
Mt. Gox has posted a new update - sillysaurus3
https://www.mtgox.com/?they_finally_provide_some_actual_information
======
devindotcom
"In order to increase repayments to our creditors, it is necessary to explore
the possibility of having MtGox Co., Ltd. continue its business."

Uh, no. I formally advise against this course of action as "hilarious." Who on
god's green earth is going to bank their coins in MtGox 2.0?

~~~
gst
That would be MtGox 3.0. MtGox 1.0 got hacked in 2011 and users of MtGox 2.0
didn't seem to care.

~~~
devindotcom
Actually it would be MtGox 4.0 now that I think about it, since it used to be
for trading Magic cards.

~~~
herokusaki
Was that version ever operational?

~~~
Flammy
There was a post on the front page a while back which strongly indicated no,
other than buying the domain name, no progress was made to actually launch a
Magic The Gathering trading card site.

------
jfasi
> At the start of February 2014, illegal access through the abuse of a bug in
> the bitcoin system resulted in an increase in incomplete bitcoin transfer
> transactions and we discovered that there was a possibility that bitcoins
> had been illicitly moved through the abuse of this bug.

...

> We believe that there is a high probability that these bitcoins were stolen
> as a result of an abuse of this bug

I find the insistence that this catastrophe was brought on by a protocol bug
very suspicious. A recent post on HN by an expert elaborated on why
transaction malleability wasn't likely to have been the source of this exploit
[1]. Meanwhile Mt. Gox is insisting that they were robbed by a bug in the
protocol.

This could be the position advised by Mt. Gox's legal representation, in a
sort of "that's my story and I'm sticking to it" sort of way. If this line is
actually true, then either the transaction malleability issue is much _much_
bigger than we anticipated, or the bitcoin protocol has some vulnerability
that we don't know about.

That's scarier than a paltry exchange collapse.

[1] [http://hackingdistributed.com/2014/03/01/what-did-not-
happen...](http://hackingdistributed.com/2014/03/01/what-did-not-happen-at-
mtgox/)

~~~
corresation
I assume you mean [http://hackingdistributed.com/2014/03/01/what-did-not-
happen...](http://hackingdistributed.com/2014/03/01/what-did-not-happen-at-
mtgox/), however I would hardly attribute that to "an expert". It is raw
speculation, and states absolutes where there are none.

~~~
jfasi
Thanks for the link! I've updated my comment.

True, this post contains speculation on some matters, but if a professor at
Cornell whose work focuses around distributed systems who authored the selfish
mining attack isn't an "expert," then I don't know who is.

~~~
corresation
The author has credentials, but there is absolutely no expertise demonstrated
in cryptocurrencies, much less regarding the specific issues of MtGox.

It was all speculation, and it is inconsistent in its inputs -- on the one
hand it disbelieves what MtGox claims, but on the other it takes historic
claims of security (that keys were in cold storage) as proof of other
conclusions.

Speculation that is based upon cherry picked belief and disbelief might yield
the conclusions that one wants, but it adds little to the information pool.

And regarding claims that keys were in cold storage: Maybe, but one thing I
think we're all learning from these amateur hour platforms is that a lot of
claims aren't backed by reality. They have "Top men" working on their
security. "Top men".

------
laichzeit0
So over a period of years your Scrooge McDuck money bin gets emptier and you
are completely oblivious to this up until the point that it's basically empty?

The kind of incompetence involved here borders on mental retardation.

~~~
Cthulhu_
But hey, unregulated trading / currency, amirite? Freedom!1one! Fuk da
bankz11!1

~~~
Allower
Dude banks rip you off twice.. the second is when your government fucking
bails them out.

~~~
bushido
The ignorance around TARP baffles me. Before I explain, let me state I am
against bailouts in general.

In the bailout $245B was given to private banks and $187B was given to fannie
and freddie, money was also handed out to GM, insurance cos. etc. to a total
amount of $610B.

As of 2014, >$380B was returned in cash, >$235B was returned through
dividends, the current "loss" to tax payers is approximately $12B. Which is
expected to turn green very soon and generate substantial profits for "we the
people".

Most large banks refunded the govt. with substantial profits, so did the
insurance cos. The TARP also saved a ton of jobs.

~~~
Consultant32452
The fact that those private banks did not have their shareholders wiped out
completely and no one went to jail are the problems I have with TARP.

~~~
bushido
Jail for what exactly? No laws were broken, at least no laws that existed at
the time.

At best the whole situation in 2008 was a bank run[0] caused by a freeze in
global liquidity.

Sure the financial institutions made some risky speculation that lost them
some money. Losses were big in absolute terms but quite tiny relative to the
assets under management and profitability.

a. Do I agree with (any company) functioning in the grey area. -- No.

b. Do I agree with bailouts of any kind. -- No.

c. Can I ever agree with people who ignorantly believe $20B in a recoverable
overnight line of credit is more valuable than >$600B in assets and >$10
trillion loss in market capitalization. -- No.

There ought to have been some convictions but none were related to the TARP
directly or indirectly.

Unfortunately, most quoted "crimes" were caused by human incompetence, a large
number of other ones are caused by public ignorance and confusion about market
making.

Designated market makers were regulated and were required to stand opposite to
their own clients when necessary. This was by design and regulation. I quote
this because invariably someone is going to cry about how these designated
market makers bet against their clients.

[0]
[http://en.wikipedia.org/wiki/Bank_run](http://en.wikipedia.org/wiki/Bank_run)

~~~
Consultant32452
During the savings and loan crisis in the 80s there were a dozen task forces
in the DOJ, over 1000 FBI agents were tasked with investigating the banks. It
resulted in over 1,000 felony convictions.

This financial crisis is significantly worse and we've had virtually no effort
put into finding out the root causes. If nothing else we have internal e-mails
from banks like Bank of America acknowledging that they knew they were selling
junk bundled as AAA rated bonds which amounts to fraud. There's all sorts of
evidence of collusion in the industry around getting those bond ratings and
around selling them as something they were not. And that's just the stuff an
armchair investigator can pull out of news articles over the years. Nothing
compared to what a forensic accountant could determine.

It's of course unrelated but when it was found that HSBC was found guilty of
laundering money for drug lord the DOJ decided not to prosecute because doing
so was a systemic risk. It doesn't take much to understand that there were no
prosecutions from the banking crisis because of a fear of systemic risk.

~~~
bushido
_> This financial crisis is significantly worse and we've had virtually no
effort put into finding out the root causes._

The root causes are quite well known. The primary reasons were:

a. Recent changes to how credit rating agencies (Standard & Poor's, Moody's
etc.) calculated ratings - Specifically they started using the stock price to
increase credit rating's - this has little to do with actual quality - it was
all good when it was a bull market, they were to short sided to see that a
sell off would cause the ratings to collapse, which is exactly what happened.
This resulted in the initial liquidity crisis.

b. Repealing the Glass-Steagall Act in 1999 that was introduced in 1933 to
limit affiliations between commercial banks and security firms. This resulted
in excessive leverage being given by banks in 1999-2000 for purchasing
investments (also contributed majorly to the greater portion of the bull run
and pop of the tech bubble - explained in point d. and e.) which later morphed
into sub-prime mortgages being offered in the early 2000's by the people who
were not allowed to conduct these activities under Glass-Steagall.

c. The Community Reinvestment Act of 1977 aggravated the situation - but this
is overlooked as it leads to political finger pointing. I will skip over it
too as it would make me sound too much like the GOP. Though if you do research
it, factor the effects of point b. into the analysis.

d. Rapid increase of Fed Rate in the months/year following repealing Glass-
Steagall made it too expensive for investors to carry their investment loans
and turn a profit. This lead to rapid liquidation of investments and popped
the tech bubble. It's really that simple.

e. Following the tech bubble burst the fed rates dropped rapidly which made it
easier for people with sub-prime credit ratings to qualify for mortgages. As
it dramatically affected qualifying using the Gross Debt Service and Total
Debt Service ratios.

f. Once the rates started increasing the only choice was for banks and
security firms to structure them into exotic investments i.e. Credit Default
Swaps. When ratings dropped due to erroneous credit rating algorithms (point
a.) this became a huge issue. (Anyone ever wondered how anyone could have been
confused by the risk of something with "Default" in its name?)

g. _The most important reason of them all_. All of this would have been a blip
and not gone out of control at all if it unfolded in 2006-2007 or 2009. That
is if it was not an election year with a guaranteed change of a President.

This crisis was caused by bad timing and the shortsightedness of both parties,
the law makers, the independent regulators and of the feds. The real
systematic risk comes from ending all their careers.

Sure they made a good investment with TARP, but it could have all been avoided
if they had not deliberately let Lehman Brothers go bankrupt that resulted in
erosion of $10 trillion in market capitalization in a matter of weeks.

I'm not saying the banks are innocent, nor do I accept the "it's all fair in
capitalism" argument.

The one thing I haven't been able to wrap my head around is why the lawmakers
found it necessary to repeal Glass-Steagall if they did not want financial
institutions to conduct the very activity that the Act forbade.

~~~
Consultant32452
I want to take a step back here. Two things are fairly clear to me. The first
is that there would've been a housing bubble with or without illegal activity.
I think that's something we agree on. I personally feel the biggest
contributing factors were the repeal of Glass-Steagall, as you mentioned,
coupled with the need for the fed to keep interest rates too low for too long.
They were low from the dotcom bust, but after 9/11 had to be extended to prop
the economy back up. What's also clear to me, but perhaps not to you, is that
there was also a lot of illegal activity going on by the banks that took
advantage of what was going on in the industry. I mean seriously, there have
been exactly 2 banker convictions since all this started going down. There
should be more than 2 banker convictions just as a matter of course due to the
statistical probability at any person might be committing a crime at a random
time. That so much money was made under so many shady circumstances followed
shortly by the open admission by the DOJ that they would not prosecute HSBC
bankers due to systemic risk make it pretty clear that there was plenty for
the feds to go after but they chose not to.

------
stevenh
I'm troubled by the persistent societal trend of people being afraid to reveal
to others that they believe a malicious event was an inside job. I suspect
many of us consider it possible that the heist was organized by Mark Karpeles
himself and that the supposed transaction malleability crisis was completely
fabricated.

~~~
nwh
He was making millions of dollars from trading fees and would have continued
to do so for the foreseeable future. Why would he steal his own funds. It just
defies any reasonable explanation.

~~~
vnchr
"Millions of dollars isn't cool. You know what's cool? Hundreds of millions of
dollars."

Awful paraphrasing but the upside potential of them stealing their customers'
coins should not be dismissed so easily.

~~~
pbhjpbhj
It's millions of dollars and freedom vs. 100s of millions that get confiscated
when you're incarcerated though (and yes that's a false dichotomy - but it's a
bug in logic, it's not my fault ..).

I'd have thought that being in control of these exchanges you could pretty
much extract as much money as you'd ever need by front-running or other
manipulations. The fluctuations in market value coupled with the acceptance of
week or 2-week transaction periods means you can get a few percent of each
transaction doesn't it.

------
rdmcfee
One thing is clear. There's a lot of information yet to come. They've
indicated that it's "highly probably" the coins were lots due to the TX Mal
bug which seems to be the least likely hypothesis in the eyes of the
community.

I suspect they're still analyzing their logs to find the full story
themselves.

~~~
sirsar
Turns out the blockchain makes a great log.

The number of coins involved in malleable TXs does not add up to MtGox's loss.

------
skywhopper
Don't miss that they're also short 2.8 billion Yen in their bank accounts in
addition to the 800,000+ Bitcoins they lost.

------
ekianjo
No real new information here but they now clearly claim that the 750 000
bitcoins owned by users have been lost due to the malleability issue, but that
an investigation is under way.

~~~
DerpDerpDerp
I don't think anyone believes that 750,000 bitcoins were involved in
malleability, nor that somehow they lost 2+billion yen to "hackers" at the
same time.

------
beaker52
'Disappeared'. I'd love to see an accountant claim that all their profit
'Disappeared' because of a bug in their accounting software.

~~~
psykovsky
LOL. It's Bitcoin. BTC doesn't disappear. It MUST be in the blockchain.

~~~
pjc50
It's entirely possible for BTC to be in the blockchain but sent to an
unspendable address, i.e. "lost forever"

~~~
danielweber
People have tracked the addresses where an entity (very likely to be MtGox)
transferred funds to prove that they had lots of bitcoins, and they haven't
been moved from that address since then.

~~~
FireBeyond
If insider “malfeasance” is the true cause, it just boils down to “who is more
patient, those who have lost some funds, or the guy sitting on 700,000 BTC and
just needs to wait for this to blow over”?

------
Havoc
>The increase of current liabilities may be linked to a loss of bitcoins and
customer funds.

Perhaps they do accounting differently in Japan but surely a loss of bitcoins
would result in a reduction of assets not an increase in liabilities?

~~~
hayksaakian
they seem to account for BTC in terms the dollar amount and as a future debt
to potential withdrawals

------
Anon9238
I just called the telephone service MtGox have (+81 3-4588-3922 ) and the only
info I could get out of the Japanese girl was that all account informations
are intact and it will be possible to log in on the website later some day.
She was speaking a lot about stuff going on in court right now that has to
finish, but nobody knows how long it can take.

Called for about 5 minutes. Queue wait time was short, below 30 seconds.

------
Geee
Well, if the Russian hackers got to the server, I bet there has been many
before them. I'm pretty sure someone just messed with their database, and
added funds to their account. Maybe added fiat, and bought BTC (users could
withdraw BTC without identity verification?) because for some reason they
couldn't add BTC directly (this would explain increased fiat in the system).

------
unclebucknasty
The fact that they are missing fiat (JPY) from a bank account(s) seems to
scream that this was, at least partially, an inside job.

That could also explain why they are so eerily silent and not forthcoming.
That is, either they are hiding something or earnestly investigating and don't
want to tip off the insider(s) in question.

------
maccard
How do they not notice almost 3 billion yen missing? That's almost 30 million
dollars if I'm not mistaken.

------
Anon9238
I had over 6k USD on MtGox that I got from selling 40 BTC.

Was going to buy back bitcoins for the money if it ever became low enough.
Just saw today that they had shut down.

Now I can't access my account. Is there any chance in hell I will get my money
back? Where do I turn?

It's just silly to only post a Japanese message on the site.

------
wsh91
What's with the query string?

~~~
mbreese
It's probably just a HN hack to get a new post out of an existing URL.

------
bowmessage
I wish they could just put themselves back online with the ~60% of users'
bitcoins that they still have and just let us all withdraw them. Let us fight
in court over the remaining 40%, right?

~~~
PeterisP
If having 60% of users Bitcoins were true, then doing what you propose would
be a crime, and make the company officers personally liable to the customers
who don't get their money.

As soon as the company knows it has 60% of the needed funds, then it is
required to not allow anyone to withdraw their money. Instead, the insolvency
process tries to treat everyone equally, so that they would pay out everybody
60% of their share, instead of some people getting all their money and some
losing everything.

It is not optional, and not a choice that the company is allowed to make -
they can affect the process on how exactly that happens (i.e., liquidating,
restructuring as a running business, etc), but they can't simply pay out money
to arbitrary debtors, that would open up many trivial ways of looting all the
remaining money by insiders.

~~~
roel_v
"Instead, the insolvency process tries to treat everyone equally, so that they
would pay out everybody 60% of their share, instead of some people getting all
their money and some losing everything."

No, there are a number of parties that get their money first, like the
liquidator, the tax man, privileged creditors, etc. Which usually means that
the concurrent creditors should be happy to get a few percent of their claims
(the average here in the Netherlands is 3%).

Not disagreeing with your point, in fact reinforcing it - the proposal of the
GP is preposterous under the law, and a flagrant violation of bankruptcy law
across the world.

~~~
t0mas88
"(the average here in the Netherlands is 3%)" Only if you include the large
number of (very) small businesses that fail, because most of those still have
a substantial sum to pay to taxes, usually already-withheld income taxes and
VAT.

For a case the size of Mt.Gox the average is higher. Remember DSB Bank? They
even got above 100%, just took a long time to sort it all out.

