Rumours of insolvency for the Japanese bitcoin giant following long term hacking allegations
The shut-down has been linked to recent reports of unnoticed hacking which has been going on for years. In a recent ‘Crisis strategy draft’ allegedly leaked from Mt.Gox, there's reports of the theft of 744.000 bitcoin, roughly equivalent to £210m ($350m) and discussions on how to restore user confidence..
This follows earlier troubles for the exchange when on February 7th they suspended customer withdrawals stating they had found a bug in the bitcoin protocol that was affecting all transactions. The assertion from Mt. Gox at the time was that the Bitcoin Foundation (the organisation that promotes the currency) should address the issue, however the Foundation passed the blame back to Mt. Gox, arguing the problem lay within their wallet service and customer support systems. Last week Mt Gox announced they had devised a work-around for the glitch though as yet this has not been put into action.
The apparent breakdown of the bitcoin exchange is leading some speculators to fear the worst. Bitcoin blogger Ryan Gait notes that he’s sold on his Bitcoin holdings stating that, "This is catastrophic, and I am sorry to share this. I do believe that this is one of the existential threats to bitcoin that many have feared".
To attempt to allay these fears a group of bitcoin organisations has issued a statement. The subject title originally mentioned insolvency stating, ‘Joint Statement Regarding the Insolvency of Mt.Gox’, though this has now been changed to, ‘Joint Statement Regarding Mt. Gox'.
The statement outlines that, "This tragic violation of the trust of users of Mt.Gox was the result of one company’s actions and does not reflect the resilience or value of bitcoin and the digital currency industry" and goes on the say, "the following services will be coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner: Coinbase, Kraken, BitStamp, Circle, and BTC China”
Despite these calming words bitcoin prices have plummeted by over 20% as the market awaits the final outcome of the Mt. Gox fiasco. Should the company redeem itself and resume trading there has already been an impact on the public acceptance of bitcoin that is likely to have a knock-back effect.
image: © Zach Copley