Mt.Gox files for bankruptcy protection

Sunset in Tokyo, Japan

Bitcoin exchange Mt.Gox has lost nearly all the virtual currency in its systems and filed for bankruptcy protection, lawyers tell a press conference.

A lawyer for the embattled Japan-based company announced at a news conference at the court that the exchange was filing for Chapter 11-style protection and stated that Mt.Gox had outstanding debts of about 6.5 billion Japanese yen ($63.6 million), the Dow Jones news agency reported.

Its customers have been unable to withdraw their bitcoins and convert them into U.S. dollars since the beginning of February. The exchange blamed the problem on a critical loophole - known as "transaction malleability" - in the cryptocurrency that it said leaves all exchanges open to hacking.

Mark Karpeles, the CEO of Mt.Gox, reiterated his belief on Friday at the news conference, blaming weaknesses in the system for the loss of its bitcoins.

The company's lawyers added that Mt.Gox may have lost nearly of its virtual currency, leading to a black hole of 2.8 billion Japanese yen, local media reported.

(Read More: Mt.Gox CEO: 'I'm still in Japan ')

The company said there were 127,000 creditors in the bankruptcy and only 0.8 percent were Japanese. Representatives added that it opted for a transparent procedure due to public outcry and will aid authorities in finding out what happened. It's liquid liabilities totaled 6.501 billion Japanese yen with its total assets being 3.842 billion Japanese yen, according to Reuters. The news agency added that 750,000 of customers' coins had been lost and 100,000 of its own.

Mt.Gox - which once claimed it handled around 80 percent of all global dollar trades for bitcoin - is an online marketplace where people can buy or sell bitcoins using different currencies.

Its website was abruptly taken offline on Tuesday with Karpeles saying the business was at "a turning point." On Wednesday, Reuters reported that the office of Manhattan U.S. Attorney Preet Bharara was seeking information from businesses dealing in bitcoin, in order to discover how they handled the cyberattacks that hamstrung several exchanges in recent weeks.

(Read More: Bitcoin's Mt.Gox disappears, insolvency feared )

Subpoenas have been sent by Bharara to Mt.Gox, as well as other firms that did business with the Tokyo-based company, a source told Reuters. Prosecutors want to know more about the nature of the cyber-attacks on Mt.Gox, and other exchanges.

Meanwhile, Japanese authorities are looking into the abrupt closure of the exchange, a government spokesman said on Wednesday in Tokyo's first official reaction to the turmoil at the company.

(Read More: Bitcoin investor fury at Mt Gox delays )

The issues at Mt.Gox have caused anger in the bitcoin community with some customers taking to social media to express their dissatisfaction. An unverified document circulating online earlier this week claimed that Mt.Gox had lost 744,408 bitcoins (worth around $350 million) due to theft related to the trading fault.

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On Friday morning the price of the virtual currency stood stable at $550, according to CoinDesk which tracks the price at various major exchanges. Mt.Gox are expected to update customers via its website which has published two updates since being taken offline.

-By CNBC.com's Matt Clinch; Follow him on Twitter @mattclinch81

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