Mt. Gox may have lost 750,000 bitcoins

http://two-bit-idiot.tumblr.com/post/77745633839/bitcoins-apocalyptic-moment-mt-gox-may-have-lost

by jordhy • 12 years ago

78 58 12 years ago

two-bit-idiot.tumblr.com

So MtGox internal documents say "The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company"? That sounds...unlikely.

anigbrowl4• 12 years ago

Assuming for a moment the leak is accurate, the document could be a memo from an organization like the bitcoin Foundation that has been leaked from within Mt Gox. I didn't get the impression that MG management were necessarily the authors of the document.

mschuster912• 12 years ago

That's a massive amount of cash. And... the fact that there is a "leak from cold storage to the hot wallets" leads me to one conclusion: It could have been noticed WAY before, if anyone had looked at the "amount that SHOULD be in the hotwallet" and the "amount that IS in the hotwallet" before re-filling it. That alone would have shown that there is/was theft or BTC loss. Seriously, did MtGox run an exchange with virtually no bookkeeping?!

jnardiello2• 12 years ago

It all started as "Magic the gathering exchange", so... yeah. Pretty much everything is possible.

saurik• 12 years ago

"Possible citogenesis concerning whether MtGox ever hosted an MtG trading site"

http://en.wikipedia.org/wiki/Talk:Mt._Gox#Possible_citogenes...

TrainedMonkey• 12 years ago

I really do not understand how it is possible to run a system size of MtGox without some kind of reconciliation.

You have a written record of how many bitcoins came in, were traded, and went out. Let's say you could not detect if transaction was successful or not, you still should have been able to detect that you are missing some bitcoins relatively quickly.

wpietri2• 12 years ago

There is a story about the country hick who comes to the big city and gets a checking account. A couple weeks later, the bank manager call him up to tell him that he has overdrawn his account, that he has no more money. "That's impossible!" says the rube. "I still have 3 checks left!"

Too many programmers are woefully ignorant of how to write systems that handle money. Too often I have seen systems that treat money as floats, or have primitives that allow the creation and destruction of money. Accounting and banking have their own special set of rituals.

I think most programmers can understand this if they think about it a bit. Think about the lower quartile of coders [1] you know jumping in and writing a system to handle many kinds of money, including a novel kind that is poorly understood. Now put them under conditions of massive growth, conditions in which there is a shit-ton of money, fiat and crypto, arriving and departing in buckets.

I once saw a cartoon where a bank teller is saying to a worried-looking customer, "I'm sorry sir, there's not enough money in your account. Let me see if there's enough in somebody else's." I could easily believe that's what happened, here, the Dunning-Kruger effect writ large.

[1] I have no knowledge about MtGox's developers; this is just a though exercise.

robzyb• 12 years ago

I really do not understand how it is possible to run a system size of MtGox without some kind of reconciliation.

It's very easy. It's actually easier than doing a reconciliation.

Its quite possible that MTGox thought "everything has to balance, because we're only giving out money that people have deposited, therefore what would be the point of a reconciliation?"

smtddr• 12 years ago

This reads like a tabloid. It may or may not be true, but this writing style is very panic-inducing. I don't recommend people take any[1] kind of action based on info received in this manner.

______

1. I say this, but if this makes more people panic sell and drive down coinbase.com's price below $500, I'm going to take a certain action... Hint: “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” ---Warren Buffett, but don't go sending funds to MtGox!

EDIT: OOPS!!! Forgot about this possibility: Note! We've exceeded our normal buy limits for today. If you would still like to purchase you will receive the market price of bitcoin on Friday Feb 28, 2014 at 04:53PM PST after your funds have arrived. ---Coinbase.com

jnardiello2• 12 years ago

What i think here is that the author actually knows what is the truth but can't prove without putting the source in a horrible position. Therefore he's just passing the news.

It's is completely neglectable if mentioned documents actually exist or not, MtGox actions speak for themselves: Marketplace total lock, pulled from BT foundation, national currencies blocked. Come on people.

Worth mentioning that while i was fascinated by the bitcoin world, i never invested in it. So far, all the marketplaces i was interested in, just failed (bitcoin-24 and mtgox). Bitcoin might be cool, but current web technologies can't guarantee consistency.

glomph• 12 years ago

Do you have any reason other than their own claim at credibility to trust this random blog on the internet?

dragontamer• 12 years ago

I'm not one to trust MTGox right now, but this is nothing more than an unsubstantiated rumor on a random blog site.

It is a shame that straight up rumors are making their way to the top of Hacker News.

jakejake2• 12 years ago

It's tempting to buy some bitcoin from mtgox just on a lark since the selling price is so low there. It's a heck of a gamble but would be a steal if they manage to pull themselves out of this mess.

anigbrowl4• 12 years ago

Value is relative.

I mean, would you like some Browlcoin for only $75? That's about 30% less than what BTC is going for on Mt Gox, so I think you'd be mad not to cash on this opportunity. Available for a limited time only, email me for more details :-)

jordhy2• 12 years ago

This is so sad it hurts. I just hope MT Gox offers a statement tomorrow probing this false or declares bankruptcy already. They are a shame beyond words for the crypto community. This must end immediately.

Aqueous2• 12 years ago

I would wait for validation to act on this. This could be an attempt to drive down prices.

Aqueous2• 12 years ago

Now that a document, real or fake has been posted, the price is going to go down whether this is real or not.

oldstrangers• 12 years ago

If true, perhaps Satoshi could finally come back into the picture and help save bitcoin with an influx from his massive pile.

baddox3• 12 years ago

You mean by giving it to MtGox to keep them solvent? That would be a crazy day.

buttsex• 12 years ago

I would love to see MtGox given a bailout. So many heads would explode.

Udo• 12 years ago

I'm hearing the malleability exploit has been used undetected for years. How many people can actually be in the know about such a thing and yet keep silent about it for a long time? That means somewhere there's a very small group of people who have about a million BTC in their wallets, and nobody noticed them.

I have to wonder what it looks like when a person suddenly becomes very rich without any explanation for it. Wouldn't at least some of these people have attracted a lot of attention?

The cynic in me thinks the lack of evidence left behind probably points to organized crime or even governments at work behind the whole thing.

redthrowaway• 12 years ago

I have to wonder what it looks like when a person suddenly becomes very rich without any explanation for it. Wouldn't at least some of these people have attracted a lot of attention?

There's no reason they had to actually spend the money. DPR had $85M in BtC yet shared a flat with unsuspecting room mates.

existencebox• 12 years ago

At the risk of drastically oversimplifying... This seems hauntingly familiar to a pattern I've seen dozens of times in MMO's when the right sort of exploit falls into the hands of the right group of people. Once you've found out about it, the damage is done, and usually now obfuscated in such a way as to be unfixable(e.g. laundering); now a handful of players can control the bulk of currency in a market. "the right people" aspect is the "keep quiet" aspect; and is necessary for the impact to have sufficient time to really grow in magnitude. (right people doesn't have to != normal people)

Perhaps I'm just overfantasizing the whole thing in my head; but I like to think (and probably in doing so coloring my perceptions) that there are similarities between certain events in cryptocurrency and game-currency life cycles.

krapp3• 12 years ago

I think a cynical view would suggest it is exactly what it appears to be.

ChuckMcM• 12 years ago

Wow, that would be, unfortunate if true. Quite the heist though, and yet perhaps somewhat bittersweet. If it kills BitCoin what was gained by stealing all that BtC, unless of course killing BitCoin is the gain.

But given the transparency of the block chain, can we re-create the path of all the malleable transactions? Can we figure out where those coins went?

mschuster912• 12 years ago

MtGox would have to disclose all wallet addrs used for incoming deposits, hot and cold storage for that.

Given the holy fucking mess they're in already, they should provide full transparency - i.e. not only disclose the wallet addrs, but also the total amount of fiat cash they hold and which account ID holds how much BTC/fiat.

That would allow an independent entity to either resolve the clusterfuck (since obviously MtGox is unable to) or fairly wind down MtGox by evenly distributing the remaining BTC/fiat amounts, a small amount set aside for some lawyers to try to unfreeze the Dwolla funds.

wpietri2• 12 years ago

I think if they were the kind of people with the discipline and character to do that, they probably wouldn't be in this pickle.

jordhy2• 12 years ago

While we debate this, the bitcoin price has plummeted to 510 USD.

Meanwhile @twobitidiot maintains the plausibility of these claims. He says that he will post more information on his feed.

I think we should follow him on twitter to find out more about this situation and protect our crypto-investments.

If the claims are true, bitcoin could see one of its biggest crashes.

this_user• 12 years ago

The question, as always with markets, is how much of this is already priced in. The MtGox BTC price has diverged for quite some time and is currently at $115 which tells me that a lot of people are already assuming a low probability of ever seeing any of the money in MtG accounts again.

So, basically there are two scenarios and combinations thereof if they indeed lost all of the coins: 1) Most of a complete loss is already priced into the general BTC market and nothing much happens. 2) Once this gains more (mainstream) attention and the general public realises what has happened, the trust BTC had been able to gain evaporates and there will be strong sell-off.

I don't think it's possible to say which one it will be.

jackpipe• 12 years ago

while there is some default risk (but perhaps not enough?) priced into the mt.fgox price, the general bitcoin price doesn't appear much affected, certainly not proportionate to the damage that could be done, or already has been done, to the whole bitcoin ecosystem.

letstryagain• 12 years ago

Even MtGox can't possibly be that stupid. Losing 9 figures without noticing? I don't think so.

hencq• 12 years ago

The likely consequences will be larger than this localized financial damage, and we believe that the benefits of keeping MtGox stable and running outweigh the risks. This isn’t about saving MtGox anymore.

I think (and really hope) this is satire. Are they suggesting bailing out a bitcoin 'bank' because them falling over would be too much of a risk for the whole system? The irony here is a little too much to be true.

345723• 12 years ago

There is a lot of irony to be had in the world of Bitcoin. From security to stability to manipulation.

icodestuff• 12 years ago

I believe they are suggesting that. The question is who picks up the tab. As long as it's not a publicly funded bailout, I can't say as I really care.

JP Morgan did it. So can Satoshi.

mafuyu• 12 years ago

All I want is my 0.5 BTC in MtGox back... Doesn't seem like it's ever happening at this rate.

natrius2• 12 years ago

I think it's a bit far-fetched to claim that MtGox failing is an existential threat to Bitcoin. Once it becomes widespread knowledge that merchants can accept Bitcoin with no fees (up to $1M) and get the exact dollar amounts in their bank accounts, they will accept Bitcoin, and they'll prefer it. Some will prefer it to an extent that they'll offer discounts for using it. Consumers will buy Bitcoin in small increments the way they buy gift cards to get lower prices at grocery store gas stations.

Coinbase or BitPay losing their customers' money would be an existential threat to Bitcoin. MtGox? Not really.

unclebucknasty2• 12 years ago

Coinbase or BitPay losing their customers' money would be an existential threat to Bitcoin. MtGox? Not really.

If MtGox was still the massively dominant exchange that it once was, I would say that it would be at least an equal existential threat to BTC. To this point, BTC has survived (even thrived) without much use as a payment currency (relatively speaking). It's been more about trading.

So, to the extent that a MtGox failure is survivable for BTC, it's because there are now other exchanges with significant market share to support liquidity and trading activity until its use for payments takes hold (if ever).

anigbrowl4• 12 years ago

Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey-pot. Every one imagined that the passion for tulips would last for ever, and that the wealthy from every part of the world would send to Holland, and pay whatever prices were asked for them. The riches of Europe would be concentrated on the shores of the Zuyder Zee, and poverty banished from the favoured clime of Holland. Nobles, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clotheswomen, dabbled in tulips.

- Charles Mackay, Extraordinary delusions and the madness of crowds

JohnTHaller2• 12 years ago

Once it becomes widespread knowledge that merchants can accept Bitcoin with no fees (up to $1M) and get the exact dollar amounts in their bank accounts, they will accept Bitcoin, and they'll prefer it.

Completely glossing over the fact that nearly all consumers have credit cards and have never heard of bitcoin. And that consumers won't have any of the consumer protections they enjoy with credit cards or those fancy cash back rewards (consumers really like cash back cards). And that whole 15 minute confirmation time, which would make it extremely difficult to use in retail.

natrius2• 12 years ago

Consumers didn't have gift cards for gas, either. Lots do now. Those gift cards have no consumer protections. When I buy items with Bitcoin, I pay and I walk away, so confirmation time is a non-issue in practice.

Cash back is a fair point, but if merchants offer discounts greater than one percent, it's a moot point.

Geee• 12 years ago

This is FUD. Someone is trying really hard to push the market down. MtGox has withdrawing limits, which means that the only way to exploit the malleability bug is to slowly drain the hot wallets, and MtGox would have to keep replenishing them from their cold vault; also assuming that MtGox's system would resend apparently failed transactions. This means that there's no way they wouldn't have noticed missing funds in their balances. No way someone could slowly steal 750K BTC, without anyone noticing. Just no way.

rblatz• 12 years ago

One would hope that they would periodically compare coins on hand vs coins reportedly held.

waterlesscloud• 12 years ago

There's no chance this is true. It would mean that Gox would have had to have drained their cold wallet (a manual process) without noticing.

Gox is not particularly competent, but there's no way that happened.

unclebucknasty2• 12 years ago

"The likely consequences will be larger than this localized financial damage, and we believe that the benefits of keeping MtGox stable and running outweigh the risks. This isn’t about saving MtGox anymore.”

If this is true, then they are literally claiming that MTGox is too big to fail.

trishume• 12 years ago

Couldn't this be confirmed or denied by analyzing the blockchain for modified transactions and counting the volume? Someone already did something similar and didn't find anything astounding: http://www.righto.com/2014/02/the-bitcoin-malleability-attac...

7c8011dda3f3b• 12 years ago

"Update on Mt. Gox: This document appears to be authentic"

http://two-bit-idiot.tumblr.com/post/77760399932/update-on-m...

http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-S...

anigbrowl4• 12 years ago

8-0

Bonus: download the PDF and change the highlighting page 11 to 20% (or just change teh color) to look at their internal balance sheet and projections out to 2016.

MekaiGS• 12 years ago

For easy viewing:

http://www.muskr.com/MtGoxBalanceSheet.gif

xyzzy123• 12 years ago

The actual PDF mentioned in the article has now been posted here: http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-S...

panarky• 12 years ago

The second slide shows a timeline[0]. If this is correct, Gox spent the last two weeks snapping up BTC at a 75% discount to replenish their balances.

I figured as much[1].

If this is even remotely true, no amount of "rebranding" will save them.

Please save us months of drama and be gone.

[0] http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-S...

[1] https://news.ycombinator.com/item?id=7211417

mmp47• 12 years ago

Comment at mtgox site says now "", so although the document might be true, there are also some positive news coming.

Goatish• 12 years ago

What is the Mt.Gox memo pdf is cover for a 0 day exploit that hijacks your BTC, and you just got screwed while scrambling in fear for your bitcoins?

Mt. Gox may have lost 750,000 bitcoins

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