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Dublin: 2 °C Wednesday 26 November, 2014

Bitcoin exchange MtGox files for bankruptcy after major theft

MtGox’s debts totaled more than $65 million and its chief executive said 850,000 bitcoin, worth several hundred million dollars, are unaccounted for.

MtGox CEO Mark KArpeles speaking at a press conference at the Justice Ministry in Tokyo.
MtGox CEO Mark KArpeles speaking at a press conference at the Justice Ministry in Tokyo.
Image: AP Photo/Kyodo News

THE MTGOX BITCOIN exchange in Tokyo filed for bankruptcy protection Friday and its chief executive said 850,000 bitcoins, worth several hundred million dollars, are unaccounted for.

The exchange’s CEO Mark Karpeles appeared before Japanese TV news cameras, bowing deeply for several minutes.

He said a weakness in the exchange’s systems was behind a massive loss of the virtual currency involving 750,000 bitcoins from users and 100,000 of the company’s own bitcoins. That would amount to about $425 million at recent prices.

The online exchange’s unplugging earlier this week and accusations it had suffered a catastrophic theft have drawn renewed regulatory attention to a currency created in 2009 as a way to make transactions across borders without third parties such as banks.

“I am sorry for the troubles I have caused all the people,” Karpeles said in Japanese at a Tokyo court.

Kyodo News said debts at Mt. Gox totaled more than 6.5 billion yen ($65 million), surpassing its assets. NHK said Mt. Gox

Karpeles had not made a public appearance since troubles surfaced last month. He had earlier said in a web post that he was working to resolve the problems.

Setback

The loss is a giant setback to the currency’s image because its boosters have promoted bitcoin’s cryptography as protecting it from counterfeiting and theft.

Bitcoin proponents say Mt. Gox is an isolated case, caused by the company’s technological failures, and the potential of virtual currencies remains great.

Just hours before the bankruptcy filing, Japanese Finance Minister Taro Aso had scoffed that a collapse was only inevitable.

“No one recognises them as a real currency,” he told reporters. “I expected such a thing to collapse.”

Japan’s financial regulators have been reluctant to intervene in the Mt. Gox situation, saying they don’t have jurisdiction over something that’s not a real currency.

They pointed to the Consumer Affairs Agency, which deals with product safety, as one possible place where disgruntled users may go for help.

The agency’s minister Masako Mori urged extreme caution about using or investing in bitcoins. The agency has been deluged with calls about bitcoins since earlier this year.

“We’re at a loss for how to help them,” said Yuko Otsuki, who works in the agency’s counseling department.

Read: US and Japan investigating bitcoin exchange after reported theft >

Read: Bit-convicts? Online exchangers charged with money laundering >

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