Mt. Gox: Bitcoin Exchange Files For Bankruptcy Protection, Hackers Got a Different Story to Tell

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By Pavithra Rathinavel | March 12, 2014 4:06 PM EST

Mt. Gox, the prominent bitcoin exchange, has filed for bankruptcy protection in the U.S. and Japan. Also, hackers alleged they have evidence to prove fraudulent activities from the Tokyo-based company, by breaking into the CEO's Web site, as reported by Wired.


Bitcoins are seen in a photo illustration. (Reuters)

What is Mt. Gox?

Mt. Gox is a bitcoin exchange where people can buy and sell digital currency (bitcoin). Bitcoin is one of the potential alternative currencies worldwide. The worrisome gray area is the regulation surrounding bitcoins.

What is the Story All About?

The cited company filed for bankruptcy protection in the previous month. The U.S. filing was supposed to safeguard the company's assets in the U.S., as reported by The Wall Street Journal. Mt. Gox has long been involved in a lawsuit worth $75 million with CoinLab, another bitcoin company.

Mt. Gox CEO Mark Karpeles admitted the company lost nearly 750,000 of its customer's bitcoins (roughly worth $480 million), in addition to 100,000 of its own, accoding to Reuters reports.

Wired cited Karpeles resorted to blaming a known issue in the bitcoin protocol that let hackers to trick the company's software into thinking the transactions failed. Gox's accounting software didn't deal with this flaw and could be tricked to send repeated bitcoin payouts to the same customer.

The Twist

Not so many are ready to buy the story of Karpeles, with some claiming the owners may have pouched the cash.

Wired said the hackers compromised Mark Karpeles' personal Web site and published a file with data acquired from the company's servers, showing a balance of 951,116 bitcoins. If the hackers' story is true, then the break-in has successfully tapped the transaction glitch to divert these funds from the exchange.

They also broke into Karpeles' Reddit account, claiming the document proving that Mt. Gox is still in control of those bitcoins. Many Reddit users noted to have found their own transaction data in the spreadsheet, are vouching for the authenticity of the published materials.

Will There be an Australian Regulator for Digital Currency?

Not long ago, Reserve Bank Governor Glenn Stevens described digital currency as a "very interesting space." According to SMH, he told the parliamentary committee he was "not inclined to feel that we have to rush in as a regulator."

"We have seen some pretty substantial losses incurred by Bitcoin holders in a couple of jurisdictions in recent weeks. It is a potential alternative currency so how it will hold its value is the first question. There have been countless currencies through history and the ones that survive are the ones that hold value,"  the governor said.

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Bitcoins are seen in a photo illustration. (Reuters)
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