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Bankruptcy Law

Mt. Gox files for bankruptcy after possibly losing all customer Bitcoins in hacker attack

Posted Feb 28, 2014 8:18 AM CDT
By Debra Cassens Weiss

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Bitcoin exchange Mt. Gox has filed for bankruptcy in Tokyo after a hacker attack.

The company’s chief executive, Mark Karpeles, said at a news conference that Mt. Gox had likely lost 750,000 of its customers’ Bitcoins and 100,000 of its own, report the New York Times DealBook blog, the Wall Street Journal (sub. req.) and Reuters.

The lost Bitcoins are worth about $473 million at current market prices, the Wall Street Journal says. Some investors said their losses in the virtual currency amounted to hundreds of thousands of dollars.

"There was some weakness in the system, and the Bitcoins have disappeared,” Karpeles said at the news conference. “I apologize for causing trouble.”

The Reuters story says Mt. Gox had problems beginning last year as it “tangled with regulators, split from former business partners and grappled with cyber attacks.” The wire service says its downfall “lays bare the difficulties the Bitcoin community faces as it tries to square its freewheeling, libertarian ideals with the rigorous regulation required in financial services and customers' needs for reliable service.”

Federal prosecutors in Manhattan issued subpoenas to Mt. Gox this month, according to the Wall Street Journal. Jurisdiction could be based on emails or financial transfers routed through Manhattan.

Last year, Mt. Gox registered as a money transmitter, as demanded by the U.S. Treasury Department's Financial Crimes Enforcement Network, after the U.S. Department of Homeland Security froze some accounts with the exchange's Iowa-based payment processor, Reuters says. The frozen accounts complicated the ability of users to liquidate Bitcoin investments, according to the wire service.

Prior coverage:

ABAJournal.com: "Should ‘virtual currencies’ be subjected to real-life regulation?"

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