptocurrency assets on the exchange.

CoinLab's lawsuit has delayed the distribution process and their absurd claims are part of the reason why creditors with actual legitimate claims (i.e. Mt. Gox users) are still waiting for the remaining assets to be distributed.

It is like the bank has robbery and 20% of the money is stolen, but instead of distributing the 80% among the customers, it is given to the bank's US partner that said "oh hey we could've been the next big bank in the US if the other bank didn't get robbed".

tlrobinson• 5 years ago

I know very little about this but shouldn’t customer deposits be handled separately from other creditors? Why should CoinLab get anything?

cecida2• 5 years ago

The problem with trying to suggest that Bitcoin is a fundamentally flawed idea is that you will be down voted to oblivion.

As a computer science concept it's rather mundane. We know what merkle trees are.

It's an extremely wasteful form of computing. Mining is an exercise in wastefulness. Proof-of-work is one of the worst concepts I've ever seen.

Ah, Tether.

vmception2• 5 years ago

that has nothing to do with this article, I’m sure there will be plenty of other bitcoin articles less tangentially related to your copypasta where you’ll be more in context pasting that

kneel2• 5 years ago

I've never seen self propagating transaction networks that pay for themselves and recruit their own evangelists before bitcoin.

Seems pretty amazing.

LegitShady• 5 years ago

It's called religion. They just separated the transacting (tithing, etc) from the self propagating evangelism. The tithing was the important part, though.

lukifer• 5 years ago

Mining is an exercise in wastefulness

While I don't disagree (I think PoW should be carbon-taxed or fully outlawed), a massive portion of the non-crypto economy is intentional waste for social signaling purposes: https://en.wikipedia.org/wiki/Veblen_good

nyolfen• 5 years ago

As a computer science concept it's rather mundane. We know what merkle trees are.

a practical, robust solution to a long-standing computer science problem (byzantine generals) that directly results in an entire new branch of computer science and economic sector is hardly mundane. bitcoin solves previously intractable trustless coordination problems. we are only at the early stages of discovering what it makes possible; you are the newspaper editor laughing at the web in 1996.

cecida2• 5 years ago

This is spaghetti language. What problem does Bitcoin solve? Economic inflation, deflation, hard money, computer science theoreticals.

I'm talking about all proofs btw. So I'd have the same questions about ethereum. This is very flawed computer science.

andrewflnr• 5 years ago

It's hilarious that this comment is right below https://news.ycombinator.com/item?id=26043119, which is whining about HN being too anti-cryptocurrency, both being similarly downvoted.

chaostheory4• 5 years ago

Since we're on the subject, how do people think the Tether situation will play out?

askmike2• 5 years ago

That's a very different subject, I don't see any overlap

chaostheory4• 5 years ago

Mt Gox was responsible for the first bitcoin bubble. Tether has been responsible for multiple bitcoin bubbles now, using their crypto that was supposedly backed by the USD 1 to 1. The rationale for pumping bitcoin is the same: to recoup stolen money.

Look at the money inflow graph. Tether surpasses everything else

https://coinlib.io/coin/BTC/Bitcoin

optimalsolver2• 5 years ago

In terms of losses, Tether will be to Mt. Gox what Little Boy was to a firecracker.

wmf7• 5 years ago

Some agency orders a freeze on Tether which triggers a panic of USDT -> BTC -> USD trades, creating a situation where 1 BTC = ~200K USDT and 1 BTC = ~20K USD. I don't expect this to happen in 2021.

kmeisthax• 5 years ago

That's already happened, and has been continuously occurring since 2017 when Wells Fargo shut down their links to the traditional banking system. Tether continues to trade at the peg because people believe it to be pegged.

The only way the Tether peg could possibly be realistic is if massive amounts of institutional investors were engaging in really unusual settlement procedures to buy into Tether. I've heard stories about Tether having it's investors operate accounts on it's behalf or something, which sounds incredibly farfetched compared to the more likely idea that they're just not bothering maintaining anything close to a reasonable reserve requirement for their peg. After all, nobody can really pull money out of Tether.

sekai• 5 years ago

It won't. People were screaming about Tether back in 2017, 4 years, still going strong. Keep in mind, they aren't the only stablecoin in the market now, so even less relevant to the crypto space.

staplers2• 5 years ago

It's always amazed me how anti-crypto and behind the times (about bitcoin) this forum has been. Remember your imagination for the possibilities of the early web and computers.

TylerE2• 5 years ago

Bitcoin as had the better part of decade and it's still practically useless in the real world.

trixie_5• 5 years ago

Case in point I guess. It is kind of amazing how one of the most important recent technological developments has been written off for more than a decade by the users of this site.

Same with TypeScript for a long time as well, and then there was a magical turning point somehow that the entire zerg all of a sudden discovered static typing was actually useful.

For one of the best sites for discussing the latest happenings in the computer software world, crypto has somehow been consistently rejected as useless when it beats other stores of value in almost every metric.

Crypto has value simply because it is better at storing value than the mediums that came before it.

elif2• 5 years ago

Something that can continue to gain value for 10 years has no practical use?

Someone had better remove the vast majority of the world GDP which is in financial markets.

flatiron• 5 years ago

Nothing wrong with hearing voices not within your echo chamber. I always take voices here I don’t agree with with more weight because they might be right.

wmf7• 5 years ago

Possibility of the early Web: getting free overnight air shipping on 50-pund bags of dog food.

Possibility of cryptocurrency: becoming "fuck you" rich in a year without doing any work.

Yeah, you have a point; crypto does have amazing potential.

quickthrower23• 5 years ago

Ooh I though you were setting up:

Possibility of crypto: getting free overnight air shipping on 50-pund bags of weed

KirillPanov• 5 years ago

becoming "fuck you" rich in a year without doing any work.

That's how most SF tech startups appear to the average blue-collar person.

It's all about perspective.

xtracto3• 5 years ago

It may be a matter of demographics. Slashdot had the same effect with other new technology (ipod. Less space than a nomad). And Usenet or irc forums were full of people discounting myspace, FB, and other newer technologies.

Hacker news has changed a lot since the time I joined. I came from /. And osnews . And initially it was strongly pro business . Now it has became more "liberal " and pro open source.

blhack• 5 years ago

Curious if you've found a place that feels the way that HN did back then.

quickthrower23• 5 years ago

Yeah it’s a collective “just use Rsync” blindness. I think Defi is pretty exciting and once it’s mainstream with more regulated options with KYC and tokens backed by fully audited companies it has some amazing potential.

Also see https://news.ycombinator.com/item?id=26041057 - HN wants it’s mp3s, so why doesn’t it want it’s money?

xtracto3• 5 years ago

Exactly! I find it so surprising how on one side stories like the one you linked are heavily upvoted, and many here complain about Google, Facebook, monopolies, etc. But when it comes to z technology that is disruptive enough to solve many of the underlying problems , people are fast to discount it because a certain implementation is slow, inefficient, misused, etc.

The discourse that I would LOVE to see here is HOW to make it better. Is BCH really better? Is XlM? even XRP.

Like when databases are discussed, we get interesting points for Postgres or MySQL or even Mongo. That's the constructive view.

Noos• 5 years ago

I do, and i see what the web has become now, and it makes me less likely to be giddy about the next new thing. I think we're at a point where the net is no longer novel enough to be magical, and we see the reality is a lot more mundane and even harmful than anyone predicted.

You can't just throw out grand concepts and wish for magic now; there needs to be a lot more reflection on the technologies people introduce. Are they sustainable, in that they can maintain their original purpose? Do they increase the attack surface of people, groups and societies greater than the benefit? Do they require skill and vigilance beyond the average person to use safely?

I don't think optimism and "it will all work out" is a rational position any more.

vangelis• 5 years ago

How are your shitcoins?

staplers2• 5 years ago

God they're doing so well especially today after Tesla announced buying $1.5 billion worth. Thanks for asking.

Groxx• 5 years ago

There's also this entertaining presentation from an outside researcher (tracing down the missing money) from 3 years ago (I don't know what's up with the framerate, but really, it's worth watching): https://www.youtube.com/watch?v=l70iRcSxqzo It's quite a rollercoaster of failures.

otoburb3• 5 years ago

The outside researcher, Kim Nilsson, wrote a recent summary[1] in response to articles attempting to whitewash CoinLab's involvement in the case.

[1] https://blog.wizsec.jp/2021/01/earlier-mtgox-payouts-coinlab...

MagicalTux7• 5 years ago

Being directly involved in this I'm not going to comment as of the veracity of the article myself, but rather point to a response of when this was posted on twitter (look at the extra responses for some fact checking):

https://twitter.com/wizsecurity/status/1355973512012292096

koolba• 5 years ago

The default twitter algo selection of comments is random gibberish. Anything more specific to point to?

marcolussetti• 5 years ago

I think he's pointing to the comments by @wizsecurity specifically, in response to the @bloomberg one.

Qub3d• 5 years ago

Here's the thread unrolled: https://threader.app/conversation/1355926433646972933/UcAWDz...

MagicalTux7• 5 years ago

The WizSecurity comments are shown as a thread, those are the most relevant imo

modeless• 5 years ago

For those who don't know, MagicalTux is Mark Karpeles, owner and CEO of Mt Gox. Assuming this is his real account.

And for what it's worth, I agree that this is a bad article based on what I know about the situation. Bloomberg reporting in general is questionable these days if you ask me. I don't trust them since the false Supermicro hack story (never retracted BTW) and I've seen several other bad stories from them since then.

rasengan3• 5 years ago

It’s real (re account)!

threepio• 5 years ago

the false Supermicro hack story (never retracted BTW)

So the idea is that Bloomberg, a company owned by a multibillionaire, published a story full of libel, and for some inexplicable reason none of the corporations damaged by that story sued them?

Or maybe ... the story is true, and those mentioned found it embarrassing, so they put out denials to the press and social media that will never have to be scrutinized (say, under testimonial oath in a deposition)?

MagicalTux7• 5 years ago

Yep this is indeed me. This article would clearly have its place on PRNewsWire rather than Bloomberg.

technion• 5 years ago

To this very day, the majority of non technical executives having a security conversation raise with me "so we're definitely not using Supermicro right" as their top security concern. It's incredible how much that story managed to achieve.

contingencies• 5 years ago

When's the book coming out?

dylan6042• 5 years ago

Will it be before or after Netflix/Prime/HBO+ releases a documentary or 'based on real events' type of show?

zoba4• 5 years ago

Mark, the security errors in Mt Gox cost me sums of money that would have completely changed the life of myself and my family. Mostly I have moved on from this, but occasionally I multiply my Mt Gox holdings by the current price of Bitcoin and imagine how life could be. I have never heard you express sorrow for the individuals whose lives you so negatively impacted.

I have no idea if you have plans to make amends for this. Even now, the top of r/MtGoxInsolvency is a post about opening an exchange again to earn money back for the creditors. Do you have any thoughts on how to make things right? https://www.reddit.com/r/mtgoxinsolvency/comments/ldnrxv/reo.... Yes of course I'm a part of the legal proceedings, but those seem to never end, and seem unlikely to bring any significant recompense.

I can't imagine living a life where so many people direct such incredible ill will towards myself, as you live. Especially given that early Bitcoin folks were often disreputable, and the amount of money you cost them, I assume you must have concerns for your own physical safety.

I hope that you'll consider those of us who are still hurt by your negligence by choosing your words and presence carefully.

dfhjklk• 5 years ago

This is a very thinly veiled threat.

downandout3• 5 years ago

I originally started my HN account to ask what I should do when my cofounder screwed me out of $12.8 million I was owed as the result of the sale of our company that he forced me out of and sold without telling me. My username came from that era of my life. I cannot even begin to describe how different my life would be had my cofounder not done this. It is unlikely that I will ever again create something that valuable, and accordingly I have a profound sense of loss over it.

So speaking from personal experience...while your anger is completely justified, you have to let it go, or it will destroy you. It’s just one of those things - a random, traumatic event that instantly and irrevocably changes the trajectory of your life, that you can do nothing about. These are jarring reminders that the world is a cold and unfair place, that the universe is not in fact looking out for us, and that people are not “mostly good” as many of us were raised to believe. But holding grudges, even against people that have inflicted unimaginable trauma on you, only hurts you.

seneca• 5 years ago

I assume you must have concerns for your own physical safety.
I hope that you'll consider those of us who are still hurt by your negligence by choosing your words and presence carefully.

This is a clumsy threat and isn't really appropriate.

MagicalTux7• 5 years ago

I am sorry for the situation and the way things and have expressed sorrow continuously, starting with the bankruptcy press conference, and on multiple occasions. I have been helping people who contacted me or who posted on reddit, been in touch with MtGoxLegal and other creditor groups, and generally tried to keep everyone aware of their rights and needed procedures to be into the bankruptcy. I also have made sure third parties wouldn't enter the process in order to benefit from it (see Brock Pierce for example) and still continue today to offer help on reddit to those in need.

I do not think me being involved in a new exchange would help make money for creditors. I have provided counseling to other exchanges who asked me to on how to avoid repeating what happened with MtGox and tried to push as much as possible for MtGox creditors to get as much as possible. When I was due to receive over a billion dollar as share holder in the bankruptcy I also made sure everyone knew about it because switching back to a civil rehabilitation needed the support for most creditors and wasn't something I could do (since I'm not a creditor myself).

But of course if I can help in something more I'd be happy to. You will likely receive more than you initially deposited into MtGox through the bankruptcy, but I do not know what you call "significant recompense."

Also most creditors I have been interacting with have been thankful for the help and I do not think that many people still direct much ill toward me, at least it doesn't feel that way anymore, but that may have to do with the lack of death threats and insults on Twitter and such. I'm hoping everyone will be eventually able to move on, but first the bankruptcy must end, and CoinLab is preventing exactly that from happening.

I have been choosing my words carefully, even going as far as avoiding voicing my own opinion here and instead linking to some fact checking from another MtGox creditor. I will however still say that CoinLab and more specifically Peter is clearly abusing his position and using stalling techniques to force MtGox and creditors to accept a settlement rather than having the whole process taking many more years, effectively taking everyone hostage for his own gain.

Staying silent will not do anything for creditors, and CoinLab clearly do not have creditors' benefit in mind. I do think this is important to point out.

shawnz• 5 years ago

occasionally I multiply my Mt Gox holdings by the current price of Bitcoin and imagine how life could be.

While this obviously doesn't justify what happened with Mt Gox, there was plenty of time afterward to reinvest at significantly lower prices than today, so I don't think it's fair to attribute all those losses to him.

colechristensen• 5 years ago

MtGOX was one of a few situations which would have led me to having a million in the bank if not for seemingly small changes. Alas, it didn’t happen, and honestly there were many other ways that it would have otherwise not happened. Sure its fun to multiply tens of bitcoins I once owned by the all time high, but this is about as effective as thinking about picking different lottery numbers. It would be nice if I got every coin back from mtgox, my balance would sell for something between a nice car and a nice house these days, but this is reality, reality has risks, and I made risky choices and got the results which I did.

axiosgunnar2• 5 years ago

occasionally I multiply my Mt Gox holdings by the current price of Bitcoin and imagine how life could be

I often have flashbacks to that one tweet I saw many many years ago saying „Bitcoin reaches USD parity“. I was considering investing a thousand bucks at that time, just for fun.

I would be 37 million dollars rich today!

Who am I kidding.

What would have actually happened is I would have sold everything once my money doubled to 2 USD/BTC, and then panicked seeing it rise and rise, bought in again right before a crash and sold everything with a huge loss.

So realistically, you should take what the Bitcoins you lost were worth at that time, and multiply it 2-3 times if you‘re lucky, and that‘s it.

Most of the stories of people getting rich with bitcoin are:

- people invested in the ecosystem, eg creators of exchanges etc

- true believers (rare)

- celebrities like the Winklevosses who actively invested large amounts of money with some kind of plan

- people who forgot a harddrive from 2010 with 100 bitcoins and found it again in 2018. (or like MtGox, where they were stuck in liquidation for so long that the assets are worth billions now)

If you‘re not in one of those groups, I think you realistically do not need to worry about having lost anything more than a few single digit multiples of your Bitcoins worth in dollars back then.

soulofmischief• 5 years ago

The writing was on the wall months before the attack. Mt Gox's usability plummeted and rumors or pentesting circulated. Orders started experiencing increasing latency.

I watched that tower fall from a safe distance. I'm not saying it's your fault that you got dragged into the Bitcoin double spend attack, but it's simply part of the game. Easy come, easy go. Don't get caught up imagining fake money you never had. It will weight heavily on your psyche forever.

globular-toast• 5 years ago

Get over it. You were the one who tried to get rich and failed. Just accept that and move on. Try again if you want to. But don't blame someone else for your risky investments.

ThreeFinger• 5 years ago

It’s not Marks foul. You have the money transferred to an exchange to mage a transaction not to hold it and wait for >40k. You would sold at 200,1000,10000.....

dogweather• 5 years ago

Being directly involved in this I'm not going to comment as of the veracity...

Why not? Just be transparent.

redegg2• 5 years ago

You will likely receive more than you initially deposited into MtGox through the bankruptcy, but I do not know what you call "significant recompense."

I was one of those claimants who sold approximately the account value north of 1000 Bitcoins to bring myself in what I thought was a better position when all of your withdrawal methods were blocked. I attempted to withdraw BTC into BitcoinBuilder, but you guys had my account flagged for additional review from a previous TX I had made weeks ago. I had literally zero other options and you guys locked up all of my balance.

Some recompense could be given to now fiat claimants who sold all of their BTC holdings into USD _the day_ that Mt.Gox shut down. There were quite a handful of individuals who did with the same rationale this in the hours leading up to the website shutdown. I'm pretty sure they are the minority of claimant cases looking at /r/MtgoxInsolvency posts.

Today, the difference in market value those few hours for me would have been approximately been $7.9 MM vs. ~500k USD + penalties. There were zero guidance the days that you had your withdrawals blocked off, and any communication of what was going on especially in those few hours would have made such a difference in the 7 years that we/I had our money locked up.

Please look into these accounts that had this sort of activity _in the hours_ leading up to Mt. Gox's shutdown. If any group would be significantly impacted by any recompense, it would be us

llamataboot• 5 years ago

Still waiting for the 50 or so BTC I had in MtGox when it disappeared. Think I should get what they were worth then, or what they are worth now :D

wmf7• 5 years ago

Would you prefer 100% of what it was worth then or 23% of what it's worth now?

Lambdanaut• 5 years ago

Why 23%? Seems arbitrary. Is that the amount in BTC that is expected to be paid out to creditors?

perennate5• 5 years ago

Of course everyone would want the greater of the two. But the claims need to be balanced because some users held cryptocurrency assets while others held dollar assets, and there aren't sufficient assets to return either one. The rehabilitation trustee has already come up with a plan that balances the demands of the various stakeholders, and most people are happy with it. There are many reasons why the assets haven't been distributed yet, but one big reason is because CoinLab keeps parroting their ridiculous claims; obviously CoinLab's lawsuit will be thrown out eventually (because their claims are absurd), but it's part of the reason the distribution keeps getting delayed and likely won't happen until, say, 2022-2023.

Only in January 2021 did CoinLab finally say, okay, we will agree that the distribution of 90% of the assets can start while our lawsuit continues (they are ridiculously demanding that CoinLab get some big portion of the other 10%, so they want that money held up until their absurd lawsuit is finally thrown out). See https://www.bloomberg.com/news/articles/2021-01-15/coinlab-r...

not_a_moth• 5 years ago

Same. I remember receiving letters in Japanese at the time of the bankruptcy. I put them on my refrigerator for guests to see because I thought they were amusing. Now it's just depressing to think about.

ece• 5 years ago

The Darknet Diaries episode on Mt. Gox was pretty good: https://darknetdiaries.com/episode/9/

perennate5• 5 years ago

CoinLab's lawsuit is a big part of the reason why creditors with actual legitimate claims still haven't received their share of the remaining assets. Somehow CoinLab thinks their claim, which hinges on vague and unrealistic what-ifs, should have priority over Mt. Gox users who held dollar/cryptocurrency assets in their Mt. Gox accounts. Obviously CoinLab's ridiculous claims will eventually be thrown out, but it has severely delayed the insolvency proceedings and eventual distribution process.

Vessenes is not a "Bitcoin insider", he is a snake who seeks to steal billions from individual users who lost assets that they had held with Mt. Gox.

Here is what former Mt. Gox users who are still waiting for the distribution process think of this Bloomberg article: https://old.reddit.com/r/mtgoxinsolvency/comments/l9m3iz/coi...

nangz2• 5 years ago

I am a MtGox creditor and intermittently get offers from Fortress Capital to buy my BTC for some % of its value. I tell them where to stick it.

It now looks like Vessenes is in cahoots with Fortress Capital in an arrangement where they drag out the frivolous coinlab lawsuit which encourages desperate creditors to sell out to Fortress.

Vessenes is really an awful piece of subhuman filth. He has zero claim to anything, but is causing misery to thousands of creditors. I hope all his descendents continue to be aware of this.

Mt. Gox demise as told by a Bitcoin insider

Related Stories