By Hubert Walker for CoinWeek……….
Much has been said in the last week regarding the fall of Mt.Gox from its privileged position in the Bitcoin community. Most of it means little as far as Bitcoin is concerned.
Last month, documents were leaked that revealed how much the management of Mt.Gox knew about the $460 million allegedly stolen by hackers and the $27.4 million missing from their bank.
On Friday, February 28, Mt.Gox filed for bankruptcy protection in Tokyo. Bankruptcy protection is similar to Chapter 11 but the company is allowed to exist as an active business. It owes approximately 6.5 billion yen (about $63.6 million) to its creditors.
Mt.Gox and its CEO Mark Karpeles blame the company’s problems on a software bug that allowed users, under certain circumstances, to be paid twice. Mr. Karpeles himself was capable of fixing the bug, but in an ironic display of his management style, all changes to the code submitted by his software team had to be approved by him and him alone. The result was a testing and debugging workflow not fast enough to react to the serious flaws that allowed the hack.
Meanwhile, the first of what could be many lawsuits to come was filed by Gregory Greene in U.S. District Court in Chicago on February 27.
With the fall of Mt.Gox, some are eager to use the situation as an opening for the regulation of Bitcoin and other decentralized virtual currencies. According to Benjamin M. Lawsky, the first Superintendent of New York State’s Department of Financial Services, this “setback” will “cause further improvements in this industry and some more regulatory involvement." Yet in light of the decentralization fundamental to how Bitcoin and other virtual currencies work (not to mention the internet), current government proposals for such improvements are unrealistic.
Preet Bharara, U.S. Attorney for the Southern District of New York, has also issued subpoenas to Mt.Gox and other exchanges as part of an investigation into potential fraud. Japan, flummoxed by the financial drama unfolding in its capital city, is also investigating possible criminal activity.
Bitcoin Phishing Scam
If you are now or ever were a user of the Mt.Gox exchange, watch out for spam email with the subject line "Mt.Gox return to customers the bitcoins"[sic]. The email links to a page formatted to look like the Wall Street Journal and asks you to download malware disguised as an update to Adobe Flash Player. Since the majority of Bitcoin users at this time tend to be computer savvy, it is unlikely that the scam will be too successful.
Despite recent setbacks and the threat of regulation, Bitcoin continues to rally.
At the time of this writing (20:18 GMT), Coindesk lists the price of one Bitcoin (1 BTC) as $653.96, £390.93 and €476.04.
© 2014 Hubert Walker
About the Author: Hubert Walker is a member of the American Numismatic Association and the Numismatic Literary Guild. Together with his co-author Charles Morgan (ANA, ANS, NLG, Ike Group), he has written numerous articles for publication online and in print, including two 2013 NLG award-winning articles for CoinWeek.com.