MtGox Trading Halted, Website Offline

MtGox Trading Halted, Website Offline

MtGox-Trading-Halted-Website-Offline

Trading at the Tokyo-based MtGox was halted, and the fact that the website itself is offline spells doom. It is a known fact that MtGox has been sick for a long time.

 

MtGox Problem

MtGox users were experiencing major lag in withdrawals last year, and there are news that the company faced legal issues with their funds seized from their Wells Fargo accounts and Dwolla account. A total of $5 million were seized due to MtGox failing to register in the U.S. as a money transmitting company.

 

At the beginning of this year, withdrawal in fiat and then Bitcoin was suspended. A document has surfaced with the title “Crisis Strategy Draft” states that MtGox has lost around 744,408 BTC or $370 million at current Bitcoin price, with an additional $55 million of unconfirmed fiat liabilities. The company suggests that theft related to transaction malleability has been ongoing for several years, probably closer to the time the problem was initially discovered, in 2011.

 

The community is overwhelmed with speculations, none of which is particularly optimistic. It can be seen that withdrawal will not recommence at MtGox for the foreseeable future. Now MtGox customers are faced with the grim prospect of what is effectively an insolvency, though no official words have been voiced out.

 

Prices falling

With the company remaining silent, fear, uncertainty and doubt has seen the price of Bitcoin declining sharply at other exchanges to a low of $430 at BTC-e. The price on MtGox was $135 at the time it halted trading activities.

 

The joint statement by Bitcoin business leaders, naming MtGox as the ‘bad actor’, and indirectly suggesting that the company is no longer trustworthy, has no doubt affected the price of Bitcoin. Comments by users on the joint statement by Coinbase, Kraken, Bitstamp, Circle and BTC China did suggest that certain words like ‘insolvent’ was taken out from the original statement.

 

The statement reads as follows:

Joint Statement Regarding MtGox

For immediate distribution: February 24th, 2014 — 10:00 PM ET

The purpose of this document is to summarize a joint statement to the Bitcoin community regarding Mt.Gox.

This tragic violation of the trust of users of Mt.Gox was the result of one company’s abhorrent actions and does not reflect the resilience or value of bitcoin and the digital currency industry. There are hundreds of trustworthy and responsible companies involved in bitcoin. These companies will continue to build the future of money by making bitcoin more secure and easy to use for consumers and merchants. As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today.

We are confident, however, that strong Bitcoin companies, led by highly competent teams and backed by credible investors, will continue to thrive, and to fulfill the promise that bitcoin offers as the future of payment in the Internet age.

In order to re-establish the trust squandered by the failings of Mt. Gox, responsible bitcoin exchanges are working together and are committed to the future of bitcoin and the security of all customer funds. As part of the effort to re-assure customers, the following exchanges will be coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner: Coinbase, Kraken, BitStamp, Circle, and BTC China.

We strongly believe in transparent, thoughtful, and comprehensive consumer protection measures. We pledge to lead the way.

Bitcoin operators, whether they be exchanges, wallet services or payment providers, play a critical custodial role over the bitcoin they hold as assets for their customers. Acting as a custodian should require a high-bar, including appropriate security safeguards that are independently audited and tested on a regular basis, adequate balance sheets and reserves as commercial entities, transparent and accountable customer disclosures, and clear policies to not use customer assets for proprietary trading or for margin loans in leveraged trading. It does not appear to any of us that MtGox followed any these essential requirements as a financial services provider.

The following industry leaders stand by this statement:

Fred Ehrsam — Co-founder of Coinbase
Jesse Powell — CEO of Kraken
Nejc Kodrič — CEO of Bitstamp.net
Bobby Lee — CEO of BTC China
Nicolas Cary — CEO of Blockchain.info
Jeremy Allaire — CEO of Circle


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