Mt. Gox goes offline amid allegations of largest-ever bitcoin heist

BY Joshua Barajas  February 25, 2014 at 12:39 PM EST
Bitcoins

Creative Commons image of bitcoins by antanacoins

The world’s largest Bitcoin exchange went offline Monday amid a series of setbacks — including a reported theft of hundreds of millions of dollars — that have raised concerns about the virtual currency’s legitimacy in the marketplace.

Bitcoin entrepreneur Ryan Selkis published an 11-page “crisis strategy draft” revealing that the Tokyo-based Mt. Gox had lost 744,408 bitcoins — worth roughly $365 million at Monday’s prices. The apparent hacking that “went unnoticed for several years” caused about six percent of the 12.4 bitcoins in existence to disappear.

The draft, which has yet to be verified, says that Mt. Gox “can go bankrupt at any moment.”

“At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public.”

In a blog post Selkis wrote that “several sources close to Mt. Gox” confirmed the authenticity of the document. It remains unclear whether Mt. Gox’s customers will get their assets back.

Several bitcoin community members, including Coinbase, Kraken and Chinese exchange BTC China, released a joint statement Tuesday that chastised Mt. Gox for its “abhorrent actions” and abuse of its users’ trust.

“As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today,” the statement said.

Mt. Gox has not responded to several media requests for comment and the company’s website has halted all bitcoin transactions. The website only displays the following message:

“In the event of recent news reports and the potential repercussions on MtGox’s operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.”

On Sunday, Mt. Gox CEO Mark Karpeles resigned from the board of the Bitcoin Foundation. USA Today reports that the virtual currency’s value fell to $490 from an opening value of $545 on Tuesday.

This follows the late-January arrest of U.S. bitcoin exchanger Bitinstant CEO Charlie Shrem on money laundering charges via the underground ‘Silk Road’ drug site.