TOKYO (Reuters) — Mt. Gox, once the
world's biggest bitcoin exchange, looked to have essentially disappeared
on Tuesday, with its website down, its founder unaccounted for and a
Tokyo office empty bar a handful of protesters saying they had lost
money investing in the virtual currency.
The digital marketplace operator, which began as a venue for
trading cards, had surged to the top of the bitcoin world, but
critics — from rival exchanges to burned investors — said Mt. Gox
had long been lax over its security.
It was not clear what has become of the exchange, which this month
halted withdrawals indefinitely after detecting "unusual activity."
A global bitcoin organization referred to the exchange's "exit,"
while angry investors questioned whether it was still solvent.
A document circulating on the internet, and purporting to be a
crisis plan for the exchange, said more than 744,000 bitcoins were
"missing due to malleability-related theft", and noted Mt. Gox had
$174 million in liabilities against $32.75 million in assets. It was
not possible to verify the document or the exchange's financial
situation.
Tokyo investors in the frontier electronic currency, who have
endured a volatile ride in the value of the unregulated
cyber-tender, said the problem was with Mt. Gox, not with the
revolutionary bitcoin itself.
Mt. Gox officials did not answer the telephone or respond to email
requests for information. The concierge at the home of the chief
executive, Mark Karpeles — an upscale apartment in the Shibuya
district — said he was not answering his intercom. His mailbox was
so stuffed with mail that the flap would not close.
The Mt. Gox homepage was not loading, although no error message
appeared. Its source code contained a line saying, "put announce for
mtgox acq here."
"VERY ANGRY"
"I'm very angry," said Kolin Burges, a self-styled "crypto-currency
trader" and former software engineer who came from London for
answers after Mt. Gox failed to tell him what had happened to his
bitcoins, which at one point were worth $300,000.
"It looks like that's disappeared," said Burges, one of six
protesters outside the Mt. Gox office, which was as deserted as a
nearby cafe that had formerly accepted bitcoins as payment. In a
statement last week, Mt. Gox said it had moved office because of
security issues.
Some protesters carried signs saying, "Mt. Gox, where's our money?"
and "Mt. Gox, are you solvent?"
"They prolonged this and kept telling people everything was OK,"
Burges said. "A lot of people did believe that, and it's very
annoying what they've done to me and up to a million others."
Six leading bitcoin exchanges — which allow users to trade bitcoins
for U.S. dollars and other currencies — distanced themselves from
the Tokyo-based exchange.
"This tragic violation of the trust of users of Mt. Gox was the
result of one company's actions and does not reflect the resilience
or value of bitcoin and the digital currency industry," the
companies — Coinbase, Kraken, Bitstamp, BTC China, Blockchain and
Circle — said in the statement. "As with any new industry, there are
certain bad actors that need to be weeded out, and that is what
we're seeing today."
On Sunday, Karpeles resigned from the board of the Bitcoin
Foundation, in a blow to the digital currency. Mt. Gox had once been
the largest exchange handling bitcoins.
Karpeles told Reuters last week, "We know there are all kinds of
criticisms made against Mt. Gox, but we believe we are doing all we
can to solve problems as quickly as possible having our customers in
mind."
His resignation from the foundation, the cyber currency's trade
group, followed a number of technical issues, including a massive
cyber attack from unknown sources that has been spamming bitcoin
exchanges.
Mt. Gox was a founding member and one of the three elected industry
representatives on the board of the foundation. Mt. Gox, a bitcoin
exchange since 2010, is a relatively old player, having grown
quickly when there were few alternatives.
Bitcoin has had a rocky ride, its dollar value soaring and crashing
more like a highly speculative investment than a store of value. And
oddly for a tradable instrument, its value varies greatly depending
on the exchange.
The Mt. Gox bitcoin, which traded at $828.99 before February 7, when
the exchange halted withdrawals, has since plunged 83.7 percent to
$135. By contrast, coins at Bitstamp, another large exchange, have
fallen 40.5 percent over the same period to $400.
While bitcoin globally has taken a beating to its value and
reputation, users say the problem is with Mt. Gox, not with the
virtual currency itself.
"I think the community will remain very tolerant of teething
problems, or whatever you want to call them," said a Tokyo-based
investor who noted he had a "negligible" amount of bitcoins with Mt.
Gox. "The whole structure is still in its infancy, so there's just
certain things that come with the territory as long as you keep
people in the loop."
The Bitcoin Foundation said in a statement, "Mt. Gox is one of
several exchanges, and their exit, while unfortunate, opens a door
of opportunity. This incident demonstrates the need for responsible
individuals and members of the bitcoin community to lead in
providing reliable services."
A commenter on the Reddit site, identified as evorhees, proudly
defended bitcoin as an epochal development in finance.
"We are building a new financial order and those of us building it,
investing in it and growing it will pay the price of bringing it to
the world," he wrote. "This is the harsh truth. We are building the
channels, the bridges, and the towers of tomorrow's finance, and we
put ourselves at risk in doing so."
REGULATORY RETICENCE
Japan's financial regulators, by contrast, have largely given
bitcoin a shrug.
"Bitcoin is not a currency; it is an alternative to currencies, like
gold," said a spokesman for the Financial Services Agency. "We are
only responsible for currencies and therefore bitcoin is not subject
to our regulatory oversight."
Finance Ministry officials also said they are not in charge of
regulating the virtual currency. A Bank of Japan spokesman said the
central bank had nothing to add to remarks that Governor Haruhiko
Kuroda made in December, when he said he was "very interested in
bitcoin".
"In one sense, it is similar to electronic-funds transfers and the
spread of electronic money," Kuroda said then. "But there are also
some differences and the price is somewhat volatile. I think each
country's central bank is watching this ... but as of now I have
nothing specific to report."
Other jurisdictions have been more proactive.
In the United States, Alabama's securities regulator said he will
issue an alert on Tuesday, cautioning consumers and investors to
stop trading on bitcoin exchanges or adding to their accounts if
they are having trouble redeeming the digital currency or cashing
out.
Karpeles himself, while insisting on his own exchange's reliability,
has made no secret that bitcoin is, as he told Reuters last April, a
"high-risk investment".
"If you buy bitcoins, you should buy keeping in mind that the value
could be zero the day after."
(Additional reporting by Chris Peters in Bangalore, Cheng Herng
Shinn, Stanley White and Noriyuki Hirata in Tokyo; writing by
William Mallard; editing by Ian Geoghegan)
The digital marketplace operator, which began as a venue for
trading cards, had surged to the top of the bitcoin world, but
critics — from rival exchanges to burned investors — said Mt. Gox
had long been lax over its security.
