Business

Here’s WTF happened to Mt. Gox last week — the Cliffs Notes version

bitcoin Julia Zakharova shutterstock

It’s been quite a week for major Bitcoin exchange Mt. Gox.

The leading Bitcoin exchange shut down, filed for bankruptcy, and gave a hint of just how much control it’s lost. Bitcoin owners are freaking out, and they have their reasons.

Don’t worry if you haven’t kept on top of all the news. We’ve gone ahead and encapsulated it all.

First things first: After Mt. Gox discovered a possible hack and the theft of hundreds of thousands of Bitcoins, including some of its own, the exchange shut down on February 25.

More than $400 million in Bitcoin has gone missing.

On Feb. 28, Mt. Gox filed for bankruptcy.

The exchange said it was under order not to pay its debts and apologized to users “for causing so much inconvenience.” Its liabilities far outweighed its assets. In fact, Mt. Gox wasn’t even sure how many Bitcoins had vanished.

A Mt. Gox help line wasn’t very helpful to some people who were trying to call in yesterday, Bloomberg reported.

Yesterday, in a Bitcoin chat room, a user named nanashi____ surfaced with word of a 20 GB file representing sensitive data of an undisclosed nature that Mt. Gox stored. Apparently, people hacked in to Mt. Gox and were trying to figure out what to do with the data.

Also over the weekend, someone posted some curious code on the text-pasting website Pastebin. It seems to be from Mt. Gox’s back end, and it seems to contain a means to route Bitcoins to places where they aren’t supposed to end up. At least that’s the way Ars Technica is writing about the code.

A class-action suit is being organized against Mt. Gox’s chief executive, Mark Karpeles, to recover the Bitcoins that went missing in the apparent hack, Bitcoin news outlet CoinDesk reported today.

Mt. Gox became a Bitcoin exchange in 2010, and a hack in 2011 resulted in the loss of $8.75 million, according to a Wired article on the evolution of the site.

At one point, Mt. Gox was the largest Bitcoin exchange. But BTC China took that title, only to have BitStamp claim it later, according to a 91-page report on Bitcoin that CoinDesk released last week.

During all the tumult, Bitcoin prices haven’t dropped off, believe it or not. At one point on February 25, the price sat at $452.22; and earlier today, it hit $656.20, the highest point since Valentine’s Day, according to CoinDesk data.

Even so, the dismantling of a major Bitcoin exchange should serve as a yellow flag for anyone thinking about buying, selling, or mining the digital currency. Clearly these systems can get sabotaged, and the lack of insurance means no there’s no guarantee to get your money back.

If you’re still not sure WTF Bitcoin is in the first place, read our introductory guide from last month.


We're studying conversion rate optimization. Take our quick survey and we'll share the results with you.