Mt. Gox, the former major Bitcoin exchange, has filed for bankruptcy protection in the US as part of a bid to protect itself from legal action in this country. The exchange had previously filed for bankruptcy protection in Japan back in February, but had avoided doing so in the United States. This latest move was almost certainly precipitated by Sunday’s announcement that hackers had breached Mt. Gox’s records and were publishing data dumps “proving” that Mt. Gox still possessed roughly 950,000 Bitcoins — far more than the 850,000 the company claims to have lost.
Considering that 850,000 BTC is still worth roughly $530 million at today’s exchange rates, it’s easy to see why so many people are incensed at the actions of Mt. Gox and the disappearance of its CEO, Mark Karpeles. Reports on Mt. Gox’s troubles over the past few months paint Karpeles as distracted, poorly organized, and ultimately more interested in launching a Bitcoin cafe in the same building as the exchange rather than working to solve the security problems of the site itself.
The hackers released screenshots and other data that purport to show Mt. Gox moving hundreds of BTC to customer wallets even after “transaction malleability” issues had supposedly prevented Mt. Gox from making any transactions at all. Filing for bankruptcy protection in the US allows the company to protect its US assets and recognize its declaration of bankruptcy in US Courts. It can be contested by US creditors.
Unfortunately for Karpeles, filing for legal protection in the United States immediately after hackers claim to have discovered allegations of criminal misconduct will almost certainly fan the flames of the investors and BTC owners already calling for his head. Bankruptcy protection is not an absolute shield — it can protect a company from being chopped up and liquidated by creditors (at least, for a little while) — but it doesn’t shield a company from criminal charges or theft of property.
One word of caution, however, before accepting the word of the hacking crew as gospel: others have noted that attempts to read Mt. Gox’s activities through the block chain are exceptionally difficult, partly because the software that performs deep block chain analysis is still in its infancy. Similarly, pouring through hundreds of megabytes of records doesn’t automatically link those logged transactions with the block chain history.
Even if data released by the hack is legitimate, it will take a great deal of time to establish its authenticity and confirm that Mt. Gox is or isn’t criminally absconding with other people’s money. If the company has engaged in criminal fraud, than filing bankruptcy won’t save it. If it hasn’t, then the leaks may end up shedding light on how the attacks against Mt. Gox were carried out — which could, in turn, lead to criminal negligence charges depending on the nature of the security breaches.
It’s clear that Mark Karpeles had neither the intelligence nor the discipline to lead a major Bitcoin exchange, but teasing out the details of the attacks and establishing Mt. Gox’s culpability is going to take time. Meanwhile, the overarching situation around BTC continues to take its own bizarre turns. On Friday, BTC blogger Ryan Selkis promised to unleash information that would destroy the legitimacy of the Bitcoin Foundation by elaborating on various unspecified “damning facts.”
On Monday, Selkis declared that he had made a tactical error and would not be publishing said facts, leaving the community with plenty of questions and a great deal of mud to fling — but not much more. Then there’s last week’s battle over the identity of Sakoshi Nakamoto who may (or may not) be a 64-year-old man living in the Los Angeles foothills. In every instance, who you believe depends far more on faith than on hard fact. Speculation on the motivations and identities of the players runs just as rampant as speculation on cryptocurrencies themselves.
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