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Mt. Gox Heist: An Inside Job, Now What?

Daniel Nyairo in Bitcoin & Cryptocurrency published on 15, January 2015

Mt. Gox

As we bid 2014 farewell and made arrangements to usher in 2015 with the usual funfair, critical and interesting Bitcoin-related news were coming out of Tokyo, Japan. Apparently, the evidence collected by police on the Mt. Gox heist pointed to an inside job.

Essentially, that means the 850,000 BTC lost, 90% of which belongs to customers, was stealthily stashed away by someone working for the company. And since Mt. Gox did not have many permanent staffers, that puts founder and CEO Mark Karpeles at the center of everything.

It is important, however, to mention that the Tokyo police report does not directly incriminate him for the theft. Nevertheless, the question now is ‘what’s next?’

Mt. Gox fall tainted the entire Bitcoin ecosystem

Perhaps to refresh your mind, it is important to take you back to where it all began. By the start of 2014, Mt. Gox was the largest Bitcoin exchange. It transacted over 70% of the market flow, with the Bitcoin price still enjoying hiatus from the previous month’s high value.

However, it is during this time that serious challenges started to manifest themselves. Gradually, it took customers—some were deeply indulged in Bitcoin gambling—longer to complete transactions, especially withdrawing funds.

But this was not the first time that customers had to face difficulties when transacting through Mt. Gox. It had happened several times before, and in each of these incidents, things went back to normal sooner than later.

As it turned out, though, this was to prove different. Several respected individuals within the Bitcoin community were quoted issuing warning on the imminent fall of Mt. Gox.

All signs were there, but everyone hoped for the best

In February, the company suspended trading on its website, in what many believed was a correctional step. However, things took a turn for the worse when it filed for bankruptcy in April.

By then, Mt. Gox had been in operation for three years and nine months.

With the Bitcoin exchange going under, about 850,000 BTC had gone missing. About 200,000 BTC were later recovered from sources that have never been disclosed.

However, perhaps the largest loss was credibility of the digital currency in the eyes of many. The naysayers were all over with the ‘we told you’ message, which sunk with those who could not differentiate a Bitcoin exchange from the blockchain and the cryptocurrency.

For close to nine months, the company has continually linked the loss to an external hack on its systems. However, that position seems to get seriously tainted by the release of this police report.

Consequently, will Karpeles have to face a judge to prove his innocence, or things will rather go away silently? Furthermore, how does this report stand to benefit all those that lost their money in the heist? Will they be compensated, and if so, by who?

All these are questions that desperately beg for answers. While the police investigation report points in the direction of closure, it seems there is a lot that will have to happen before we see the end of the scandal.

 

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