Mt. Gox Seeks Court Protection After $500 Million Bitcoin Loss

from The troubled Mt. Gox bitcoin exchange filed for bankruptcy protection in
Japan Friday, with its chief executive saying it had lost nearly $500
million worth of the digital currency in a possible theft.

Mark Karpeles (pictured), who has not been seen in public for several days,
re-emerged to tell a press conference that his firm’s digital vaults had
been almost completely emptied.

The company’s lawyer said 750,000 bitcoins belonging to customers had
gone, along with Mt. Gox’s own store of the currency, which she said
was around 100,000 units.
That number of bitcoins would be worth around $477 million, calculated against the price on the Coindesk exchange at 10:30 GMT.

Karpeles said Mt. Gox had liabilities of ¥6.5 billion ($64 million)
and that around 1 million users had been affected when hackers broke
into the exchange in early February.

The global virtual currency community was shaken this week by the
shuttering of Mt. Gox, which had frozen withdrawals earlier in February
because of what the firm said was a bug in the software underpinning
bitcoin that allowed hackers to pilfer them.

Supporters rallied round, insisting that the bitcoin itself is sound
and the problems lay with Mt. Gox, which they said was badly managed and
unable to cope with the burgeoning popularity of the young currency.

Kolin Burges, an investor who has kept vigil outside the Tokyo
offices of Mt. Gox for several weeks, said on Twitter on Friday that he
would be packing up.

“Karpeles in Tokyo says Mt. Gox is bankrupt. 750,000 customer
bitcoins stolen & 120,000 company bitcoins stolen. None left
#mtgox#mtgoxprotest” he tweeted.

He later added: “Packed up #mtgoxprotest for the last time and did leaving interview with Asahi TV. It’s been a wild ride!”

The admission that such a huge amount of the crypto-currency has
disappeared could add to calls for regulation of an industry that has
taken regulators and bankers by surprise.

Finance Minister Taro Aso said earlier Friday he had always thought
bitcoin was suspect and said the country might take action following the
Mt. Gox debacle.

Aso’s comments came as Vietnam said it was banning banks from using
the unit and after chief U.S. central banker Janet Yellen said the
Federal Reserve had no powers to control it.

Aso, who also serves as deputy prime minister, said he had foreseen
difficulties for the crypto-currency, which is generated by complex
chains of interaction among a huge network of computers around the

“I was thinking that this sort of thing won’t last long,” said Aso, 73. “I was thinking it would collapse sometime.”

“Japan is overwhelmingly advanced in this field. In this sense, I was
thinking since before that we might face a situation where Japan has to
act, but I’d say it came earlier than I thought.”

His comments come after Yellen told a Senate hearing that banks under
the Fed’s regulatory purview were not involved with bitcoin, and so it
had no powers in the matter.

“This is a payment innovation that is taking place entirely outside of the banking industry,” she said.

“The Fed doesn’t have authority with respect to bitcoin.”

Yellen pointed to other U.S. regulators, including the Treasury,
watching the bitcoin sector for potential money-laundering and other
criminal uses of the digital currency.

However, she stressed, “it’s not so easy to regulate bitcoin” because
it is used outside the banking system, and has no centralized authority
behind, as do regular fiat currencies.

Vietnam banned its banks from handling bitcoin, with the State Bank
of Vietnam cautioning: “The ownership, trading and use of bitcoin and
other virtual money as an asset carries potential risks for users.”

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