
Apparent Theft at Mt. Gox Shakes Bitcoin World - grahamr
http://www.nytimes.com/2014/02/25/business/apparent-theft-at-mt-gox-shakes-bitcoin-world.html
======
chm
This is a really sad moment but let's hope it teaches everybody lessons. One
very nice thing about cryptocurrencies is that they can be kept safe in cold
storage without too much trouble. Some people kept all their coins there. It's
a shame, but too bad.

Otherwise, I really hope Gox dies, in a darwinian business sense. Forest fires
destroy big trees but makes way for new shoots.

~~~
sneak
Yeah, lessons are what people need.

[http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_s...](http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_story_thread_how_much_did_you_lose/cfo57gh)

"But too bad."

~~~
chm

      I stupidly had my life's savings in bitcoin, and when the
      price started to fall, I converted to dollars and watched
      the price plummet. I lost $357,000.
    

As I said, this is a sad moment for him. My point still stands: it was a
_very_ naïve and borderline criminally stupid thing to do. I feel bad for the
guy because _he_ didn't make Mt. Gox crash, but then he could win the
equivalent of a Darwin Award in finance.

Harsh words, but you can't reason yourself out of such a bad decision as that
he made. He _should_ have used cold storage, period.

------
sillysaurus3
Wow. Check out the people who lost serious money on MtGox:
[http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_s...](http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_story_thread_how_much_did_you_lose/)

One person lost 1998 btc. That was anywhere from $500,000 to a million bucks.

~~~
meddlepal
On one hand I feel really bad for a lot of these people, but there were so
many flashing lights and warning signs around MtGox that these people had to
see putting money into this company was a bad idea right?

The exchange was a cobbled-together technical-mess that was originally
supposed to be used for trading cards. They made a quick pivot and tried to
wing it as a financial institution.

Hopefully the BTC and finance community learn from this disaster. There is
going to be a huge market for a highly-regulated exchange run by banks and
investment houses in the near future.

~~~
pmorici
Yeah, the only possible excuse is if you were new to Bitcoin and went with Gox
because it is what was mentioned in the media most often. When I first got
into it a year ago I used Gox for a couple weeks before I realized it was
totally FUBAR and got out.

------
rahimnathwani
Existing discussions about this news:

[https://news.ycombinator.com/item?id=7295190](https://news.ycombinator.com/item?id=7295190)

[https://news.ycombinator.com/item?id=7295084](https://news.ycombinator.com/item?id=7295084)

[https://news.ycombinator.com/item?id=7294762](https://news.ycombinator.com/item?id=7294762)

[https://news.ycombinator.com/item?id=7295331](https://news.ycombinator.com/item?id=7295331)

~~~
anigbrowl
We know that. It's notable that the NYT has picked up on it, and is presenting
it this way, though.

------
trippy_biscuits
It's interesting to watch ordinary people attempt to dabble in currency. How
many criminal organizations, governments, and financial institutions
(redundant?) the world over have people who wake up everyday just to
manipulate the value of currency? For example, a common criticism of China is
that they purposely manipulate their currency to devalue the US dollar. In
which ways could such organizations impact a new currency like bitcoin? Simple
theft doesn't work very well unless immediately converted to cash, just like
tangible goods being fenced, often below true value. Was it really just theft?

~~~
tdg
Not to be nitpicking but a common criticism of China is that they manipulate
their currency to _increase_ the value of dollar not devalue it.

~~~
eru
Yes, the Chinese are hard at work to give Americans ever more manufactured
goods for ever fewer green pieces of paper.

(Or to be more accurately, entries in a data base.)

~~~
hcal
I'm just an armchair economist, but I have read real economist argue that a
strong US dollar limits the US's ability to repatriate it's manufacturing
base. Also, I don't think China so much increases the dollar as it limits the
growth of the Yuan in measure with technological and capital improvements that
allow it to keep its export market strong and keep manufacturing business in
China.

~~~
eru
Yes, that's essentially what I said. And I question whether getting stuff for
cheaper (or free) is a bad thing for those downtrodden Americans.

------
pmorici
This is a bit bigger than Silk Road in terms of the amount of money people
will probably lose but it wouldn't surprise me if something similar to the
rally that followed the Silk Road take down happens. It's going to put Bitcoin
in the news, this is the best entry price in the past 4 months, and Mt.Gox
going under means the unethical players continue to shake out which can only
be good.

~~~
davidw
> Mt.Gox going under means the unethical players continue to shake out which
> can only be good.

I'm not completely clear on the details (likely no one is), but it seems to me
that the _unethical_ players stole a lot of money and got away scot free. Lots
of innocent people lost money, and yes mtgox, an _incompetent_ player, will
get shaken out. That doesn't exactly seem like a stellar outcome.

~~~
pmorici
When I say unethical players I mean Mt.Gox who's master plan was apparently to
hide their insolvency while at the same time creating enough uncertainty to
tank the price so they could arbitrage their money problems away.

~~~
davidw
Well, I meant the people actually stealing money, who don't seem to get
mentioned much in this whole discussion. What Empty Gox has done is not really
good or right or anything, but deliberately stealing is worse in my book.

------
sorenbs
How traceable are bitcoins. Suppose Gox released their logs, would it be
possible to track when someone tried to offload the stolen bitcoins on one of
the major exchanges?

given the alleged value of the stolen coins are in the range of 0.5B USD it's
not unreasonable to suspect that some government capacity would investigate
this.

If the stolen coins can indeed be detected - how would they go about
extracting the value? Seems like a large scale, risky money laundry effort
would be needed.

------
beachstartup
hypothetical question for someone who is knowledgeable about bitcoin: since
bitcoin is an experiment, what happens if it completely fails? what does a
total failure scenario even look like, in terms of symptoms?

where does all the 'real' money go?

i don't understand how 6% of bitcoin can disappear when one of the supposed
selling points is that you can verify all the transactions.

~~~
buro9
You don't need to be knowledgeable about bitcoin specifically to know what
happens, at the last financial crisis we got the same lesson.

Value is perceived, and value can evaporate.

If bitcoin completely fails, the value evaporates.

It's a bit like buying a house in Detroit a decade ago for a hefty price, and
trying to sell it today. Your money wasn't eaten by the house, no-one ran away
with it, but it's now worth significantly less than it was and effectively the
value just disappeared.

(PS: And I hope you bought the house with cash you could afford to lose rather
than debt you now owe someone.)

~~~
kapkapkap
No. Its a closed system. For every dollar that someone spent on a bitcoin,
that dollar was received by someone else.

Now, you can certainly say that the money was _spent_ on things like
electricity, or GPU hardware, that has little/no value now. But thats
irrelevant - the money most certainly spent, rather than "evaporate" into thin
air.

~~~
verroq
Oh you mean like how millions of Bitcoin market cap disappeared when people
jumped off the hype train? Does that look like a closed system to you?

~~~
dragonwriter
> Does the FBI even consider bitcoin as something that actually has any value
> that requires investigating an accusation of theft?

Market cap isn't money, its an estimate of value based on a premise that is
not merely flawed but outright insane -- that _every_ unit of an asset that
exists can be liquidated at the current market price of a single unit (that
is, that market clearing price is not effected by supply.)

Its used because its easily calculated, and people are prone to want to
believe that values that are easy to calculate are also meaningful.

------
gremlinsinc
Times like these I'm glad I didn't have a dime in gox--but I was never
trustful of them, they didn't to seem to be as legit to me as Coinbase or
Bitpay -- I'm not 100% sold on some of the other exchanges either - coins-e
has left me with a bad taste in my mouth when they held onto my dogecoins for
2 weeks during a transfer request...

Luckily I have no money in BTC at all - other than 2k for mining
equipment(scrypt) - and the coins earned from my small operation is only about
1 BTC so far -- which I'm planning on holding onto till it rallies, WHICH it
will (too much investment money in too many companies) for it not to.

Lots of companies have spent a lot of money to integrate it, and there will be
a vacuum for a few weeks, maybe even months, but trust will come back into the
market and it'll grow...

One thing I'd like to see is some sort of P2P exchange service where exchanges
don't happen on any network --ie all funds remain in wallet until time of
exchange, -- of course this wouldn't work for usd necessarily, but for coin to
coin exchanges it would, unless it was also tied into some sort of site like
coinbase where they can store a fiat currency value like a bank for deposit at
a later date.

~~~
lucisferre
> WHICH it will (too much investment money in too many companies) for it not
> to.

That sounds like bubble talk to me.

------
wila
The most interesting part in that text for me was "Released in 2009 by an
anonymous creator known as Satoshi Nakamoto"

It was news to me that the creator of the bitcoin technology is anonymous.
Heard the name several times before, but never knew it was a pseudonym for an
anonymous person or group of persons.

~~~
nervousvarun
"He" used to post in various message boards at the beginning then abruptly
stopped in 2011([http://www.coindesk.com/information/who-is-satoshi-
nakamoto/](http://www.coindesk.com/information/who-is-satoshi-nakamoto/)).

------
jbb555
I'm just hoping I can get home after work and buy some coins at the price the
are now before it goes up again. I feel that this is mostly already discounted
in the price, everyone was expecting it. It may drop further but it's not
going to last.

I should add that I only plan to spend perhaps 1% of my money available for
saving/investing in bitcoin. I think it's a good investment but the risk is
too high to risk more.

~~~
bostonpete
1% doesn't seem like "good investment" money. Sounds more like a long shot
investment...

~~~
toolz
I think we call this diversification of your investments, not 'long shot'
investing.

------
yeukhon
I wonder if law enforcement is already questioning him; I am sure FBI has eyes
on him already. Yes. I want him to come out and explain to us. Any employees
should come out and give us insider stories. Whoever took advantage of this
(whether it's criminal or Mt itself) should be punished.

~~~
sp332
I'm pretty sure the FBI doesn't operate in Japan. (Not like that, anyway.)

~~~
talmand
Does the FBI even consider bitcoin as something that actually has any value
that requires investigating an accusation of theft?

~~~
dragonwriter
> Does the FBI even consider bitcoin as something that actually has any value
> that requires investigating an accusation of theft?

ISTR that both the US Justice Department and at least one state government in
the US has initiated prosecution based on the fact that Bitcoin is a thing
with value, so probably.

~~~
talmand
I would think they were more interested in the products being sold as compared
to the made-up currency that was being used to purchase said products.

But I haven't been following that case so I have to admit I have outdated info
on that one.

~~~
dragonwriter
> I would think they were more interested in the products being sold as
> compared to the made-up currency that was being used to purchase said
> products.

I'm not talking about the SR related prosecutions, I'm talking about, among
others, the ponzi scheme prosecution against Bitcoin Savings & Trust, where
bitcoins were invested for promised returns _in bitcoins_ in a ponzi scheme.
(Though I misrecalled, and this prosecution was a civil prosecution by the SEC
not the Justice Department; still, its a pretty strong indicator that the US
federal government recognizes bitcoins as thing of value when it comes to the
law regarding such things.)

~~~
talmand
That makes me wonder if, in that case, if the SEC would have to recognize some
form of value to the bitcoins lost or is it enough that the victim feels there
was value to the bitcoins lost.

Just because the Feds may not recognize any value of an object you possess
doesn't mean that another can simple take it on a whim.

Things like bitcoin sure make for interesting legal debates.

------
blueskin_
Saw this coming a mile off.

I hope the people who lost bitcoin learn not to keep them anywhere but in
their own wallets.

~~~
naterator
I came late to the Bitcoin party, so when I started mining other coins mid-
last year the first thing I did was download the wallet client and encrypt,
and backed it up. And I _still_ didn't fully trust that my coins were safe,
and that there wasn't some other bug in the protocol that could result in my
coins getting stolen somehow (or at least confusion arising as to who owns
them). I don't understand how people put so much trust in these exchanges as
to have millions of dollars equivalent of coins there.

~~~
tempestn
I think people (perhaps rationally) believe that the people running the
exchanges know more about keeping bitcoins secure than they themselves do. The
analogy would be that you're a lot safer putting your money in a bank than
trying to keep it safe in your house. And certainly a company whose entire
business is trading in bitcoin _should_ know how to keep them safe.
Unfortunately the reality is obviously sometimes different.

Certainly you can keep your own coins essentially 100% safe relatively easily
with encryption and backups, but most people wouldn't even think to try, let
alone have the necessary knowledge to do so.

~~~
eropple
_> I think people (perhaps rationally) believe that the people running the
exchanges know more about keeping bitcoins secure than they themselves do._

There was nothing rational about this assumption. Banks are bonded and insured
with teams of very, very good security professionals auditing their stuff. Mt
fricking Gox? Not so much.

~~~
talmand
I see this as more of how local banks were before government guarantees
started being implemented. If someone robbed the bank it was your money they
were taking and not the bank's. Heck, if the bank burned to the ground your
money was gone. Made for a tighter community in some cases; you rob the bank
the whole town hunts you down.

What was a bank? Any person off the street with a safe in a building who
claimed they could keep your money safe for you until you needed it. Sound
familiar?

Personally, I would have put about as much trust into these exchanges as I
would have of those old banks.

~~~
eropple
_> Sound familiar?_

Yes, and equally stupid, which was my point in the first place. Why did you
post?

------
reality_czech
All those arguments about whether or not they ever traded Magic: the Gathering
cards look kind of frivolous now, DON'T THEY. Sounds like Bitcoin is about to
have its Enron moment...

------
karmicthreat
I really wish I had some BTC just to separate some fools from their money.
Either through trading on the market or some sort of BTC based gambling. BTC
isn't very liquid but I'd bet you could extract 50K in USD from it a year
without too much trouble.

~~~
mimog
>> I really wish I had some BTC

So go and buy some

~~~
talmand
He'd be rich if only "something"...

