Mt. Gox, formerly bitcoin's largest trading site, went offline earlier this week after reports surfaced that over 850,000 bitcoins had gone missing from the exchange. That's about $477 million at the current conversion rate. Users collectively lost 750,000 bitcoins, Mt. Gox CEO Mark Karpeles says, and the site itself lost 100,000. Karpeles announced today that the company is filing for bankruptcy protection.
It's not clear what exactly happened to the missing currency — it was either stolen due to a weakness in the system, voided by tech flaws, or both. Karpeles said during a news conference at the Tokyo District Court press club Friday morning, "There was some weakness in the system, and the bitcoins have disappeared. I apologize for causing trouble." Mt. Gox, based in Tokyo, handled 80 percent of the world's bitcoin transactions at one point.
Bitcoin users remain supportive of the digital currency despite this huge security breach. Bitcoin-sharing service Coinapult founder Erik Vorhees lost almost $300,000 in the Mt. Gox debacle, yet he urges other users to "shake it off, brothers, for this won't be the last calamity endured before the win." (Bitcoin users are primarily white, male libertarians.) In a Reddit letter to his 'brothers,' Vorhees blamed Mt. Gox, not bitcoin itself, for the whole debacle:
I should have known better, of course. I take responsibility for leaving those funds with an entity that had proven incompetence repeatedly. I chose to ignore even my own warnings, for nothing more than the sake of convenience. Gox is still at fault, to be sure, but I have learned the lesson.
Max Keiser, of the crowdfunding-by-bitcoin site startJOIN.com, takes a more extreme view:
MtGox is just a blip. Long term effects = 0. Similar to 9/11.— Max Keiser (@maxkeiser) February 28, 2014
Jonathan Waller, a game developer, lost 211 bitcoins in Mt. Gox. That's almost $118,000. He told The Wall Street Journal, "It is disappointing [Mt. Gox] hid so much for so long. I hope they manage to become a fully-functioning exchange again, but their reputation is so damaged it may not be possible." He, like other users, is not ready to give up on bitcoin despite losing an astronomical sum of money.
To users, Mt. Gox really is just another "calamity" before "the win." The "win" is developing a worldwide digital currency that's not regulated by the flawed American government.
Roger Ver, a Tokyo resident who has provided seed capital for bitcoin ventures, told The Washington Post he's not giving up, either. "Mt. Gox is a horrible tragedy," he said. "A lot of people lost a lot of money there, myself included. I hope we can use this as a learning experience." Reasonable people differ about what that lesson should be.
This article is from the archive of our partner The Wire.