If it's a hoax, then it's well done. I would guess it's something done by an investment banker who knows how to write documents up like this. But the write up is far too melodramatic for me to believe this was written by someone actually involved in the situation.
"At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public."
"This isn’t about saving MtGox anymore."
Why is there only a single line on preventing a run on MtGox? That to me would be the most pressing issue once MtGox opened up the floodgates.
This is a rather bold request. So to back it up he says the entire fate of bit-coin depends on this.
There is only a single line about preventing a run on mtgox, because (a) trading will only start when mtgox is (mostly?) re-capitalized and has most people's bitcoins. And the prevention of a run on mtgox is pretty straightforward and non-controversial ... just limit the amount of withdrawals.
I am pretty sure this document is the real thing. But one thing I cannot yet decide is whether he stole all or some of the coins or really lost them. The idea that he lost over 700K of coins over the years without noticing is very hard to believe. On the other hand if he did steal the coins, and now is asking for the community to donate them back to him, then he has an immeasurable amount of chutzpah.
..that "too big to fail" really is not about jobs or anything like that, but about maintaining faith in the currency.
The problem remains that the bailout didn't just manage to shore up faith in the currency and banking system, but grossly enriched many of the same bankers who'd, if not caused the crisis, played a major role in precipitating and enlarging it.
It mirrors "too big to fail" startlingly well.
"The unrest started when Economy Minister Domingo Cavallo introduced restrictions to the withdrawal of cash from bank deposits, intending to stop the draining of deposits that had been taking place throughout 2001 and had reached the point where 25% of all the money in the banks had been withdrawn." People had were previously gradually withdrawing money over time.; no 'bank run' had occurred. The Corralito occurred, which among other political factors lead sections of the populace to riot. Read the article.
Riots Hit Cyprus Bank After Accounts Frozen
Panic of 1837
Moreover, the panic unleashed a wave of riots and other forms of domestic unrest. The ultimate result was an increase in the state's police powers, including more professional police forces.
Baltimore bank riot
The Baltimore bank riot of 1835 was a violent reaction to the failure of the Bank of Maryland in 1834. The riot, which lasted from 6-9 August, was aimed at the homes and property of a number of former directors of the bank, who had been accused of financial misconduct and fraud
I'll give you the others, however. The fact that two are from over a century and a half ago however seems to support my implication that bank runs don't necessarily lead to riots (and more specifically, that not bailing out banks won't necessarily lead to riots).
I'm reminded of the Federal Reserve calling in every major Wall Street bank CEO and demanding that they chip in to help rescue the imploding hedge fund Long Term Capital Management, lest it take down the entire market.
First time I'm ever seriously considering just cashing out all my coins...
Longterm things like colored coins are looking good for Bitcoin, plus exchanges not run by complete assclowns
Because preventing one at this point is impossible.
If they have truly lost almost everything (2000 BTC remaining), they have nothing, and those USD funds are probably frozen or to be frozen in various investigations. On the contrary, I find this document incredible because it actually envisages keeping mtgox open under new management. That's not going to be possible. Because of massive trust issues with anyone willing to go near this company, at best it's going to close down in an orderly fashion. Putting more money into it now is a lost cause, and without an audit by outside accountants, why should anyone trust them, no matter who the CEO is?
If they actually have lots of USD (I am doubtful), the best outcome for them is a precipitous crash in the bitcoin price down to almost zero, at which point they can pay out all their customers in bitcoin easily by purchasing new bitcoin and walk away with millions of USD. They seem to have done their best to engineer this by being completely opaque about their situation, but I suspect that's just incompetence and panic.
If they don't have accessible funds in USD, and have lost their BTC (as seems likely), no-one will get anything and the company will be wound up. Payouts have been glacial or nonexistent for months, so something has been badly wrong for quite some time.
The best bet for customers now is to apply to financial authorities immediately to have the company shut down and investigated.
Wiping their tweets and leaving it to now to shut down the website then showing a blank page shows you what level they are operating on - I suspect they have no appreciable assets available and are running on fumes, if not they would be acting in a far more rational manner and reassuring customers.
They will not survive this panic and this will end badly when the financial authorities step in.
Edit: and now the MtGox website is totally down.
Mt Gox failing doesn't surprise me. The number of people stepping up and saying this is a hoax or fake does surprise me.
Over 2 months ago I responded to a poster on another bitcoin story who said they had waited over 5 months for their withdrawals. That means Mt Gox has not been solvent since at least last summer.
How can there be a run on a bank you can't get your money from? While the recent freezes of USD and BTC withdrawals were only recently announced it appears that you couldn't really get your money out before either.
I'm going to take a guess. An investor received this document, was appalled and published it.
If I was an investor in Mt Gox and received a document like this, which is clearly an admission of very illegal activity, I would publish it publicly and forward it to the FBI. I don't think there will be a gox.com, but I do think someone will end up on an Interpol list in a few days. Mt Gox wasn't run by people who should be celebrated, it was run by criminals who knowingly took monetary deposits for their insolvent for-profit business.
But Mt. Gox isn't a business. It's an unregulated exchange, so there's really no point in taking for granted that they would meet some standard of professionalism which by definition they don't have to.
I meant Mt.Gox isn't a business in the sense that businesses, typically, have regulatory frameworks they have to follow, and standards to meet. Particularly when they deal with currency.
Maybe I should have said there's no reason to expect them to act like professionals.
Sure you would, just not a licensed one.
The document states their USD assets are $22.5M liquid and $10.5M seized/locked ($33M total) and USD liabilities of $55M.
How is this $22M deficit possible when the balance sheet on page 8 (look for the non-redacted version in this thread) shows a positive income for both the 2012 and 2013 fiscal years?
But that took some time to manufacturer if fake.
Domain Name: GOX.COM
Registry Domain ID: 816800_DOMAIN_COM-VRSN
Registrar WHOIS Server: whois.godaddy.com
Registrar URL: http://www.godaddy.com
Update Date: 2014-02-24 17:29:44
Creation Date: 1997-10-09 23:00:00
Registrar Registration Expiration Date: 2017-10-08 23:00:00
Registrar: GoDaddy.com, LLC
Registrar IANA ID: 146
Registrar Abuse Contact Email: email@example.com
Registrar Abuse Contact Phone: +1.480-624-2505
Domain Status: clientTransferProhibited
Domain Status: clientUpdateProhibited
Domain Status: clientRenewProhibited
Domain Status: clientDeleteProhibited
Registry Registrant ID:
Registrant Name: Mark Karpeles
Registrant Organization: Tibanne Co. Ltd.
Also, if I were on that situation and soundly advised I wouldn't touch a US based registrar for my new domain even with a 10 foot Bitpole.
So yes, Gox.com probably his now
However, MtGox also suspended trading at the same time the document was released, which adds to the likelihood the it is real.
Create burner email addresses, prepaid cards, etc and setup the domain. Sounds as plausible as all of the other MtGox conspiracies.
Did find this though, which was nostalgic https://web.archive.org/web/19961223071948/http://www.gox.co...
> Netscape Navigator (v.2 or later), Microsoft Internet Explorer (v.2 or later) or Spry Mosaic (v.2 or later).
Domain Name: GOX.COM
Registry Domain ID: 816800_DOMAIN_COM-VRSN
Registrar WHOIS Server: whois.godaddy.com
Registrar URL: http://www.godaddy.com
Update Date: 2014-01-21 18:29:05
Creation Date: 1997-10-09 23:00:00
Registrant Name: Andy Booth
Registrant Organization: Booth.com
Placing this sentence in bold text seems like an attempt to create panic. It seems unlikely that Mt. Gox would want to do that.
The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company.
I find it extraordinarily difficult to believe that Mt. Gox would make a statement of this nature. "MtGox can go bankrupt at any moment" has a very amateurish ring to it, in stark contrast to recent communications from Mt. Gox.  Publicly stating that they deserve to go bankrupt seems highly inconsistent with planning for a relaunch.
Also, the document alternates between first person ("we will use SNS platforms...") and third person ("Publicly, MtGox declared that"), which is suspicious given that the statements released by Mt. Gox recently do not do that. 
It's possible that this is real. Personally, I doubt it.
"Work with us in everyone's interest and we may slowly be able to return some value to you, work on your own interests and we all will lose everything.".
1. A business like mtgox would expect to be moving coins into cold storage. The moment they need to move coins from cold storage into the hot wallet they would take notice and check their accounting. Theft from transaction malleability would show up in any simple summing of the balances and liabilities. They would notice the theft and stop pulling money from cold storage long before cold storage was empty.
2. The tone is too harsh on mtgox to be a report from a client of mtgox. Who produced it? If you hire a consultancy you can be sure they will brand any document produced.
3. Where did the cash liabilities imbalance come from? The "leaked" financial report did not show them spending the fiat reserve so where did the missing 20M go? How could the fiat liability be unclear? Shouldn't fiat liability be the one thing their accountant has a clear picture of? How do you "average across currencies", you cannot "average" exchange rates, the word makes no sense.
The more I look at this the more it feels like a post on bitcointalk.
Bank accounts seized by DHS?
I feel really sorry for those with funds tied up with MtGox. It was only recently where I used MtGox to store most of my bitcoin and I am lucky to have decided to move them all to paper wallets.
This demonstrates one of the biggest issues holding back widespread adoption of bitcoin, the ability of the layperson to securely hold large amounts of bitcoin.
Is that how this happened?
Given that bitcoins are supposed to be owned by addresses that are protected by private key, I wondered why people couldn't "withdrawal" their bitcoins. If Mt. Gox was controlling the private keys (as a hosted wallet service) that makes more sense.
In the future there will potentially be decentralized exchanges where a Bitcoin transaction can be a component of an exchange transaction and there is no third-party involved. But not today.
In a proper BTC exchange, most of the Bitcoin are in cold storage, which means they can't be stolen even if the exchange was hacked. The hot wallet would represent the variability in the exchanges BTC holdings and would be very small, so that in case of theft it could be either insured or covered.
That to me sounds like it's safer than any scheme I can come up with, without losing the mobility of the BTC.
Of course, if this document is true, it means MtGox did absolutely no accountancy on their cold wallets for the past 3 years.. that's just plain crazy :(
Similarly, if you deposit $100 USD(5 physical 20 dollar bills) in a bank those physical bills don't just sit there waiting for you. They can be given to anyone during the course of the business. You just get "100" added to some database row somewhere. When you want that $100 back, the Bank has to reach into its funds and pay you.
* Make a physical deposit against an account number we give you at a bank branch
* Buy Linden Dollars, swap them for Bitcoin, swap them for Dogecoin
* Give people gift card codes
* Pay random people via PayPal or Google Wallet
The last of those was the least sketchy looking but by and large it creeped me the hell out. The options looked like 50% scamming and 50% money laundering.
And a lot of the intermediary payment services like Dwolla stopped working with btc. So if you want doge, either mine it, get sent it from random strangers, or trade it for btc (which is more readily available through services like coinbase).
And before you say "more regulation" - Paypal is not a bank and operates as a money transfer service. They can and have frozen people's accounts out before.
The reason the methods are so strange is that most other method allow the buyer to do a chargeback and scam the seller.
According to his linkedin he is the Founder of Inscrypto, "We are like Bitcoin’s privately funded, decentralized version of the FDIC."
Either they lost a lot on this or they just got the best advertisement ever for why one might need their services.
(see slide 2)
original tweet sharing the slide deck:
Edit: the NYT article attributes the leaked document to someone else though, http://www.nytimes.com/2014/02/25/business/apparent-theft-at...
Whether or not the document is real or not is pretty irrelevant to me at this stage. Only bad news can now come from Gox.
- Moved to a virtual office
- No withdrawls
- AstroPay rumoured to be non functional
- Communication failure of the highest order
- etc etc
This is a company going bankrupt.
If we had our coins in MtGox and they go bust, I'm going to be pretty distraught by the experience and it would sting enough for me to pay it no more attention going into the future. If Gox does go bankrupt, Bitcoin could lose a large % of their 'userbase', and some passionate and technical ones at that. Chance of MtGox going bust is probable in my opinion. I can't really any scenario where good news comes from Gox.
Happy to buy back in again, but probably wont consider it until the dust has settled, and there's a lot more dust to be kicked up in my opinion.
Been watching Bitcoin religiously for a while now and it feels a little relieving to not have any more serious skin in, for a while at least. Happy to look like an idiot tomorrow morning/next week whenever.
I rode this ride all the way down from $800 where I was investing and never sold.
Still won't, because I can't imagine the economy being that stupid. All the money that was in Gox that was going to get out already did. The rest is already deflated from the death of confidence in Gox. All the rest of the money is going into a black hole of whatever the US fed got and whatever MtGox dies with.
Unless people start panic selling their coins on the other exchanges (which I don't even get why you would - Gox is dead, the greatest blemish of incompetence in the trading scene is no more, that is a good thing), I don't see how this would impact the general btc price any more. If anything, I'd hope it would rally, but that malleable transactions nonsense probably is going to keep people scared for a while.
> cash for buying coins at MtGox price - Target: 50% covered
Called it: https://news.ycombinator.com/item?id=7289629
On a serious note: I still doubt the legitimacy of this document, given how absurd it is to lose that much BTC without noticing.
Suppose they figured it out three or four months ago that all their bitcoins were gone, what would have made things better? Suppose they figured they'd commit a small fraud two years ago before bitcoin took off, when were they supposed to come clean?
People are building supercomputers to mine bitcoins. The whole idea of bitcoin is as rational as Easter Island totems but organized religion is probably a better analogy.
The amount of lost BTC is in the hundreds of millions of dollars. I personally cannot believe it possible that this is not an insider job. I admit, I've traded on MtGox (speculation in 2011) but things were different back then and I never had my own wallet. My assumption is that it would be trivial to run DAILY reporting that verifies the amount of BTC you think you have on deposit with what you actually do. This is banking 101 and the ONLY way to ensure there is not a bug in your transaction handling.
You are right brudgers that you cannot necessarily expect somebody to police themselves. But Coinbase. Winklevosses. Etc. I'm looking at you. These guys are CLEARLY crooks and have been all along and you let yourselves get snowed.
Far more absurd things have happened.
Department of Homeland Security?
ps. also, they have 80 THOUSAND seized btc from banned accounts?
that is a whopping bit of profit if that space is a comma and not a decimal
anyone notice this document is a bit sloppy with commas vs spaces?
This sounds like some kind of bullshit.
The downside to helping out Gox is that the incompetent people don't pay. I'd suggest those with deposits would see a better return if they allowed Gox to go bankrupt, then filed a class-action lawsuit in an attempt to pierce the corporate veil and go after the company's officer's assets. It might still be pennies-on-the-dollar but it wouldn't be zero pennies.
That's a bit mind boggling.
whatever they were paying to accountants and lawyers already, it wasn't enough.
Should be noted that at the time of this document release, all trading on MtGox is shutdown.
Here is what i've worked out so far what has happen. MtGox worked out a while ago that they were insolvent, so they reached out to prominent members of the Bitcoin community to help them out.
The plan was instead of just having MtGox make a statement saying 'we are insolvent, no more money' they would team up with the other exchanges and come up with a plan where they could wrap that news around some 'good' news.
This document is the draft of that plan as it was being worked on by the exchanges and MtGox.
The 'good' news parts would be:
1. MtGox customers would be transferred to a new entity Gox
2. Karpeles wouldn't be involved
3. The new exchange would have old 'owed' figures from MtGox
4. The other exchanges would attempt to partially bail out the MtGox holders
edit: point 4.5. the Mt Gox closing statement would shift blame away from Bitcoin - which is important. MtGox has spent the last 3 months blaming on a 'bitcoin bug' what was a failure of their own accounting and auditing system. A lot of media bought up the 'bitcoin bug' story.
5. The other exchanges and Gox would announce all this at the same time on Tue 25th Feb
6. For some reason the exchanges did their part but Gox didn't do their part
7. Someone from the exchanges leaked this internal strategy doc that was written between MtGox and the exchanges to show what should have happen today but didn't since MtGox bailed out on their part of it.
We are now stuck in a situation where part of this internal plan has been implemented (the exchanges, gox.com being registered) but the majority of it has not.
edit: most interesting q's for me atm are: why did MtGox reneg on this plan (or have they?), when did MtGox finally reach out for help? and how long have these insiders known that MtGox is in trouble - there was a huge sell spike in MtGox coins days ago.
edit 2: note that outside of verifying this doc with somebody who works at one of the companies, since this doc was leaked and published the following has happen, as outlined in the doc:
* the other markets released their joint statement
* the gox.com domain was registered/activated
* trading halted
edit 3: you may have noticed slide 8 of the presentation is censored, i've managed to remove the black bars. It is details of MtGox's financials, image here:
Google Doc version here:
"Coins for equity,…"
You can't just improvise a private-offering of shares for Bitcoin in the envisioned timeframe. The other exchanges know this. The kind of people with the deep pockets and credibility to consider a reboot/turnaround would know this.
Who's going to donate to a distrusted brand with large, poorly-understood multi-jurisdictional legal problems, which also starts out 633K BTC ($280 million, at $450/BTC) and $33 million USD in debt?
"…and cash injections to buy coins at the cheap MtGox price are some options among many."
THERE ARE NO COINS TO SELL AT THE CHEAP MT GOX PRICE, if the rest of the document is to be believed. Even if they launched this plan and kept that fact secret – against the other implied steps of bringing in credible new expert team members – there's no net-improvement in the entities' position if it keeps selling BTC (adding BTC-denominated debt to its balance sheet) at a lower price it would take to acquire BTC elsewhere. That's not even competent as fraud: you'd want to buy at the artificially-low price, not sell.
It's nonsense on its face, even according to its own terms.
I can believe this is a parody of some industry bailout idea that was floated… but recrafted to poke fun at it. (The proposed April 1 relaunch and reasoning evocative of "too big to fail" bailouts are more hints.)
For this to have been a legitimate outline of a believed-possible plan, everyone involved in its authorship would have to be high on their leftover Silk Road stashes.
Gox may well be in trouble, but the document is an obvious fake.
Of course there are coins to sell on gox, up until they halted trading, all trading is just shuffling their internal ledger, they didn't need the actual hard currencies underneath. (Which is why they should have been siloed, both the 780k reported missing bitcoins but ALSO the less highlighted 30m deficit on USD. (which is in part critical to show it wasn't just tx mallebility or btc problems, it was general bad accounting))
Meanwhile, there are 624K+ phantom coins listed as being in customers' accounts. So you can't (honestly) attract new "long term, high leverage" investor/trader fiat cash with the idea "there are cheap real coins here for you to buy then transfer out at a profit!" No one gets any new real coins by shuffling phantom coins around, and Gox needs all the real coins for themselves. If any real coins go to others at low prices then Gox becomes relatively more insolvent, not less.
And for as long as the arbitrage opportunity exists – phantom Goxcoins are selling for way less than real coins – who would be foolish enough to transfer new real coins in?
If they buy goxcoins off the exchange for cheap, they no longer have to repay the people who sold them with real coins, thereby reducing their debt
But I initially read p. 7 as proposing something that would work to attract needed money (including traders) over time, since it's labelled "Support from Bitcoin big players and core community - long term, high leverage". That would imply they're getting something of value in return, like equity or redeemable coins.
But of course the new money, as investors or traders, can't get real coins cheap, because cheap coins don't exist.
Perhaps I've misread – and p. 7 is only another restatement of the short-term gambit, to extinguish Goxcoins via buybacks while at panic discount prices.
But then the "cash injections" are just a 100% donation to help unwind Gox debts, and the crazy part becomes: who'd want to throw fresh money into that wood-chipper?
I suppose it might make internal sense if the audience was deeply committed to the idea of Gox's resurrection – existing investors, or people entangled facing personal liabilities. Prior recipients of in-retrospect fishy distributions, maybe?
Completely rebuilding an entire exchange from the ground up in 1 month seems insane. I would not like to be in that office right now.
Maybe they individually own a lot of Bitcoins and are thus, indirectly, big equity holders.
While I don't know if Charlie Shre is really guilty of money laundering, I have to question BCF's members' credibility.
See, e.g., http://multivalent.sourceforge.net/Tools/pdf/Extract.html
*COINBASE RELEASES STATEMENT ON MT. GOX INSOLVENCY
*COINBASE SAYS MT. GOX VIOLATED TRUST OF USERS
Fred Ehrsam — Co-founder of Coinbase
Jesse Powell — CEO of Kraken
Nejc Kodrič — CEO of Bitstamp.net
Bobby Lee — CEO of BTC China
Nicolas Cary — CEO of Blockchain.info
Jeremy Allaire — CEO of Circle
How do you lose HUNDREDS of millions of dollars worth of bitcoins over the course of years and not notice it?? There is no evidence that this "accidental loss" is not merely obfuscated theft.
Or is the 2nd slide written by someone else? Why would they hypothesize about the demise of Bitcoin, not to mention say "The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company" about themselves?
Still, I agree there's a high probability it's a hoax.
Re-launch April 1?
No discussion whatsoever of criminal liabilities?
Tallying seized funds in others' hands (including CoinLab and USGov), pending legal cases, as assets?
Totally fanciful belief there'd be donations and new buyers/investors ("cash injections to buy coins [that by the way actually don't exist] at the cheap MtGox price") through a 1-month shutdown-restart, where the only asset is Gox's brand?
It's hallucinatory, to whatever extent it's not an intentional parody of other 'too big to fail' bailouts.
The only way I can see it making sense is if it is by someone inside Gox, probably (from the tone) without formal tasking, seeking to galvanize action from decision-makers in a mixture of denial and panic at the time it was written.
Or, as I think is the more common term, "commit fraud".
This is bullshit. No way it went unnoticed for years. They're trying to pull what SR2.0 pulled, stole the money and are now trying to run.
If they would shut down immediately, they would own:
744,408 BTC is 367,704,753 USD... (at $493 per BTC).
744,408 BTC (MtGox av price 160 USD= 119,105,280 USD)
Not that I think MtGox is coming back. I'm only interested in how(there's no "if" anymore) they shutdown. Will they be able to make everyone whole again.
Now, if this is real and they really did lose over 700K of coins... they better just pack up and run to a far away galaxy.
Wasn't Bitcoin supposed to be different?
This is a good thing because right now Mt. Gox is giving Bitcoin a very bad name. Silk Road made Bitcoin seem shady. Mt. Gox makes Bitcoin seem like a joke, like you can lose it all because the exchanges are so immature compared to exchanges for USD or etc.
Better now than in a year when a much larger portion of the public has accepted Bitcoin. In the meantime, here comes sub-500 on Bitstamp. Buy the rumor, sell the news, folks.
Just what the community needs most - new Gox-quality services, hidden behind brand obfuscation. Ready to go!
Update: Tracking the Coinbase spot price it dipped below $500 for a short while just after the document went public. It's now back over $500. Smells even more that someone is trying to push the non Mt.Gox BTC price down to buy cheap to sell on the rebound.
In a "fiat currency" world regulators would step in and a) supply liquidity (either in BTC or fiat) and b) impose withdrawal limits while at the same time try to prevent a bank run by backing the weak actor.
(Not that I dislike BTCs lack of a central authority, but it certainly would come in handy here)
If this is real, I don't want Mt Gox to survive. Just like I don't think many of the banks during the mortgage crisis should have survived. We'd be better off today had the market been allowed to destroy them (or, if not today...then in five or ten more years; in the long run, all we've ever gotten from bailouts and Hail Mary passes for the big banks has been more criminality on an even larger scale further down the road, and less justice for the people they hurt).
I don't know what the right answer is here, but bailing out a criminal enterprise isn't it.
I don't understand how you can trust any exchange otherwise!
There's no way the other Bitcoin users can afford to pay 100M to bail out their customers.
NO, really from a standpoint of say security, financial,etc?
The Fiat is only as trust worthy as its baddest actor. This works not only for physical but for bitcoin a well.
Another way to put it is if you have 100% transparency you have 0% bad information ..ie less price swings and less opportunities to make money on swings either up or down.
Even at the very end, epic Ponzi scammer Marc Dreier was convinced he could dig himself out with more "investments".