Bitcoin Exchange Mt. Gox Disappears
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Troubled bitcoin exchange Mt. Gox has vanished overnight. The company's website is now blank and the last trade in Mt. Gox bitcoin was 10 hours ago at $135. Not long ago, Mt. Gox was the largest and most trusted bitcoin exchange.
The apparent collapse of the exchange is no big surprise, however. For weeks, the exchange has halted bitcoin withdrawals and rumors of its solvency were abound. In the latest sign, Mt. Gox CEO Mark Karpeles resigned as director of the Bitcoin Foundation yesterday.
Documents titled 'Crisis Strategy Draft' revealed today suggest 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years. It says the the cold storage has been wiped out due to a leak in the hot wallet. The document shows assets of $32.43 million and 2,000 BTC, versus liabilities of $55 million and 744,408 BTC.
The documents also highlights a four part strategy to avoid a chaotic situation, including reducing liability and temporarily switching off the MtGox exchange. It is unclear if the execution of the strategy has led to the turning off of the website and exchange.
Explaining the situation, the document says:
"For several weeks MtGox customers have been affected by bitcoin withdrawal issues that compounded on themselves. Publicly, MtGox declared that “transaction malleability” caused the system to be subject to theft, and that something needed to be done by the core devs to fix it. Gox’s own workaround solution was criticized, and eventually a fix was provided by Blockchain.info. The truth, it turns out, is that the damage had already been done.
At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years.
The cold storage has been wiped out due to a leak in the hot wallet. The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public. We believe in the value of Bitcoin, its potential to change the world, and its principles of transparency. Most importantly we care about the customers of MtGox and other bitcoin-based businesses who will be affected.
The likely consequences will be larger than this localized financial damage, and we believe that the benefits of keeping MtGox stable and running outweigh the risks. This isn't about saving MtGox anymore"
The documents also proposes a 4 part strategy to avoid a chaotic situation:
1- Immediately reduce liabilities as much as possible with partners
With actual assets using arbitrage/ injecting new coins to erase them from the books. Informing and asking selected Bitcoin main players to ask for their help. The MtGox price is low, making it possible to erase a significant portion of the debt, but it needs to be done quickly. Injections in coin are most useful (enough to run the exchange) but some cash is also needed to not run a fractional reserve.
2- Switch off the MtGox exchange temporarily (1 month) while announcing a restructuring and re-branding
On a freshly branded static homepage, post a letter from Mark Karpelès stepping down as CEO of MtGox, bringing in transition advisors, and citing poor organization and technology. Moving to a new country (Singapore?) could be helpful.
3- Push the new branding (ready) and reset all SNS channels for communication:
Using Facebook, Twitter, etc with the new branding, we will give constant updates, changing the tone of communications and informing stakeholders on all progress: new advisors, team members, location, fee structure. We need to inspire confidence.
4- Set up a competent team and redesign the service and codebase:
Announce a new CEO, talented developers, and trusted business people to establish a new business model. ( Finance, marketing strategy, IT, developers, Customer support). Build a low-cost, profitable business again that gives customers a reason to stay (low fees, stability, etc) while we work off our debts to stakeholders.
UPDATE (10:39AM ET): Mt Gox issues a statement:
Dear MtGox Customers,
In the event 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
The apparent collapse of the exchange is no big surprise, however. For weeks, the exchange has halted bitcoin withdrawals and rumors of its solvency were abound. In the latest sign, Mt. Gox CEO Mark Karpeles resigned as director of the Bitcoin Foundation yesterday.
Documents titled 'Crisis Strategy Draft' revealed today suggest 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years. It says the the cold storage has been wiped out due to a leak in the hot wallet. The document shows assets of $32.43 million and 2,000 BTC, versus liabilities of $55 million and 744,408 BTC.
The documents also highlights a four part strategy to avoid a chaotic situation, including reducing liability and temporarily switching off the MtGox exchange. It is unclear if the execution of the strategy has led to the turning off of the website and exchange.
Explaining the situation, the document says:
"For several weeks MtGox customers have been affected by bitcoin withdrawal issues that compounded on themselves. Publicly, MtGox declared that “transaction malleability” caused the system to be subject to theft, and that something needed to be done by the core devs to fix it. Gox’s own workaround solution was criticized, and eventually a fix was provided by Blockchain.info. The truth, it turns out, is that the damage had already been done.
At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years.
The cold storage has been wiped out due to a leak in the hot wallet. The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public. We believe in the value of Bitcoin, its potential to change the world, and its principles of transparency. Most importantly we care about the customers of MtGox and other bitcoin-based businesses who will be affected.
The likely consequences will be larger than this localized financial damage, and we believe that the benefits of keeping MtGox stable and running outweigh the risks. This isn't about saving MtGox anymore"
The documents also proposes a 4 part strategy to avoid a chaotic situation:
1- Immediately reduce liabilities as much as possible with partners
With actual assets using arbitrage/ injecting new coins to erase them from the books. Informing and asking selected Bitcoin main players to ask for their help. The MtGox price is low, making it possible to erase a significant portion of the debt, but it needs to be done quickly. Injections in coin are most useful (enough to run the exchange) but some cash is also needed to not run a fractional reserve.
2- Switch off the MtGox exchange temporarily (1 month) while announcing a restructuring and re-branding
On a freshly branded static homepage, post a letter from Mark Karpelès stepping down as CEO of MtGox, bringing in transition advisors, and citing poor organization and technology. Moving to a new country (Singapore?) could be helpful.
3- Push the new branding (ready) and reset all SNS channels for communication:
Using Facebook, Twitter, etc with the new branding, we will give constant updates, changing the tone of communications and informing stakeholders on all progress: new advisors, team members, location, fee structure. We need to inspire confidence.
4- Set up a competent team and redesign the service and codebase:
Announce a new CEO, talented developers, and trusted business people to establish a new business model. ( Finance, marketing strategy, IT, developers, Customer support). Build a low-cost, profitable business again that gives customers a reason to stay (low fees, stability, etc) while we work off our debts to stakeholders.
UPDATE (10:39AM ET): Mt Gox issues a statement:
Dear MtGox Customers,
In the event 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
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