Mt. Gox CEO: We're Bankrupt, and the Bitcoins Have Disappeared

Oh, and Mt. Gox is bankrupt.

|
Feb 28 2014, 4:45pm

On February 7, Mt. Gox announced that it was suspending Bitcoin withdrawals indefinitely. The suggestion that the world's first Bitcoin exchange was insolvent caused the cryptocurrency to plummet, and Mt. Gox appeared nearly dead. Flash forward to this last Tuesday, when the Mt. Gox site went offline, which stood as a de facto announcement of its demise. And today, Mt. Gox officially filed for bankruptcy in its home market of Japan.

As the saga has unfolded, Mt. Gox CEO Mark Karpeles has denied that his firm was in the midst of collapse, instead arguing alternately that Mt. Gox was dealing with "technical issues" and that attackers had taken advantage of a fundamental flaw in the Bitcoin protocol. “We are very surprised that anyone could fault Mt. Gox instead of the bitcoin software," Karpeles told the Wall Street Journal following the original announcement about the suspension of withdrawals.

This morning, Karpeles gave a presser to Japanese media in which he announced the bankruptcy of his firm. The video from local media is interesting to watch: listen to the cameras machine-gunning during his deep, apologetic bow, which is followed with Karpeles announcement that Mt. Gox has seen around 750,000 bitcoins belonging to customers, along with 100,000 of Mt. Gox's own bitcoins, disappear.

Along the announcement that nearly half a billion dollars' worth of bitcoins had vanished into the ether, Karpeles stuck to his assertion that Mt. Gox's problem was actually a problem with Bitcoin.

"We have lost Bitcoins due to weaknesses in the system," Karpeles said in the conference, per AFP's translation. "We are really sorry for causing trouble to all the people concerned."

This assertion by Karpeles essentially amounts to him saying "Oops, ¯\_(ツ)_/¯, it's not us that lost billions, it's a fundamental flaw in Bitcoin." Naturally, if that were true, it'd be a death sentence for Bitcoin. Without the backing of an agency like the FDIC or the largesse of massive market cap—just two factors that keep confidence in the dollar high— consumer confidence in Bitcoin is largely based on the security of the protocol.

Karpeles' previous comments have other Bitcoin leaders hopping mad. The problem, they argue, is that Mt. Gox was an incompetent company that never moved to solve known weak points in Bitcoin transactions. They have a point: It's been clear from the beginning that Bitcoin will live or die with its exchanges, which need solid security and fiduciary stability. As Motherboard's Alex Pasternack put it so eloquently the other day, the biggest problem with Bitcoin isn't technical, it's human.