One-Time Bitcoin Exchange Giant Mt. Gox Collapses Amid Insolvency, Trading Allegedly Suspended The former cryptocurrency king fizzles out, reportedly filing for bankruptcy after allegedly losing $375 million in Bitcoins in the wake of supposed 'years-long' 'unnoticed' theft.
Opinions expressed by Entrepreneur contributors are their own.
Mt. Gox has flatlined, just as we predicted. The apparently now-extinct Bitcoin exchange, which grew from a humble trading post for Magic: The Gathering cards into what was for a time the world's mightiest cryptocurrency powerhouse, has gone offline. Its website is now nothing more than a blank white slate beneath a URL, showing zero content, its Twitter feed stripped eerily bare.
Worse, it appears that trading on the enfeebled exchange has come to a screeching halt as well, as revealed by an incriminating screenshot reportedly shared by a Reddit user. Some 744,408 BTC -- which add up to about $375 million at today's exchange rate -- were likely lost in the aftermath of Mt. Gox's implosion, according to a copy of the Tokyo-based company's alleged Crisis Strategy Draft, leaked Monday night by Ryan Galt, a venture capitalist and Bitcoin blogger also known as "The Two-Bit Idiot." The allegedly vanished Bitcoins are reportedly equal to approximately 6 percent of the 12.4 million Bitcoins in circulation.
Galt claims that the purported crisis strategy document is from "an otherwise reliable source" and "appears to be authentic," stating that multiple sources "close to Mt. Gox" have confirmed the staggering admissions and numbers within it.
Related: Bitcoin Exchange Mt. Gox Apologizes About Crippling Hack, Says Withdrawals to Resume Soon
The unverified alleged crisis plan reads:
"For several weeks MtGox customers have been affected by bitcoin withdrawal issues that compounded on themselves. Publicly, MtGox declared that "transaction malleability" caused the system to be subject to theft, and that something needed to be done by the core devs to fix it. Gox's own workaround solution was criticized, and eventually a fix was provided by Blockchain.info.
The truth, it turns out, is that the damage had already been done.
At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years. The cold storage has been wiped out due to a leak in the hot wallet.
The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public.
We believe in the value of Bitcoin, its potential to change the world, and its principles of transparency. Most importantly we care about the customers of MtGox and other bitcoin-based businesses who will be affected.
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."
Related: Bitcoin Plunges After Mt. Gox Blocks Withdrawals
Reacting to the news of Bitcoin's apparent collapse, top officials from six major Bitcoin companies together issued a joint statement on Coinbase:
"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," reads the statement, which was officially endorsed by the co-founders of Coinbase and the chief executives of Kraken, Bitstamp.net, BTC China, Blockchain.info and Circle.
Mark Karpelès, CEO of the now apparently defunct Mt. Gox trading post, recently stepped down from the Bitcoin Foundation's board of directors. The Tokyo-headquartered trade organization, which "standardizes, protects and promotes" the use of the digital currency, announced Karpelès' resignation on its blog in a short, unceremonious statement last Sunday, some two weeks after Mt. Gox halted customer withdrawals on February 7.
Mt. Gox issued an official apology for the freeze of external Bitcoin transfers due to what it called a "massive and concerted" denial-of-service attack. The apology pledged that withdrawals would resume again soon, though with certain limits. Yeah, make that never.
Karpelès' withdrawal of his board seat comes on the heels of Mt. Gox's recent falling out with the foundation over how Bitcoin wallet transactions are handled. The exchange claimed its recent transaction malleability woes were due to a "fundamental flaw" in the Bitcoin protocol that it reportedly put pressure on the foundation to confront. The foundation fired back, saying that Mt. Gox's issues stemmed from its own "wallet, lack of flexibility and customer support," according to ZDNet.
Bitcoin Foundation members again issued a statement regarding Mt. Gox Monday night after learning of the exchange's alleged imminent bankruptcy, this time attempting to bolster public confidence in the volatile digital currency.
"We are shocked to learn about Mt. Gox's alleged insolvency," the foundation said in a statement emailed to Business Insider. "While we are unable to comment on whether or not Mt. Gox's business operations employed operational best practices and reasonable accounting procedures, we can assure the public that the Bitcoin protocol is functioning properly."
Meanwhile, as of 2:41 a.m. ET, Bitcoin prices fell below $437.67, the lowest level since the middle of last November.
