Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Friday, February 28, 2014
Bitcoin Updates - February 28 , 2014 -- Mt Gox files for bankruptcy in Tokyo - now a total of 850 , 000 bitcoins allegedly stolen ( of which 100 , 000 were owned by Mt Gox ) ..... Additional articles of note on bitcoin touching on Mt Gox , regulation attempts , security / malware .......... BTC - E coming under a major cloud of suspicions - keep an eye on this Exchange folks - as bad as Mt Gox was , you at least knew who was the CEO of Mt Gox , where their office in Tokyo was ( until they went belly up and vamoosed ) , where Mt Gox was set up and which country's laws and regulations would apply - as you can't state with certainty where BTC-e is located ( Russia or Bulgaria ) , whose country's laws apply ( Russia , Bulgaria or might it be Cyprus ) and who owns and / runs BTC-e , ask whether this lack of transparency provides comfort after the MT Gox debacle ?
Readers will recall that back in October, when the only way for Bitcoin seemed up, none other than the head of sophisticated hedge fund/private equity megafund Fortress Group, Michael Novogratz, recommended buying Bitcoin: "I have a nice little Bitcoin position,” Novogratz said. "Enough that I’m smiling that it doubled... Put a little money in Bitcoin...Come back in a few years and it’s going to be worth a lot."
Or, you can come back in a few months and now that the momentum euphoria is over and done with, watch it be worth far less.
According to the FT, Fortress "is sitting on losses of $8m on an experimental investment in Bitcoin. The company’s annual report revealed that it bought $20m of the virtual currency in the final months of last year, making it the first mainstream investment company to list Bitcoin among the assets on its balance sheet."
The value of its position was already underwater by the end of December, however, and the price of Bitcoin has continued to slip this year amid scares over the underlying technology and the bankruptcy of what was once the largest virtual currency exchange.
By buying the currency for its own account, Fortress not only places a small bet on its future value but also learns more about the practicality of using Bitcoin as a financial instrument in the future and about the potential for business built around virtual currency.
The company deemed Bitcoin too speculative, however, to put in any of the funds it manages on behalf of other investors.
Good. Because as of year end, Fortress valued its stash of Bitcoin at $16.3 million at the end of December. Since then Bitcoin has fallen by a further one-quarter so far this year, cutting the value of the stake to $12.1m at mid-Friday prices. The bankruptcy of the formerly biggest Bitcoin exchange will do that.
As for Fortress, don't cry for the asset manager: "The experimental stake in Bitcoin represents a fraction of Fortress’s $2.6bn balance sheet. The company manages $61.8bn in assets and posted a 121 per cent rise in net income to $484m for 2013."
Oh well: on to the next gigamomentum (to borrow a popular prefix) investment which sophisticated investors buy into and just because the dumber money always chases on their coattails, makes them believe what incredible investors they are. So for anyone following in Fortress' footsteps: go for it, just don't come back to check on your money "in a few years." It will have long since been "disappeared." Come to think of it, just like those millions of Mt. Gox bitcoins...
The fallout from Mt. Gox’s 28th February bankruptcy filing is already in full swing, as one bitcoin investor has filed a class action lawsuit in Chicago on behalf of the alleged victims of the troubled Japan-based exchange and its CEO, Mark Karpeles.
Gregory Greene and his lawyer Steven Woodrow, a partner at the Edelson law firm in Denver, Colorado, filed a complaint against Mt. Gox and Karpeles in the U.S. District Court on Thursday, claiming the company was fraudulent and negligent in its failure to protect customers against theft.
Woodrow, who submitted the lawsuit to the Northern District of Illinois in the U.S. District Court, stated his position on the filing, saying:
“This is a case of serial mismanagement, if not outright fraud, by Karpeles and Mt. Gox.”
Greene estimates that his stake of bitcoins tied up in Mt. Gox is around$25,000. Still, the reported shortage of 850,000 bitcoins at Mt. Gox puts the total estimated value of lost bitcoins at over $475m at today’s market price, meaning the lawsuit could be the first of many.
Edelson partner Chris Dore spoke to CoinDesk about the case, confirming that interest in joining the class action is already high.
Framing the case
Dore said that the Mt. Gox case is a natural extension for his law firm, which specializes in consumer tech cases relating to online privacy and data breaches. He noted that though this is the law firm’s first bitcoin case, they’ve been interested in the space for some time and even “started investigating” the Mt. Gox incident before they were contacted by Greene.
As for whether they’ll be able to try the case in the US in light of Mt. Gox’s status as a Japan-based organization, Dore was unconcerned, saying:
“We moved under US law. They have a US entity that is here and they do business in the US, so at the most basic level they’ve subjected themselves to the jurisdiction of the US.
So, we don’t have to worry about Japanese laws and how they apply.”
Dore admitted there would likely be “some issues” given the company’s location, but said he’s “confident that [his firm] can work through those” on behalf of its clients.
Failure to provide security
Central to Greene’s case it seems will be the assertion that Mt. Gox had the obligation to uphold appropriate security on behalf of customers, and that this failure amounted to negligence.
Argues Greene in a statement:
“Mt. Gox intentionally and knowingly failed to provide its users with the level of security protection for which they paid.”
Dore echoed this concern, stating:
“Part of the reason that you pay a company like this is to provide a security service. Part of that fee is the promise they’re making to keep their money safe.”
The lawyer continued alleging that Mt. Gox effectively allowed a “slow bleed hack” to occur, one that its purportedly improper accounting practices were ill-equipped to detect.
Valuing the loss
Dore indicated that exactly how class members would be reimbursed, if needed, was still “an open question,” but that he already sees a number of ways any lost bitcoins can be properly valued.
In particular, Dore suggested that prices could be fixed at the time of Mt. Gox’s decision to abruptly suspend service, or at any other similar point.
“There is a sliding scale because it is a fluctuating currency, but you can look at it from a timing perspective.”
As to the issue of whether any bitcoins will prover recoverable, Dore, too, was optimistic. Said Dore:
“Simply because you’ve declared bankruptcy doesn’t mean that you have no money. We don’t know, that’s the bottom line. That’s what the purpose of the lawsuit is, to uncover where the money went.”
First lawsuit of many
Greene’s lawsuit is seeking class action status for himself and other Mt. Gox users, who are asking for monetary damages and restitution. Unfortunately for many, Dore indicated that the class is limited to US citizens only. However, he did state that his firm may file a similar suit on behalf of clients in Canada and other jurisdictions.
Still, interest in the US is high, as Dore indicated, saying:
“Since we’ve been sitting here on the phone, I’ve seen three emails come in.”
It’s not yet clear who will represent Mt. Gox in its defense, though Baker & Mackenzie, the law firm that represents Mt. Gox in Japan has been named as a possibility.
Baker & Mackenzie declined to comment on the article. For more on the case, view the full filing below.
Image credit: Class action lawsuit via Shutterstock | Additional reporting provided by Tom Sharkey
BTC-e, the notoriously private bitcoin exchange rumoured to be based out of Bulgaria, has revealed that it has reduced fees across three of its third-party withdrawal services.
The news was revealed via a string of Twitter posts beginning on 27th February and continuing into 28th February that called for USD and EUR withdrawal fees to be reduced to as low as 1%.
The move brings withdrawal fees closer to the site’s USD deposit fees, which were slashed to 0% on OKPAY and Perfect Money earlier in February. BTC-e imposes an additional standard fee of 0.2 to 0.5% fee on every transaction.
The two largest bitcoin exchanges currently available to investors, Bitstamp and BTC-e, both stand to gain market share in the wake of Mt. Gox’s sudden meltdown. But some are questioning the safety in using the largely anonymous exchange BTC-e.
Not much is known about BTC-e besides its size and some scant information on its website. It’s the second-biggest bitcoin exchange by 30-day volume, according to bitcoincharts.com. There’s evidence that BTC-e is already benefiting from the Mt. Gox halt; a Tuesday update on BTC-e’s support website noted that the support system would be moved to a new platform “in order to cope with the increased number of client requests.”
But who runs it, and from where?
The terms of use on the exchange’s website say it is governed by the laws applicable in Cyprus but the website’s description on Google says the exchange is based in Bulgaria. The support system’s latest updates are presented in Russian and English. The founders of the BTC-e bitcoin exchange have taken pains to remain anonymous, giving only the names Aleksey and Alexander in a December interview with CoinDesk.
Users are unable to send a message to the site’s administrator. When one tries, as this reporter did, a window pops up with this response: “Please use tickets to contact us about any questions & problems.” There is no email address easily available on the website.
BTC-e did not respond to requests for comment sent through the support system and a Twitter account purporting to be from the exchange. Interestingly, the handle@btcecom, on Wednesday only followed one Twitter account — that of Charlie Shrem, the New York-based bitcoin entrepreneur arrested in late January on charges of alleged links to the bitcoin-only drug market Silk Road. The account now follows no one.
Zachary Collier, who works as an application developer in Pueblo, Colo., questioned BTC-e’s legitimacy in a post on Reddit that has nearly 300 comments.
Collier, 25, told MarketWatch he started using the exchange more than a year ago because it was one of the first to support litecoin, a derivative of bitcoin. “I took the risk so I could [convert] some of my cryptocurrencies into litecoin,” he said in a phone interview, adding that he doesn’t keep his funds on the exchange. Read: To secure your bitcoins, print them out
“If we don’t know their identities, we can’t really know anything else about the exchange,” he said in a phone interview. One of his biggest concerns is BTC-e’s unknown location. “Some people think it’s in Bulgaria. There’s a good chance it’s in Russia,” he said. A location in Russia could be problematic because authorities there have come out against bitcoin, he added.
Jeremy Liew, a partner at Lightspeed Venture Partners who has invested in the Chinese bitcoin exchange BTCChina, predicted a more dire outcome for those switching to BTC-e in a tweet. He testified at the virtual currency hearings in New York earlier this year.
Its founders and owners are supposedly called Aleksey and Alexander, which could be pseudonymous, and they may or may not be young and/or Russian.
Its domain name is administered by the branch of an Australian domain-hosting company in Johnsonville, on the outskirts of New Zealand’s capital city of Wellington. Its support desk runs on a program supplied by an Indian company with an office in England and the content is in Russian and English. No physical contact details and/or phone numbers are provided on the website.
The payment collection service it uses operates out of Moscow, Russian Federation and Kiev, Ukraine. The operation itself may or may not be located in Cyprus but it apparently uses the services of a branch in the Czech Republic of a major German bank. Funds apparently find their way there via a UK financial services agency registered in the British Virgin Islands.
Welcome to the distinctly opaque world of BTC-e – with the seemingly terminal demise of MtGox now reputedly the world’s second-largest bitcoin exchange.
Then there’s the ‘Bulgaria connection’
The above insights have been harvested from a range of open sources on the World Wide Web. It’s not much to go on and, bizarrely, what we haven’t been able to find is more than a scintilla of evidence for the oft-repeated description (we ourselves are guilty) of BTC-e as ‘Bulgaria-based’.
But then, the other surviving major – Bitstamp – is equally routinely described as ‘Slovenia-based’, raising the spectre of south-east European domination of world bitcoin trading. Bitstamp indeed has a Slovenian founder and CEO – one Nejc Kodrič, whose photo on his linkedin.com page could have been taken for his high-school yearbook, he looks that young – but on the exchange’s website, in the only entry in the ‘About Us’ section, Bitstamp is placed in the picturesque village of Aldermaston in Berkshire, UK.
Back to BTC-e, and the purported Bulgaria connection, here’s an illustrative extract from a story running today at buzzfeed.com, about American Barry Silbert’s plans to establish a regulated US-based bitcoin exchange.
The two main Bitcoin exchanges aside from the crisis-ridden Mt. Gox — Bitstamp and BTC-e — are based in Slovenia and Bulgaria respectively.
Well, as mentioned earlier, we can’t find anything which puts BTC-e in Bulgaria in any shape or form.
BTC-e joins Facebook - perhaps
The exchange does have a page on Facebook though, as of Sunday last and as of this minute with six likes. It’s entirely possible that neither Aleksey nor Alexander had anything to do with that initiative because a feature of bitcoin is of course that everyone is allowed to do pretty much anything they want, and the page byline says that it’s ‘for BTC-E exchange traders’.
Regardless of who created that Facebook page, don’t bother going there if it’s substantive – or indeed any – information about BTC-e that you’re looking for. There isn’t any.
Trying to nail down where BTC-e might be found by using the website’s ip address, publicly available at whois, didn’t help. The site uses the Cloud Flare CDN service and in consequence returns a different IP depending on where you query from. If you request that site from Europe, as we did, it returns the content of the site from Cloud Flare servers in Europe. Ditto if you’re in the United States – you get a US ip address. In fact the BTC-e.com site could be located anywhere in the world. That’s the Cloud for you.
Aleksey and Alexander speak to the media - apparently
How do we even know that BTC-e’s proprietors are Aleksey and Alexander? Only because – and to the extent that – some e-money media say so. On 11 December last, coindesk.com ran an item about ‘recent banking issues’ experienced by BTC-e customers and indicated that they – coindesk.com – actually got voice-to-voice with Aleksey and Alexander, though “they wouldn’t share their surnames”.
But coindesk.com felt able to write:
At least one of the banks involved in the process is located in the Czech Republic; the BTC-e site references Bulgaria in its SEO descriptions; the founders, Russian programmers Aleksey and Alexander, honed their skills at the Skolkovo tech park; and the BTC-e managing company is based in Cyprus.
That’s true by the way about BTC-e search engine results. If you google the name, you get under the website url the statement that it’s ‘a cryptocurrency exchange based in Bulgaria where users can trade Bitcoins’ and other things. You just don’t find that statement on the website itself.
For the ignorant on point, the ‘Skolkovo tech park’ mentioned by coindesk.com is more formally known as the Skolkovo Innovation Centre, a Russian government initiative being progressively developed just outside of Moscow, with the broad objective of lifting the Russian Federation’s game across all technology sectors. It does sound like the sort of place where Aleksey and Alexander might have indeed ‘honed their skills’.
Does it matter?
Should we – or anyone – care who is behind BTC-e or where it operates from? Knowing that MtGox.com had an office in Tokyo and a real face – that of the now much-hounded Mark Karpeles – hasn’t stopped that particular bitcoin exchange from shutting its doors, in all probability terminally and with significant loss to its clientele. And given that it is an absolute tenet of the bitcoin faith that no government controls it, the concomitant surely is that anyone shafted by the MtGox debacle or any other bitcoin-related shenanigan is entirely on his or her own.
It seems though that BTC-e itself cares. For just yesterday, a statement appeared in the News section of its website concerning the MtGox shutdown. After making predictably reassuring noises about the BTC-e operation, the statement says this:
The company plans to start publishing financial statements, verified by an external audit, on a regular basis.
Presumably those auditors will want to know, and may even insist on exchange users knowing, who calls the shots at BTC-e.
Interestingly, there’s a similar MtGox-induced statement at Bitstamp.net, also in News and also from yesterday:
Bitstamp is now performing quarterly financial audits and will post our financial reports on our website.
It’s scarcely credible to us here at iNVEZZ.com that any investor would entrust either fiat money or bitcoins to an exchange about which not one iota of information is volunteered on the exchange website, so thumbing its nose at any suggestion of accountability should things go pear-shaped.
Seemingly Aleksey and Alexander, or whoever they are, did come out from under their particular rock to talk to coindesk.com but that is hardly a substitute for transparency – perhaps ‘glasnost’ is the more apt term here – in the operation of a major financial exchange.
Maybe ‘they’ know
It’s occurred to us that there is perhaps some underground current of knowledge surrounding BTC-e.com that we’re not privy to but that is shared by a cognoscenti within that exchange’s clientele. Certainly perusal of a sample hour of chatter early today on the BTC-e chat forum hosted by dcaz.net gave no indication that the exchange’s anonymity – or integrity come to that - is a live issue.
Which is fine for them, if such an in-crowd exists. But it’s not for the poor schmucks who may hereafter be induced to go trading on BTC-e, should it then follow MtGox into oblivion.
Aliosha, Sasha – it’s time to front up or sell out to someone who will.
The Volgograd Prosecutor’s official website has seemingly issued a retraction of the report it ran yesterday, in which it was claimed that citizens would be blocked from accessing BTC-e.
A machine translation of this latest news on the VolgoProc.ru site reads as follows:
04.02.2014 Note to editors
On the prosecutor’s Volgograd Region is hacking. As a result, it was posted on the website the news that a criminal’s online resources are untrue. Prior to resolve technical issues, please check the authenticity of the news in the press service of the Prosecutor of the Volgograd region on the phone 4/21/31.
It’s possible that hackers were responsible for either the original story or this retraction. Either way, there is little cause for alarm as we reported yesterday.
We will update this story as it develops.
Update: Russianreader and chat room resident, eliotcougar, who helped with context for the original story, suggests a possible explanation. Apparently, in Russia controversial ideas are sometimes floated online or in the media as a means to gauge public sentiment. Should opinion prove negative, they are then retracted as “hacks” or otherwise explained away.
The report is talking about blocking the BTC-e website in Russia. The website would be blocked under a new Russian law that allows the government to block certain websites associated with terrorism or extremism without a court order.
The accusations are coming from one local legislator in one Russian city. The complaint needs to reach the Prosecutor General’s Office before any action can take place.
BTC-e is located in Bulgaria, which means this is more about blocking a Bitcoin website in Russia than actually investigating BTC-e.
There are Still Problems for Bitcoin in Russia
While there are easy ways to get around a nationwide ban of BTC-e in Russia, the reality is that the regulatory picture around Bitcoin is still not very clear in this country. A country that is willing to ban websites without a review from any court is definitely the kind of country that would also try to ban Bitcoin. The Russian government recently sent out a warning about how businesses and the Russian people should try to avoid Bitcoin because of the risks involved with the digital currency. It may only be a matter of time before Russian regulators stop making recommendations and start shutting down Bitcoin businesses.
Banning Bitcoin Won’t Work
As I’ve written in the past, the reality is that a ban on Bitcoin will be about as useful as banning the BTC-e website. The Russian people will simply use Tor and VPNs to get around the strict regulations placed on the Internet or Bitcoin. The fight against Bitcoin is a battle that cannot be won by any government, but that definitely won’t stop them from trying.
Note: Thanks to eliotcougar from our chatroom for helping out with some info for this story.
Mt. Gox is officially filing for bankruptcy protection with an outstanding debt of ¥6.5bn ($63.6m), finally admitting openly that 750,000 of its bitcoins and 100,000 of the company’s own have been lost.
The exchange’s lawyer announced the news during a conference at the Tokyo District Court late on Friday afternoon, Japan time. CEO Mark Karpeles, wearing a suit and tie, bowed deeply in the tradition of disgraced Japanese business leaders fronting the media.
Subtitles read: “The 750,000 bitcoins we kept for users, (37,000 million yen), almost all gone.”
The 850,000 BTC loss figure is higher than the 744,400 figure mentioned in the so-called “Crisis Strategy Draft” document leaked and released by Ryan Galt, aka The Two-Bit Idiot, earlier in the week.
That same document also described fiat assets of $32.43m and liabilities of $55m. The assets include $5m “held by CoinLab” and another $5.5m “held by the DHS“. The Department of Homeland Security seized that amount from Mt. Gox’s US accounts in mid 2013, claiming it had not registered properly as a money transmission business.
Nightmare week
It’s been a nightmare week for Mt. Gox and its customers, with much of the situation’s true nature still mired in online speculation, rumor and conspiracy theories. The exact fate of all Mt. Gox customers’ bitcoins is still unclear.
CEO Karpeles resigned his position on the Bitcoin Foundation Board just four days ago, beginning a chain of events that culminated in today’s press event. Shortly after that, Mt. Gox’s entire Twitter history disappeared, the ‘crisis’ documents were leaked, and then the website went completely offline, taking with it most customer hopes of ever seeing their money again.
Many have resigned themselves to losing hundreds of thousands or even millions of dollars, including those who claim to have lost business startup capital, college funds or even entire life savings in the crash.
http://www.zerohedge.com/news/2014-02-28/mt-gox-files-bankruptcy-after-473-million-bitcoins-disappeared ( Bitcoins disappeared like magic .... )
Mt Gox Files For Bankruptcy After $473 Million In Bitcoins "Disappeared"
Submitted by Tyler Durden on 02/28/2014 07:56 -0500
For a case study of a blistering rise and an absolutely epic fall of an exchange that i) was named after Magic: the Gathering and ii) transacted in a digital currency which many have speculated was conceived by the NSA nearly two decades ago and was used as a honeypot to trap the gullible, look no further than Mt.Gox which after halting withdrawals for the second (and final time) has finally done the honorable thing, and filed for bankruptcy. As the WSJ reports, "Bitcoin exchange Mt. Gox said Friday it was filing for bankruptcy protection after losing almost 750,000 of its customers' bitcoins, marking the collapse of a marketplace that once dominated trading in the virtual currency. The company said it also lost around 100,000 of its own bitcoins. Together, the lost bitcoins would be worth approximately $473 million at market prices charted by the CoinDesk bitcoin index, although the price of Mt. Gox bitcoin had fallen well below that index after it stopped bitcoin withdrawals in early February."
The punchline: speaking to reporters at Tokyo District Court Friday after the bankruptcy filing, Mt. Gox owner Mark Karpelès said technical issues had opened the way for fraudulent withdrawals, and he apologized to customers.
"There was some weakness in the system, and the bitcoins have disappeared. I apologize for causing trouble"
So $473 million Bitcoins disappear just like that? But you heard the man - he is sorry. So all is well - and why not: it works for the TBTF banks every day.
What is amazing is that at the time of filing Mt. Gox had outstanding debt of about ¥6.5 billion ($63.6 million), and just as amazing is that it actually had assets worth ¥3.84 billion.
Elsewhere, prices on the CoinDesk index, which tracks the Bitstamp and BTC-e bitcoin exchanges, fell slightly after the announcement but appeared to stave off a larger drop.
Mr. Karpelès, wearing a gray suit and a blue tie, appeared calm while his lawyer did most of the talking, but he appeared to have difficulty finding words when reporters asked him to send a message to his investors, just repeating his apology.
Computer geeks who were hoping to ride the momentum train to riches, and apparently had never heard of gold, were unhappy:
"It is disappointing they hid so much for so long," said Jonathan Waller, a 30-year-old game developer who said he had had 211 bitcoin in Mt. Gox. "I hope they manage to become a fully-functioning exchange again, but their reputation is so damaged it may not be possible," he said.
Over the past month, customers from as far away as the U.K. and Australia had come to air their complaints outside the company's Tokyo offices. One of them, Londoner Kolin Burges, figured in news photos around the world holding a sign saying, "MT GOX—WHERE IS OUR MONEY."
William Banks, a website developer in Australia, said he lost about 100 bitcoins in Mt. Gox. He had been using the platform since the end of 2012, when he bought some bitcoins at $40 each. Recently, he bought more at about $800 a pop as he became more confident in the virtual currency. He said he has contacted a Japan-based lawyer to look into legal action.
About Mt. Gox's loss of bitcoins, he said, "That seems impossible to me. It's just such an astronomical amount of coins to lose."
Only when redenominated in USD. Remember: BTC is its own currency so why fret? As for the collapse of this latest Ponzi scheme: if things appear too good to be true (wink wink S&P 500), they usually are.
HANOI, Vietnam (AP) — Vietnam's communist government said trading in bitcoin and other electronic currencies is illegal, and warned its citizens not to use or invest in them.
A central bank statement late Thursday didn't spell out penalties for those who disobeyed the instruction, but it said that virtual currencies are linked to money laundering and other illegal activities.
The collapse of a major bitcoin exchange in Tokyo this week has drawn renewed attention to the currency.
Late last year, China banned its banks and payment systems from handling bitcoin. Thailand earlier put a blanket ban on its use.
Currencies like bitcoin are unnerving financial regulators in Asia and elsewhere because they are outside of their control. Established banks don't like them because people can send the money around the world with any fees.
There are a few websites that claim to offer bitcoin in exchange for Vietnamese dong, but it's unclear whether they have done any trading so far.
Aside from an investment and buying goods and services online, bitcoin could be used by Vietnam's diaspora to sends home remittances if the currency were to take a broader hold.
Tokyo (AFP) Thu Feb 27 2014 01:49:09 GMT-0500 (EST)
Yoshikazu Tsuno/AFP
Bitcoin trader Kolin Burges (C) from London is surrounded by reporters as he protests against Tokyo-based bitcoin changer MtGox in front of the company's office in Tokyo on February 26, 2014
Bitcoin users in Tokyo will gather on Thursday for a meeting set to be dominated by the shuttering of the MtGox exchange amid claims of a multi-million dollar theft.
Dozens of members of "Bitcoin Tokyo" are expected to be at their weekly get-together, with some of them bracing for six-figure losses stemming from a claimed emptying of the digital vaults at the Japan-based MtGox.
"It's going to be dominated by the issue," said Jonathan Waller, co-organiser of the group, which works to promote the virtual currency in Japan.
Waller is one of a reported one million people who had an account at MtGox, the first exchange for the crypto-currency, and says his deposit was worth more than $100,000.
"We want to share information and discuss" what has happened, he said, adding that he was angry but felt quite powerless.
"We can't help. We just have to wait and see," he said.
Bitcoin continued its rollercoaster ride Thursday, trading near the $600 mark, according to the Winkdex index, down 6.0 percent in 24 hours.
Josep Lago/AFP
A bitcoin ATM is pictured in a commercial area of Barcelona on February 26, 2014
The value swing -- characteristic of a currency that began life worth a few cents and topped out well above $1,000 -- came as Japanese authorities began probing the MtGox debacle and as a US lawmaker called for the unit to be banned.
The MtGox website, which went dark on Tuesday, remained largely empty save for a message from Mark Karpeles, the France-born chief executive who has not been seen in public for several days.
"As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues," he said.
"Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates."
A Bitcoin derivatives company -- btc.sx -- said it was suspending trading "due to the current closure of our main partner exchange".
The company, which allows investors to carry out leveraged trades against the future price of a Bitcoin, said: "All customer balances are secure and we will honour any withdrawal requests."
YOoshikazu Tsuno/AFP
A man looks at the bitcoin exchange website of MtGox in Tokyo on February 25, 2014
Founder Joe Lee is described on the company website as "a Bitcoin enthusiast whos (sic) parallel interest in finance and technology took him on a journey ending up in MtGox's Tokyo offices".
In Washington, Senator Joe Manchin wrote to federal regulators urging a US ban onBitcoins.
"This virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy," Manchin said in his letter to theFederal Reserve and other regulatory heads.
"I urge regulators to take appropriate action to limit the abilities of this highly unstable currency."
Japanese authorities began a probe Wednesday into the MtGox exchange as the Wall Street Journal reported US prosecutors had already served a subpoena on the firm.
The crisis at MtGox first gained wide recognition on February 7 when the company halted withdrawals, citing a flaw in the software that supports Bitcoins, which it said could allow hackers to steal them.
Other exchanges said the problem was not with Bitcoin, but rather with MtGox, which critics say was not robust enough to handle the volume of transactions it was getting.
In the weeks after the suspension the price of a Bitcoin on MtGox dropped and sat at around a quarter of the global average before the website went offline on Tuesday.
A document circulating online and purporting to be a MtGox "crisis strategy" said the firm might have lost more than 744,400 Bitcoins in a theft that had gone unnoticed for years.
That number of Bitcoins would be worth more than $400 million at present rates and represents around five percent of all the Bitcoins in existence.
Pirated versions of popular Mac apps like Angry Birds are coming bundled with CoinThief, a Bitcoin-stealing trojan.
Just two weeks ago, we reported that a new trojan called CoinThief was stealing thousands of dollars worth of Bitcoin from Mac users. One unfortunate reddit user lost 20 BTC (~$11,340 at the time of this post) due to the malware. CoinThief spread through cryptocurrency-related applications such as Bitcoin Ticker TTM (To The Moon), Litecoin Ticker, BitVanity, and StealthBit. However, security firm ESET has discovered that the trojan is now masquerading as cracked versions of popular Mac applications, including Angry Birds, Pixelmator, BBEdit, and Delicious Library. According to ESET,
“There is clearly strong evidence that the trojan was specifically designed to profit from the current Bitcoin craze and fluctuating exchange rates.
According to detection statistics gathered by the ESET LiveGrid, the threat is mostly active amongst Mac users based in the United States.”
In case you’re not familiar with the malware, CoinThief installs a rogue browser extension that monitors for popular Bitcoin exchanges and wallets like BTC-E and Blockchain respectively. CoinThief also installs a background application (a keylogger) to capture login credentials and send them to a remote server. This makes it really easy for the malware author(s) to steal Bitcoins, since users unwittingly hand over their account credentials to Bitcoin exchanges and wallets.
Detecting and removing CoinThief is not too difficult, and instructions can be found here. If you’re really interested in just exactly how CoinThief works on a deep, code level, check out this analysis at Reverse Engineering Mac OS X. And finally, this should go without saying, but if you want to avoid CoinThief (and other types of malware), avoid pirated software. Official Mac App Store versions of apps like Angry Birds and Pixelmator obviously don’t come bundled with CoinThief. And anyway, if you can spend over $1000 on a Mac, you can surely afford a $5 game.
“The Two-Bit-Idiot,” who leaked the original documentblowing the lid off MtGox, has declared via Tumblr to have “all of the pieces to the Mt. Gox puzzle,” which depicts MtGox as having “acted alone and in desperation.” The fact that MtGox had no buyers lined up to shoulder the burden of their mistakes demonstrates the degree to which MtGox and Mark Karpeles are even bigger frauds than many in the community (myself included) had anticipated.
What is left to find out is when Karpeles knew his exchange had failed, and to what extent he went to hide it.
I encourage you to stayed tuned to TBI’s Tumblr, but also here at CryptoCoinsNews where we will be keeping you up to date. On the blog, Two-Bit states,
I now have all of the pieces to the Mt. Gox puzzle. Mt. Gox acted alone and in desperation. Comprehensive post after I lawyer up.
Due to some angry Gox depositors, I’ve been advised to disclose that Karpeles was overstating the fact that he had “lined up” investors. The truth is, in a move of desperation, Mark asked several investors for a bailout, all of which seemed to have immediately notified the authorities once they learned the extent of the fraud, negligence or incompetence at Mt. Gox.
That is to say, my leak did NOT cost depositors their investments. There was no chance of a bailout. Please direct your anger at Mt. Gox, and please do not blame me for your losses. Even if you disagree with my reporting, there was nothing to gain by continuing to cover this up, but much prolonged agony for Bitcoin and perhaps additional damage for new depositors.
Thank you for your support and understanding.
History:
After MtGox had halted withdrawals for much longer than any other exchange during the malleable transaction attacks, rumors circulated that MtGox had lost user funds and had become insolvent. Many of these theories had been discounted as fear-mongering until Two-Bit-Idiot leaked a document that plainly declared MtGox had lost over 740,000 and were planning on shutting down to “rebrand” after replacing the obviously incompetent management team.
Submitted by Tyler Durden on 02/28/2014 18:52 -0500
The payment collection service it uses operates out of Moscow, Russian Federation and Kiev, Ukraine. The operation itself may or may not be located in Cyprus but it apparently uses the services of a branch in the Czech Republic of a major German bank. Funds apparently find their way there via a UK financial services agency registered in the British Virgin Islands.
The exchange does have a page on Facebook though, as of Sunday last and as of this minute with six likes. It’s entirely possible that neither Aleksey nor Alexander had anything to do with that initiative because a feature of bitcoin is of course that everyone is allowed to do pretty much anything they want, and the page byline says that it’s ‘for BTC-E exchange traders’.
Presumably those auditors will want to know, and may even insist on exchange users knowing, who calls the shots at BTC-e.
