Mt. Gox

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Mt. Gox
MtGox Logo.png
Founded 2010
Headquarters Tokyo
Products Bitcoin Exchange
Twitter @MtGox
Website mtgox.com


Mt. Gox, once the world's largest bitcoin exchange, ceased operations in February 2014 under allegations of theft, fraud and manipulation.

Founded by software hacker Jed McCaleb, Mt. Gox was originally known as the "Magic the Gathering Online Exchange." Its primary focus was selling cards from the trading card game series "Magic the Gathering". In 2010, Mt. Gox began selling bitcoins. McCaleb sold the site in 2011 to Mark Karpeles, who would become CEO. By April of 2013, Mt. Gox handled 70 percent of the world's bitcoin trades.[1][2]

During the summer of 2013, various technical issues led to Mt. Gox halting customer withdrawals in US dollars. Mt. Gox claimed that a "bug in the bitcoin software" could allow transaction details to be altered.[3]

On February 23, 2014, Karpeles resigned as CEO of Mt. Gox. Incidentally, the official Mt. Gox Twitter feed erased all previous tweets from the account.[4]

Reports on February 24, 2014 have said that Mt. Gox lost almost 750,000 bitcoin due to long-running theft.[5]

Mt. Gox filed for bankruptcy protection in Tokyo on February 28. It said 750,000 bitcoins belonging to its customers and 100,000 of its own bitcoins were stolen by hackers who exploited a security flaw in its software. It also said $28 million were missing from its Japanese bank accounts.[6]

In February 2014, the Mt. Gox homepage displayed the following message:

Dear MtGox Customers,

In light of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

Best regards, MtGox Team[7]

In the first confirmation of a criminal investigation at Mt. Gox, the exchange said on March 26, 2014 that it was working with the Tokyo police regarding the disappearance of bitcoins worth about $490 million. Much of that money was found late in a hardware wallet. Karpeles was charged and was on trial in Japan, a court case that began in June and continued through December 2018. He pled innocent to charges of embezzling about 340 million yen (more than $3 million) from Mt. Gox and manipulating Mt. Gox data. Prosecutors are seeking a 10-year sentence. The verdict is expected on March 15, 2019.[8]

The Mt. Gox Bitcoin Fortune

At the time of Mt. Gox's collapse, Mark Karpeles owned a majority share in the company. To date, approximately 200,000 BTC of the original 850,000 lost have been recovered. The bankruptcy trustee handling these funds has sold approximately $387 million worth of BTC, but an estimated $1.8 billion remains. Typically in such a legal case, the recovered assets are inherited by the company's shareholders. This means that Karpeles, who is currently on trial in Japan for embezzlement and manipulation of records, would inherit most of the bitcoins. This has caused a significant uproar in the bitcoin community - Karpeles has claimed to have received "very specific" death threats from enraged, anonymous people as a result. Karpeles has publicly stated that he doesn't want the bankruptcy to be resolved in this way. A number of Mt. Gox creditors petitioned the Japanese government to put the bankruptcy case on hold so that "civil rehabilitation" proceedings could begin. In Japanese law, "civil rehabilitation" is a process in which non-monetary claims, such as bitcoin, can be converted into fiat currency based on its value at the time of proceedings. On June 22, 2018, the Tokyo District Court issued an order of commencement for civil rehabilitation proceedings to begin.[9][10]

On July 11, 2018, Mark Karpeles issued a plea to the Tokyo District Court, saying, "I am innocent of all charges. I never once improperly used any funds during my work at Mt. Gox.[11]

Key People

  • Jed McCaleb, Founder
  • Mark Karpeles, CEO

References

  1. Bitcoin exchange MtGox offline amid rumours of theft. The Guardian.
  2. The rise and fall of the world's largest bitcoin exchange. Wired.
  3. Mt. Gox resigns from Bitcoin Foundation - WSJ. Reuters.
  4. MtGox MELTDOWN: Quits Bitcoin Foundation board, deletes Twitter. The Register.
  5. Mt. Gox Halts All Transactions in New Bitcoin Setback. The Wall Street Journal.
  6. Mt. Gox says working with police in missing bitcoin probe. Reuters.
  7. Home Page. Mt. Gox.
  8. Mt Gox CEO Mark Karpeles Claims Innocence as Trial Nears End. Coindesk.
  9. Mt. Gox Creditors Get New Avenue for Recovering Bitcoin Losses. Bloomberg.
  10. Announcement of Commencement of Civil Rehabilitation Proceedings. Mt. Gox.
  11. The Fight Over Mt. Gox’s Bitcoin Stash. Bloomberg.