hyenergix
05-03-14, 09:09
Erosion of faith served as death knell for Bitcoin exchange
Published March 05, 2014
[NEW YORK] As the Bitcoin exchange Mt. Gox was careening towards collapse in early February, its owner, Mark Karpeles, found that even some of his fellow virtual currency advocates were losing faith.
Members of the Bitcoin Foundation's board, an important promoter of virtual currencies, were losing confidence because the exchange had been associated with another foundation member who was arrested in January on money-laundering charges.
The young currency in recent months had been increasingly backed by prominent investors, but the taint of any criminal activity was starting to take over the headlines.
Some wanted Mr Karpeles, chief executive of Mt. Gox, the Tokyo-based site that once had been the go-to place to buy Bitcoins, to either resign from the Foundation or be removed from its board, said people briefed on the matter.
It was that steady erosion of faith in the Bitcoin community that ultimately served as the death knell for Mt. Gox, which had been enduring a series of problems, including having accounts frozen by the US authorities last year.
Without the public backing of Bitcoin believers, Mt. Gox lacked the ability to get the financing it needed, those familiar with the discussions say.
On Feb 28, Mt. Gox filed for bankruptcy protection, five days after Mr Karpeles resigned from the Foundation and just days after its website suddenly went dark. The exchange said that most likely it had lost 750,000 of its customers' Bitcoin holdings and more than 100,000 of its own coins, or more than US$450 million worth.
At a news conference in Tokyo, Mr Karpeles, dressed in a suit instead of his usual T-shirt, bowed in contrition and apologised in Japanese.
"There were weaknesses in the system," he said. "I'm truly sorry to have caused inconvenience."
It is not clear how much lasting damage the collapse of Mt. Gox will do to the push by venture capitalists and wealthy investors to turn Bitcoin and other digital currencies into a viable alternative to traditional currencies such as the US dollar and the euro.
Digital currency advocates say other exchanges were quickly supplanting Mt. Gox as the place for people to convert traditional currencies into Bitcoins, and the impact will be short-lived.
But US prosecutors are stepping up their inquiries. They have issued subpoenas to several digital currency companies, including Mt. Gox and the Internet Credit Union, based in New Brunswick, New Jersey, and one in Japan, said several other people briefed on the matter.
Prosecutors hope to better understand how money is transferred in the digital realm and converted from dollars to Bitcoins. The people briefed on the matter said they would not be surprised if the authorities subpoena other companies and institutions involved in money transfers.
Bitcoin prices had briefly tumbled after the site went dark, but have since recovered. On Feb 28, Bitcoin was trading at US$539, according to the website Coindesk.
Still, Bitcoin investors are left to figure out what, if any, recourse they have against their losses at Mt. Gox. At least one class-action lawsuit has been filed.- NYT
http://www.businesstimes.com.sg/specials/executive-money/erosion-faith-served-death-knell-bitcoin-exchange-20140305
Published March 05, 2014
[NEW YORK] As the Bitcoin exchange Mt. Gox was careening towards collapse in early February, its owner, Mark Karpeles, found that even some of his fellow virtual currency advocates were losing faith.
Members of the Bitcoin Foundation's board, an important promoter of virtual currencies, were losing confidence because the exchange had been associated with another foundation member who was arrested in January on money-laundering charges.
The young currency in recent months had been increasingly backed by prominent investors, but the taint of any criminal activity was starting to take over the headlines.
Some wanted Mr Karpeles, chief executive of Mt. Gox, the Tokyo-based site that once had been the go-to place to buy Bitcoins, to either resign from the Foundation or be removed from its board, said people briefed on the matter.
It was that steady erosion of faith in the Bitcoin community that ultimately served as the death knell for Mt. Gox, which had been enduring a series of problems, including having accounts frozen by the US authorities last year.
Without the public backing of Bitcoin believers, Mt. Gox lacked the ability to get the financing it needed, those familiar with the discussions say.
On Feb 28, Mt. Gox filed for bankruptcy protection, five days after Mr Karpeles resigned from the Foundation and just days after its website suddenly went dark. The exchange said that most likely it had lost 750,000 of its customers' Bitcoin holdings and more than 100,000 of its own coins, or more than US$450 million worth.
At a news conference in Tokyo, Mr Karpeles, dressed in a suit instead of his usual T-shirt, bowed in contrition and apologised in Japanese.
"There were weaknesses in the system," he said. "I'm truly sorry to have caused inconvenience."
It is not clear how much lasting damage the collapse of Mt. Gox will do to the push by venture capitalists and wealthy investors to turn Bitcoin and other digital currencies into a viable alternative to traditional currencies such as the US dollar and the euro.
Digital currency advocates say other exchanges were quickly supplanting Mt. Gox as the place for people to convert traditional currencies into Bitcoins, and the impact will be short-lived.
But US prosecutors are stepping up their inquiries. They have issued subpoenas to several digital currency companies, including Mt. Gox and the Internet Credit Union, based in New Brunswick, New Jersey, and one in Japan, said several other people briefed on the matter.
Prosecutors hope to better understand how money is transferred in the digital realm and converted from dollars to Bitcoins. The people briefed on the matter said they would not be surprised if the authorities subpoena other companies and institutions involved in money transfers.
Bitcoin prices had briefly tumbled after the site went dark, but have since recovered. On Feb 28, Bitcoin was trading at US$539, according to the website Coindesk.
Still, Bitcoin investors are left to figure out what, if any, recourse they have against their losses at Mt. Gox. At least one class-action lawsuit has been filed.- NYT
http://www.businesstimes.com.sg/specials/executive-money/erosion-faith-served-death-knell-bitcoin-exchange-20140305