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Bitcoin Crime Japan The Almighty Buck

Fraud, Not Hackers, Took Most of Mt. Gox's Missing Bitcoins 108

itwbennett writes Nearly all of the roughly $370 million in bitcoin that disappeared in the February 2014 collapse of Mt. Gox probably vanished due to fraudulent transactions, with only 1 percent taken by yet-to-be-identified hackers, according to a report in Japan's Yomiuri Shimbun newspaper, citing sources close to a Tokyo police probe. The disclosure follows months of investigations by police and others into the tangled mess surrounding the disappearance of the 650,000 bit coins.
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Fraud, Not Hackers, Took Most of Mt. Gox's Missing Bitcoins

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  • Bitcoin != Coins (Score:1, Interesting)

    by Anonymous Coward

    $370 million is subjective. 650,000 inherently worthless pieces of information went missing. Nobody should have lost any money unless you were dumb enough to buy Bitcoins.

    • by wonkey_monkey ( 2592601 ) on Thursday January 01, 2015 @06:22PM (#48713353) Homepage

      What do you think those funny little rectangles of material we all carry around with us all the time to exchange for goods and services are inherently worth?

      There's nothing subjective about the fact that you could, as some particular time not specified by the summary, exchange those 650,000 bitcoins (not "bit coins" as the summary would have it) for $370m.

      Nobody should have lost any money unless you were dumb enough to buy Bitcoins.

      Yeah, yeah, we're all bitter about not getting in on the ground floor too. Let it go.

      • by Anonymous Coward on Thursday January 01, 2015 @06:39PM (#48713415)

        Yeah, yeah, we're all bitter about not getting in on the ground floor too. Let it go.

        The most common comment on stock trading forums discussing speculative stocks. And bitcoin has so far behaved very similar to speculative and gamed stock trading.

      • Re: (Score:1, Insightful)

        by Anonymous Coward

        What do you think those funny little rectangles of material we all carry around with us all the time to exchange for goods and services are inherently worth?

        They are worth the face value because they ARE money. If I had gold in my pocket you may feel its wroth more however its useless if nobody want it and people stop caring about its rarity and scientific values. Cash IS money because my government has decreed it to be so. Unless you are a libertarian that you should realise what the government says goes, we are not savage beasts living in the wild trading sticks are rocks for goods and services.

      • by Kjella ( 173770 ) on Thursday January 01, 2015 @06:58PM (#48713505) Homepage

        There's nothing subjective about the fact that you could, as some particular time not specified by the summary, exchange those 650,000 bitcoins (not "bit coins" as the summary would have it) for $370m.

        No, there was never such a time. When MtGox collapsed there was less than 13 million bitcoins total, most of which is being hoarded. Looking at the exchange trade volume [blockchain.info] there's maybe $5-10 million dollar daily liquidity. In order to sell out without the market crashing you probably couldn't sell more than 10% of that so it'd take years to cash out. And that's assuming you don't overdo it and spook the herd so they all cash out too.

        • by delt0r ( 999393 )
          You are trying to have a rational discussion with a bitcoin fanboy. It is like talking to a HFT proponent about the benefits of increased liquidity in the market via millisecond trades of already liquid stock.

          Don't get me wrong, I am sure there are plenty of people dealing with bitcoin for what it is. A speculate "stock" with limited daily volume. But they don't go round ranting about it much.
          • During these "bitcoin is a scam" arguments, no one ever seems talks about using bitcoin for what it was designed. As an alternative medium of exchange. I would never keep money in bitcoin, because it's chaotic. I never keep money in my paypal account either, but that's not what it's for - it's just a very useful tool for buying things in certain circumstances.
            • by delt0r ( 999393 )
              I would love to have a system (like bitcoin) that worked properly, but for something to be a useful medium of exchange, it needs to have more price stability than bitcoin. It is hoarded and that just stops it being all that useful as a currency.
      • the proper answer is that they are worth whatever you can get for them. Aluminum was once a precious metal worth more than gold.

        • Hard to believe that the "precious metal" that was used to crown the Washington Monument was aluminum. (Or so I'm told.) Refining it chemically was extremely expensive. Refining it today is pretty cheap.
    • by hey! ( 33014 )

      $370 million is subjective. 650,000 inherently worthless pieces of information went missing.

      "Inherently worthless" is the salient feature of money. When you trade things of intrinsic value you are bartering. It's only the fact that you were taught to value "dollars" without question that makes you think "$370 million" has any intrinsic value.

      • Re: (Score:3, Insightful)

        by Anonymous Coward

        With bitcoin, the only thing you are trading is the knowledge that somebody wasted a shitload of electricity.

        • by Anonymous Coward

          Which is more than you are trading with cash.

          Even trading gold is nothing more than trading the energy consumed in mining it.

          • by lucm ( 889690 ) on Thursday January 01, 2015 @07:34PM (#48713625)

            trading gold is nothing more than trading the energy consumed in mining it.

            Gold comes from mines? I always believed it came from pawn shops and elderly relatives.

            • by jhantin ( 252660 )

              trading gold is nothing more than trading the energy consumed in mining it.

              Gold comes from mines? I always believed it came from pawn shops and elderly relatives.

              Well, the generation of that gold probably occurred in a process even more energy intensive than bitcoin mining, such as a very large star going out with a bang. After that it's just been transferred around.

            • Gold comes from mines? I always believed it came from pawn shops and elderly relatives.

              I thought it came from Fox news...damn you Gretchen Carlson! You damn minx, you shall not fool me again!

            • by delt0r ( 999393 )
              I currently live in Switzerland. I thought it all came from the Nazis :D.



              Boom Godwind! And i win internets for the day.
              • by lucm ( 889690 )

                It is interesting that Switzerland did all they could to protect the secrecy of the accounts of war criminals and dictators, but did not think twice before sharing information about US customers with the IRS.

                Swiss banking secrecy and swiss cheese now have many things in common (they stink, they have holes, nobody cares about it, etc).

          • by dk20 ( 914954 )

            "Cash" is backed by the government that printed it.

            Bitcoin is backed by?

            • So if somebody steals your cash the government reimburses you?
              • If the cash stolen is in an FDIC account, then yes, it does.

                • by mysidia ( 191772 )
                  FDIC does not insure or otherwise offer any protections or guarantees against fraud or theft. FDIC only protects against insolvency by your bank not consisting of any fraud, theft, or other regulatory breaches.
                  • Interesting, I did not know that the FDIC did not cover theft from the bank (electronic or otherwise), since the main point would seem to be to instill consumer confidence in putting their money in banks in the first place. Thanks!

                    • by mysidia ( 191772 )

                      since the main point would seem to be to instill consumer confidence in putting their money in banks in the first place

                      Other issues are addressed by federal regulations and required rules that banks need to adhere to and routine auditing that banks have to undergo in order to protect against fraud/theft. There are minimum dollar amounts in capital required to be chartered as a bank, and there are additional private insurance protections banks are essentially required to take out, so banks have to hav

            • by X.25 ( 255792 )

              "Cash" is backed by the government that printed it.

              I really don't know whether I should laugh or cry.

              • by dk20 ( 914954 )

                Try this.

                Go to say a gas station, convenience store, etc and offer to pay by "bitcoin" and see what they do (laugh or cry).

                I will do the same with "cash" which MUST be accepted at those stores and walk away with my product.
                One says "legal tender" and therefore is considered a legally mandated form of payment, the other is not.

        • Re: (Score:3, Informative)

          by hey! ( 33014 )

          With bitcoin, the only thing you are trading is the knowledge that somebody wasted a shitload of electricity.

          The technical term would be 'seigniorage' [wikipedia.org].

          • to the best I could determine seigniorage is the cost of making money, eg metals, printing presses, etc. There were some historical uses but those don't work any more.

        • by dissy ( 172727 )

          With bitcoin, the only thing you are trading is the knowledge that somebody wasted a shitload of electricity.

          So bitcoin is bad because the metal presses that stamp out coins and the printing presses and cutters that make bills all run on magical unicorn farts instead of electricity?

      • > "Inherently worthless" is the salient feature of money. When you trade things of intrinsic value you are bartering.

        They are not disjoint sets. Money was whatever commodity had the most acceptability and was easiest to trade. Normally that happened to a commodity with features like durability, scarcity, divisibility, etc. The US dollar is backed almost entirely by debt, so it is not true to say it is inherently worthless. Those debts (Treasury bonds, mortgage-backed securities, and bank loans) have

    • $370 million is subjective. 650,000 inherently worthless pieces of information went missing.

      One of the principals of economy is that everything is worth what somebody is willing to give you for it. The 650,000 bitcoins were worth $370 million because somebody would have been willing to give that much money for them. Of course they are inherently worthless, just like every other piece of matter or information or string of bits. Nothing has intrinsic worth. It only has the worth of what someone is willing to give you in trade for it.

      • Actually, it's generally accepted that things like oxygen and water have inherent worth - it's just that most such things exit in such quantity that they have very little *economic* worth - a largely unrelated concept.

      • by Locando ( 131600 )

        The 650,000 bitcoins were worth $370 million because somebody would have been willing to give that much money for them.

        We don't know that. In fact, I would consider it highly likely that if someone tried to unload 650,000 bitcoins at once, the value of the bitcoin would quickly drop enough so that those 650,000 wouldn't be worth $370m anymore.

        • Yup, and the same thing would happen if you tried to sell that much value in other lower volume currencies. However, that is how we value things. We consider the spot price and don't consider slippage.
    • Value is subjective. If it weren't nobody would trade anything for anything, because everyone would value everything exactly the same as everyone else did.
  • Didn't we all talk about this ages ago and the firm conclusion was MtGox used the bug the transaction malleability bug to their full advantage and ran off with everyones money?

  • Why do people make so many errors when putting the name of the Magic The Gathering Online eXchange in a news story?

    It's almost like it isn't still a hobby site.

    • Can't sites change use in your world? At one point it might indeed gave been "Magic the Gathering Online Exchange", but it doesn't always have to stay that.

  • What I don't understand is this: Bitcoin is a distributed network. We know (or can know) which bitcoins were "lost" in MtGox. What is "true" in the Bitcoin world is determined by the "opinion" of the network.

    So couldn't the top 5 or 10 players in the network, who collectively have something like 75% of the computing power, collude and simply invalidate the transactions out of MtGox?

    • What I don't understand is this: Bitcoin is a distributed network. We know (or can know) which bitcoins were "lost" in MtGox. What is "true" in the Bitcoin world is determined by the "opinion" of the network.

      So couldn't the top 5 or 10 players in the network, who collectively have something like 75% of the computing power, collude and simply invalidate the transactions out of MtGox?

      No, the top largest mining pools cannot because:

      1) A 51% attack doesn't change the blockchain history or allow one to steal funds out of existing accounts. If this even ever did occur(unlikely) they could simply either temporarily deny new transactions from being processed or make 1-3 double spends before being noticed and stopped.

      2) The miners in the mining pools can instantly switch pools if their trust is misplaced by the pool operators with no effort and have done so repeatedly in the past where top min

    • no. assume you have one transaction 50 blocks ago that requires changing. In order to preserve every other transaction in those 60 blocks, you will need to recalculate all 60 blocks (each block of transactions feeds into the hash algorithm for the next block). There are thousands of blocks that need to be "fixed" to do what you are talking about. The computing power required to "catch up" to the current blockchain is obscene unless everyone agrees to stop working on this blockchain until that is done.

    • > We know (or can know) which bitcoins were "lost" in MtGox

      No, we can't, because those were not block chain transactions. They were funds transactions internal to Mt. Gox's account books. Let's assume Mt. Gox had 500,000 bitcoins in "cold storage" (the private keys printed out and stored in a safety deposit box, where no hacker can get to them). Some of those 500,000 coins belong to Mt.Gox itself, from accumulated trading fees. The rest belong to customers. Who owns what is kept track on their inter

      • by Tom ( 822 )

        Thanks to you and everyone else for their answers, now I understand the whole thing a lot better.

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