Major Bitcoin Exchange Vanishes Taking Millions With It
NEW YORK ( MainStreet) Holders of bitcoin wallets at Mt. Gox, formerly the largest online bitcoin exchange in the world, are seeing nothing more than a blank screen today. The entire operation has vanished and with it millions of dollars in customer assets.
In the biggest blow to the digital currency's credibility since its inception in 2009, investors in the peer-to-peer payment system are seeing deposits vanish and bitcoin value plummet. Reuters reports the Tokyo offices of Mt. Gox have been vacated, while chief executive Mark Karpeles remains unavailable for comment. He has also resigned his position with the Bitcoin Foundation.
"Effective immediately, Mt. Gox has submitted their resignation from the board of directors," Jon Matonis wrote in a Bitcoin Foundation blog entry dated February 23. "We are grateful for their early and valuable contributions as a founding member in launching the Bitcoin Foundation. Mt. Gox Co. Ltd. (Japan) held one of the three elected industry member seats. Further details, including election procedures, will be forthcoming."
Fred Ehrsam and Brian Armstrong, founders of Coinbase and other bitcoin "industry leaders," issued a statement saying, "This tragic violation of the trust of users of Mt. Gox was the result of one company's actions and does not reflect the resilience or value of bitcoin and the digital currency industry."
The statement continues, asserting that there are hundreds of trustworthy and responsible companies involved in bitcoin:
"As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. Bitcoin operators, whether they be exchanges, wallet services or payment providers, play a critical custodial role over the bitcoin they hold as assets for their customers. Acting as a custodian should require a high-bar, including appropriate security safeguards that are independently audited and tested on a regular basis, adequate balance sheets and reserves as commercial entities, transparent and accountable customer disclosures, and clear policies to not use customer assets for proprietary trading or for margin loans in leveraged trading."
An unverified but widely reported document, purportedly a Mt. Gox "Crisis Strategy Draft," states that the exchange had lost 744,000 bitcoins in a theft that "had gone unnoticed for years." The document outlines a four-part strategy to rebrand and relaunch the service as "Gox."
One comment posted in reaction to the document says, "Different lipstick, same pig."
Bitcoin enthusiast and blogger Ryan Galt, is cashing in his stake in the crypto-currency.
"I do believe that this is one of the existential threats to bitcoin that many have feared and have personally sold all of my bitcoin holdings through Coinbase," Galt says on his Two Bit Idiot blog. "To do so, and not give you the same information, would be dishonest and immoral. I am a risk tolerant investor, but I believe this will be catastrophic for Bitcoin, both as a currency and as a fledgling industry."