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New Clues About Why Mt. Gox Failed (thedailybeast.com) 50

An anonymous reader writes: The Daily Beast is investigating internal emails, contracts, and new information provided by a former accounting employee at Mt. Gox for clues about how and why the world's largest bitcoin exchange failed in 2014. They conclude that CEO Mark Karpeles "bought a company already missing tens of thousands of bitcoins" in 2011, leading to an email exchange a few months later where the previous owner suggested ways to make up the $800,000 shortfall. Unfortunately, Karpeles "had signed a non-disclosure agreement that left him unable to discuss the loss," and after a second larger hack, he moved the majority of bitcoins offline into "cold storage," leaving only enough online to complete transactions.

According to the article, former Mt. Gox employees "claim rogue U.S. government agents seized $5 million of Mt. Gox funds in summer 2013 in retaliation for Karpeles's refusal to cooperate with them. This seizure supposedly cut into the firm's operating reserves, which may have been the beginning of the end, at least according to the former Mt. Gox accountant."

While $450 million eventually disappeared, Thursday ZDNet reported that a class-action lawsuit brought against the bitcoin exchange by investors "has been dismissed."
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New Clues About Why Mt. Gox Failed

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  • by Anonymous Coward on Saturday May 21, 2016 @10:33AM (#52155395)

    Mt Gox was used for illegal money laundering. This whole topic is like asking, "Why did the mafia get arrested?" ... well, duh.

    • This. And given how much the mafia depends on reliable money laundering, I'm a little surprised to see former CEO Mark Karpeles still above the waterline.
      • by rtb61 ( 674572 )

        One can only conclude that a certain level of protection is being provided in exchange for inside information and back up files, perhaps even that Mt Gox was set up to collect information then collapse when it was no longer needed and provide a mountain of bitcoin for espionage purposes. This considering whose money was lost and how vengeful those types are, they basically live for ego and revenge, they are being kept quite effectively at bay.

  • by Nutria ( 679911 ) on Saturday May 21, 2016 @10:40AM (#52155437)

    Who else thought "NID" from the Stargate universe???

  • It's Magic the Gathering Online eXchange

    Calling it "Mt. Gox" instead removes a very major clue as to why it failed. For some reason a hobby card swapping site turned out to be less than ideal for exchanging bitcoins with currency - who would have thought?
  • Unfortunately, Karpeles "had signed a non-disclosure agreement that left him unable to discuss the loss,"

    There's no way this would have been an enforceable contract. There can't be a "meeting of the minds" [wikipedia.org] when one party is withholding the fact that nearly a million dollars is missing from the company.

  • by Anonymous Coward

    IANAL but NDA's do not cover criminal activity and can't compel you to be complicit in covering up a criminal activity (and lying to customers about the state of their assets is a crime). You also can't indemnify someone against illegal activity they committed (from The Daily Beast article). This article almost feels like it placed by Karpeles lawyers because it doesn't even try to question any of these claims. There has to be something else going on here... If you buy a company and find out a substantia

    • Yep... for the amount of money involved, there should have been lawyers involved...

      Yes, I don't always like them either, but they do serve a purpose, one is to avoid this nonsense...

      But yes, Karpeles might just be an idiot, he won't be the first or last.

      • But yes, Karpeles might just be an idiot, he won't be the first or last.

        Or he could be a savvy businessman who took a calculated risk: a million missing vs. lots of growth potential.

  • Doesn't matter if it's got a wonderfully elegant underlying structure, it's still a FUNGIBLE, TRADEABLE RESOURCE, with a set of mechanisms controlled by PEOPLE.

    If a company town somewhere offered the perfect elegant scrip [wikipedia.org] system, where demand is balanced against resources to ensure complete fairness in the system... if people are in control of it, they're going to find some way to exploit their position over others with that system.

    Even though it was getting popular, it's still a niche currency, and it was

  • easy one (Score:2, Insightful)

    by PopeRatzo ( 965947 )

    Mt Gox failed because bitcoins are a stupid idea and the people who have been pushing them have a childish view of money and finance.

    • by sjames ( 1099 )

      Actually, that had very little to do with it. They were sloppy and kept losing bitcoins. The same problem would exist if they were holding dollars, rubles, or gold bars. Rule number 1 when holding something valuable: don't lose it!

  • Not a Mountain (Score:5, Informative)

    by freeze128 ( 544774 ) on Saturday May 21, 2016 @11:36AM (#52155653)
    It's MTGOX, not Mt. Gox.

    The website was originally named because it was a trading site for "Magic the Gathering" cards. It's an acronym for "Magic The Gathering Online Exchange". It's not a mountain named Gox.
    • It's MTGOX, not Mt. Gox.

      The website was originally named because it was a trading site for "Magic the Gathering" cards. It's an acronym for "Magic The Gathering Online Exchange". It's not a mountain named Gox.

      This should fixed. It's time to name a mountain Gox.

    • by Anonymous Coward

      May I introduce you to their logo?
      https://www.mtgox.com/img/mtgo... [mtgox.com]

  • by Brannon ( 221550 ) on Saturday May 21, 2016 @01:29PM (#52156105)

    It was an anti-establishment un-regulated bank for a rogue currency. That was a huge draw with a certain segment of society.

    But it turns out that there are good reasons for bank regulations.

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