Tokyo-based bitcoin exchange said to be insolvent

March 12, 2022

TOKYO (AP) — One of the world’s largest bitcoin exchanges
has seemingly disappeared, delivering a severe blow to the virtual
currency as it struggles to gain legitimacy.
A coalition of
virtual currency companies said Tuesday that Tokyo-based Mt. Gox went
under after secretly racking up catastrophic losses.
Mt. Gox’s
website was returning a blank page Tuesday. The disappearance of the
site follows the resignation Sunday of Mt. Gox CEO Mark Karpeles from
the board of the Bitcoin Foundation, a group seeking legitimacy for the
exotic new form of money. The exchange had imposed a ban on withdrawals
earlier this month.
Prominent supporters of bitcoin — including
San Francisco-based wallet service Coinbase and Chinese exchange BTC
China — sought to shore up confidence in the currency by saying Mt.
Gox’s collapse was an isolated case of mismanagement. They said it had
abused users’ trust, but did not offer details.
"As with any new
industry, there are certain bad actors that need to be weeded out, and
that is what we are seeing today," the statement said.
Since its
creation in 2009, bitcoin has become popular among tech enthusiasts,
libertarians and adventurous investors because it allows people to make
one-to-one transactions, buy goods and services and exchange money
across borders without involving banks, credit card issuers or other
third parties. Criminals like bitcoin for the same reasons.
For
various technical reasons, it’s hard to know just how many people around
the world own bitcoins, but the currency has attracted outsize media
attention and the fascination of millions as an increasing number of
large retailers such as Overstock.com begin to accept it.
Speculative
investors have jumped into the bitcoin fray, too, sending the
currency’s value fluctuating wildly in recent months. In December, the
value of a single bitcoin hit an all-time high of $1,200. In the
aftermath of the Mt. Gox collapse Tuesday, one bitcoin stood at around
$470.
Central banks across the globe have been hesitant to
recognize bitcoin as a legitimate form of money, and Mt. Gox’s virtual
vanishing isn’t helping.
Mt. Gox "reminds us of the downside of
decentralized, unregulated currencies. There is no Federal Reserve or
IMF to come to the rescue. There is no deposit insurance," said Campbell
Harvey, a professor at the Duke University Fuqua School of Business who
specializes in financial markets and global risk management.
Campbell
believes, however, that Mt. Gox’s disappearance "doesn’t mean the end
of the road" for bitcoin and other virtual currencies.
The
collapse "might represent the end of the ‘wild west,’ where anyone can
set up shop and deal in crypto-currencies," he said. But "increasingly
sophisticated investors" are funding serious ventures that will "raise
both quality and confidence."
Documents purportedly leaked from
Mt. Gox lay out the scale of the problem. An 11-page "Crisis Strategy
Draft" published on the blog of entrepreneur and bitcoin enthusiast Ryan
Selkis said that 740,000 bitcoins are missing from Mt. Gox, which
roughly translates to hundreds of millions of dollars’ worth of losses,
although figures are fuzzy given Bitcoin’s extreme volatility.
"At the risk of appearing hyperbolic, this could be the end of bitcoin, at least for most of the
public," the draft said.
In
a post to his blog, Selkis said that the document was handed to him by a
"reliable source" and that several people close to the company had
confirmed the figures. Reached by phone, he declined further comment.
The Japanese government has not announced any formal investigation.
The scandal may cost customers dearly.
At
the Tokyo office tower housing Mt. Gox, bitcoin trader Kolin Burges
said he had picketed the building since Feb. 14 after flying in from
London, hoping to get back $320,000 he has tied up in bitcoins with Mt.
Gox.
"I may have lost all of my money," said Burgess, next to
placards asking if Mt. Gox is bankrupt. "It hasn’t shaken my trust in
bitcoin, but it has shaken my trust in bitcoin exchanges."
Mt. Gox
CEO Karpeles did not immediately return several messages seeking
comment. A security officer at the office tower said no one from Mt. Gox
was in the building. Tibbane, an Internet company that Karpeles is CEO
of, still has its name listed on the building’s directory.
"I have no idea" where they are, said Burges, the trader. "I’m both annoyed and
worried."
The
disappearance of Mt. Gox could be fatal for bitcoin, which was started
as a currency free from government controls. Bitcoin’s boosters say the
currency’s design makes it impossible to counterfeit and difficult to
manipulate.
But the currency has struggled to shake off its
associations with criminality, particularly its role in powering the
now-defunct online drug marketplace Silk Road. Only last month, another
member of the Bitcoin Foundation, Vice Chairman Charlie Shrem, was
arrested at New York’s Kennedy Airport on charges of money laundering.
Authorities
have been taking an increasingly hard look at bitcoin and related
virtual currencies including Litecoin, Namecoin, Ripple and countless
others. Some countries, including Russia, have effectively banned the
currency. In other jurisdictions, authorities are weighing whether to
try to tame the marketplace through licenses or other mechanisms.
Even
if Mt. Gox doesn’t drag bitcoin down with it, there’s fear that the
exchange’s demise will push officials to take an even more skeptical
stance.
"I think this is disastrous from a (regulatory)
standpoint," Selkis, the enthusiast, said in a message posted to
Twitter. "The hammer will now come down hard."
___
Satter reported from London. Associated Press Writer Stephen Wright in Bangkok also contributed to this
report.
___
Online:
Mt. Gox: http://www.mtgox.com
Joint statement from other Bitcoin companies: http://blog.blockchain.info/2014/02/25/joint-statement/

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