Mt. Gox Files For Bankruptcy, Lost 750,000 Of Its Customers’ Bitcoin Holdings And More Than 100,000 Of Its Own Coins, Or More Than $450 MILLION Worth

Aaaaaaand, it’s gone …

– Mt. Gox Files for Bankruptcy (New York Times, Feb 28, 2014):

TOKYO — Mt. Gox, the troubled exchange for the virtual currency Bitcoin, filed for bankruptcy protection on Friday and said that it might have lost 750,000 of its customers’ coins, essentially all of them, in a hacking attack.

The Tokyo-based exchange, which warned this month of a software flaw that may have allowed hackers to defraud it of Bitcoins, had halted all trading this week.

Mark Karpeles, the company’s chief executive, wearing a suit instead of his usual T-shirt, bowed in contrition and apologized in Japanese at a press conference in Tokyo.

“There were weaknesses in the system,” he said. “I’m truly sorry to have caused inconvenience.”

He said that the exchange had most likely lost 750,000 of its customers’ Bitcoin holdings and more than 100,000 of its own coins, or more than $450 million worth.

Mt. Gox had said on its website on Wednesday that it was still “working very hard” toward a resolution.

Investors in the exchange had said they did not expect to recover their money stashed on the Mt. Gox platform, which once accounted for four-fifths of the world’s Bitcoin trading.

But Mt. Gox’s bankruptcy, filed with the Tokyo District Court under Japan’s Civil Rehabilitation Law, which is similar to Chapter 11 in the United States, will mean that a bankruptcy supervisor is set to develop a restructuring plan, and will also be responsible for handling any payment of claim distributions to its creditors. That process could take form several months to several years.

The exchange has liabilities of 6.5 billion yen, or $64 million, compared with total assets of 3.84 billion yen, the company said. It has 127,000 creditors.

The demise of Mt. Gox did not come as a surprise for many — and has fanned skepticism in some quarters over the virtual currency’s future in Japan.

“I didn’t think something like this would last for long. I thought it would collapse at some point,” Taro Aso, the Japanese finance minister, told reporters earlier Friday, according to the Nikkei website.

He also suggested that Japan might move to regulate Bitcoin.

“Not everybody accepts it as a legitimate currency. And it’s unclear who should supervise it,” Mr. Aso said. “Japan must do something about it.”

Many Bitcoin advocates, however, have put Mt. Gox’s woes down to managerial and security incompetence and say that the technology underlying Bitcoins remains sound.

“It’s a simple case of gross mismanagement and neglect. But we’re seeing a lot of stronger Bitcoin companies now with better systems and proper staff,” said James MacWhyte, an early Bitcoin adopter and occasional Mt. Gox customer who is working to set up an association of Bitcoin users in Japan.

“Competition is great. Mt. Gox had no competition for a long time, and that’s how it got to where it got,” he said this week. “Now it’s time to raise the standard.”