Mt. Gox

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Mt. Gox
Founded 2010
Headquarters Shibuya, Tokyo, Japan
Key People Mark Karpelès, Jed McCaleb
Employees 250-500
Products World's first bitcoin exchange
Twitter @MtGox

Mt. Gox was one of the world's first bitcoin exchanges. The company ceased operations in February 2014.


Founded by software hacker Jed McCaleb, Mt. Gox was originally known as the "Magic: the Gathering Online Exchange." Its primary focus was selling cards from the trading card game series "Magic: The Gathering". In 2010, Mt. Gox began selling bitcoins. McCaleb sold the site in 2011 to programmer Mark Karpeles, who would become CEO. By April of 2013, Mt. Gox handled 70 percent of the world's bitcoin trades.[1][2]

During the summer of 2013, various technical issues led to Mt. Gox halting customer withdrawals in US dollars. Mt. Gox claimed that a "bug in the bitcoin software" could allow transaction details to be altered.[3] Anonymous former employees have claimed that around this time, the development, maintenance, and cybersecurity measures of the company's trading platform and servers, not to mention the company itself, were in complete disarray. The insiders pointed to Karpeles, claiming "he liked to spend time fixing servers, setting up networks and installing gadgets" rather than fulfilling his duties as the company's CEO.[4]

On February 23, 2014, Karpeles resigned as CEO of Mt. Gox. Incidentally, the official Mt. Gox Twitter feed erased all previous tweets from the account.[5]

Reports on February 24, 2014 have said that Mt. Gox lost almost 750,000 bitcoin due to long-running theft.[6]

Mt. Gox filed for bankruptcy protection in Tokyo on February 28, 2014. It said 750,000 bitcoins belonging to its customers and 100,000 of its own bitcoins were stolen by hackers who exploited a security flaw in its software. It also said $28 million was missing from its Japanese bank accounts.[7]

Closing down

On February 25, 2014, Mt. Gox announced that the site would be shutting down to protect the site its users.

After its website briefly disappeared from the Internet, the site went back online.[8] The Mt. Gox homepage displayed the following message:

"Dear MtGox Customers,

In light 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.

Best regards, MtGox Team" [9]

In the first confirmation of a criminal investigation at Mt. Gox, the exchange said on March 26, 2014 that it was working with the Tokyo police regarding the disappearance of bitcoins worth about $490 million.

In August 2015, Mark Karpeles was arrested by Japanese police and charged with manipulating Mt. Gox's records in order to increase the balance of a certain account.[10] After almost a year in prison, he went to trial in Tokyo for embezzlement and manipulating corporate records.

Finding the culprit

Swedish software engineer Kim Nilsson teamed up with other Mt. Gox customers to find the hacker or hackers that stole Mt. Gox's bitcoins. They formed a company called WizSec in 2014.[11] By 2016, Nilsson had tracked a large number of the missing bitcoins to wallets owned by a single user. Nilsson tracked the user's posts on various online message boards, concluding they used the username WME. One day, Nilsson read an old post on a bitcoin forum in which WME posted a letter from his lawyer, with his real name plainly visible. Nilsson forwarded this to special agent Gary Alford of the United States Internal Revenue Service (IRS), who has a history of catching cybercriminals.

In 2016, a Russian IT specialist named Alexander Vinnik was arrested by police while vacationing with his family in Greece. He was charged with helping run BTC-e, a digital currency exchange whose primary purpose was to launder money using bitcoin. Vinnik has denied the charges, but Nilsson and certain prosecutors believe that based on existing evidence, the connection between Vinnik and the Mt. Gox case is strong. The IRS investigation is currently ongoing.[12]

The Mt. Gox Bitcoin Fortune

At the time of Mt. Gox's collapse, Mark Karpeles owned a majority share in the company. To date, approximately 200,000 BTC of the original 850,000 lost have been recovered. The bankruptcy trustee handling these funds has sold approximately $387 million worth of BTC, but an estimated $1.8 billion remains. Typically in such a legal case, the recovered assets are inherited by the company's shareholders. This means that Karpeles, who is currently on trial in Japan for embezzlement and manipulation of records, would get most of the bitcoins. This has caused a significant uproar in the bitcoin community - Karpeles has claimed to have received "very specific" death threats from enraged, anonymous people as a result. Karpeles has said that he doesn't want the bankruptcy to be resolved in this way. A number of Mt. Gox creditors petitioned the Japanese government to put the bankruptcy case on hold so that "civil rehabilitation" proceedings could begin. In Japanese law, "civil rehabilitation" is a process in which non-monetary claims, such as bitcoin, can be converted into fiat currency based on their value at the time of proceedings. On June 22, 2018, the Tokyo District Court issued an order of commencement for civil rehabilitation proceedings to begin.[13][14]

On July 11, 2018, Karpeles issued a plea to the Tokyo District Court, saying, "I am innocent of all charges. I never once improperly used any funds during my work at Mt. Gox."[15]