Bitcoin Exchange, Currency, and Value News: Mt. Gox Hacked, Leaked Excel Document Shows Transactions
Hackers have broken into several accounts of Mark Karpeles, the owner of the MtGox Bitcoin exchange. Mt. Gox stopped trading last month and filed for bankruptcy after reporting that $465 million in Bitcoins had been lost purportedly due to a security bug.
Some have speculated that Karpeles, or the people behind Mt. Gox, pulled the heist on their own, effectively stealing the Bitcoins. However, in the highly unregulated marketplace of Bitcoins where there are no legal protections, it is unclear how measures can be enforced besides internet vigilantism. The hackers who have entered Karpeles' accounts seem to be motivated by frustration over the actions of Mt. Gox, whom many users entrusted with their Bitcoins only to lose their money.
The Mt. Gox Bitcoin exchange filed the application for bankruptcy protection in Japan through lawyers acting on behalf of the exchange, several days after Mt. Gox went offline following reports of a massive theft of Bitcoins. At the same time, the boss of the Mt. Gox exchange, Mark Karpeles, said that he was working hard to find a "solution to our recent issues".
According to Mt. Gox, technical troubles prevented customers from transferring digital cash to other exchanges on Feb. 7, meaning that Bitcoin holders could not transfer their money out of the Mt. Gox network to protect their coins or cash out. The application for bankruptcy protection was accepted by a district court in Tokyo, where the company claimed to have outstanding debts of 6.5 billion yen, or over $60 million.
Mt. Gox's lawyers decided to apply to the court for bankruptcy protection after regulators from the United States filed a subpoena against the company. Bitcoin is backed by major investor confidence, despite concerns by governments and efforts to shut down or control the digital currency. The primary concern is the lack of oversight and the ability for criminals in the illegal underworld to make protected transactions.
Bitcoin can be used to bypass financial institutions, which makes it attractive to people who want to trade directly without going through any third parties, something which has led to adoption by speculative investors and criminal enterprises. A leaked FBI report back in 2012 revealed that the federal agency was concerned that Bitcoin could become widely used by criminals. The report said that the digital crypto-currency was an "increasingly useful tool for various illegal activities beyond the cyber realm" and that the US Senate committee commissioned the FBI to investigate Bitcoin.
Many people in the community have called upon the exchange to release more information about what happened to the lost Bitcoins, about which currently not much is known. Hackers have taken this a step further by taking matters into their own hands. The recent attacks saw hackers entering both the personal blog and Reddit account of Mr. Karpeles, giving them access and control over both social media accounts.
The hackers also broke into proprietary data behind the troubled exchange, taking detailed information about Mt. Gox's trading activities and posting them on the internet. They posted a 716 MB file containing documents from Mt. Gox, including an Excel spreadsheet that contained data on more than one million trades as well as entries from Mt. Gox's business ledger and information about its back-office administration software.
The rogue hackers pointed out that although the exchange claimed that $465 million of Bitcoins, or the rough equivalent of approximately 744,000 coins, had disappeared from Mt. Gox, there was no activity suggesting that they had been traded. This was after pouring through the blockchain, or the the central list of buying and selling that keeps track of the activity of the Bitcoin network. Bitcoin Revolution is one of the examples of an auto trading platform for cryptocurrency that sells and buys automatically based on its algorithms.
Although users retain anonymity when trading Bitcoins, meaning their identity is secure, Bitcoins' unique codes mean that the movement of coins can still be traced. After they made the data dump, they wrote a message saying "It's time that MtGox got the Bitcoin community's wrath instead of [the] Bitcoin community getting Goxed," referring to the glitches and instability behind the Mt. Gox exchange through its tenure, often caused by technical problems before finally closing after the multi-million dollar Bitcoin heist last month.
Mt. Gox's shutdown has only contributed to the long story of instability within the Bitcoin market, where shortly after the theft the price settled to between five and six hundred dollars, compared to one thousand per Bitcoin late last year.
Countries like China have forbidden merchants within its borders from accepting the digital currency in an effort to avoid the uncertainty involved, a move which has caused drops in the price. Vietnam has also banned its banks from from dealing in the cryptocurrency, saying that the virtual cash is not legal tender and that trading in bitcoins carried "potential risks" for users, similar to the European Union's stance on the industry.
Customers concerned about their Bitcoin holdings have even travelled to Japan in an effort to reclaim their funds. Some travelled in protest, holding signs and talking to reporters.
The firm behind Mt. Gox said that there was a "high probability" that the Bitcoins had been stolen through a bug in Mt. Gox's systems and that it has launched an investigation in order to find the culprits. Mt. Gox said that to "establish the truth" about what had happened a "huge amount of transaction reports" would need to be investigated and that because of this, Mt. Gox would not give the exact amount of missing deposit funds or the total number of Bitcoins that had disappeared.
In addition to the approximately 750,000 Bitcoins belonging to customers that were lost, the company also said that it had lost approximately 100,000 of its own, or nearly $500 million. Mt. Gox said that it had appointed an expert to look into the possibility of criminal proceedings, saying "We will make all efforts to ensure that crimes are punished and damages are recovered." It is unclear about the possibility of paying back creditors, although the exchange did establish a call center to answer customers' questions.
The Japanese government is still trying to determine what led to the collapse of Mt. Gox. "We still have not had a clear grasp of the situation," Japanese Finance Minister Taro Aso said. "[We] don't know if it was a crime or just a bankruptcy." Mt. Gox was not the only exchange that was targeted, since another Bitcoin bank called Flexcoin announced at the same time that it was going out of business, saying that it got hacked and got 896 coins stolen and is working with law enforcement to trace the source of the hack. "As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately," it said.
The intrigue surrounding Bitcoin is far from over. Last week, Newsweek claimed to have unveiled the man named Satoshi Nakamoto behind the virtual currency, although he denied everything, telling reporters "I got nothing to do with it." The 64-year-old Japanese physicist who lives in California was asked if he was involved with Bitcoin, and he said, "I am no longer involved in that and I cannot discuss it." Newsweek said it assigned a reporter to spend two months investigating the claim and tracking him down. Although it is not known whether Nakamoto is a pseudonym, the original creator is suspected to have several million dollars in Bitcoins since the early days of the currency.