updated 10:46 am EST, Tue February 25, 2014
Gox domain purchase, leaked relaunch document point to potential recovery
Headlining BitCoin's struggle for wide acceptance is the saga of Mt. Gox, once the premier exchange for the crypto-currency. Overnight, the exchange went completely down, giving rise to fears of the loss of millions of dollars of the currency. However, somewhat unexpectedly, domain investor Andy Booth has confirmed the sale of the Gox.com domain to Mt. Gox CEO Mark Karpeles, in parallel with the public release of what appears to be a pitch for investors in the exchange to relaunch Mt. Gox as simply "Gox" and offer limited withdrawals as it generates revenue to recover the exchange and repay investors.
Mt. Gox was a Bitcoin exchange based in Tokyo, Japan, and rebranded itself from a previous venture in 2010 as a Bitcoin business and was the largest-volume Bitcoin exchange. On February 23, the CEO of Mt. Gox resigned from the board of the Bitcoin Foundation.
The same day, all posts on their Twitter account were removed. On Monday, all trading was suspended, with the previously mentioned website shut down. Six other exchanges damned the previous king-of-the-hill in a joint statement, calling the company guilty of a "tragic violation of the trust of users."
The site now has a short message that reads "Dear MtGox customers, in the event 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."
A document leaked to the public yesterday noted that Mt. Gox may have suffered the outright theft of 744,408 Bitcoins (BTC), which at an average market value today, is worth over $387 million. The company blamed a "transaction malleability" flaw with the currency as the root cause of the problem -- a bug in the protocol potentially allows fraudsters to alter transaction details to make it appear that sending the coins to a different wallet didn't occur, and forcing a resend.
A poll of 3,000 users undertaken by CoinDesk showed that 68 percent of Mt. Gox customers were still awaiting payment for the exchange, many for one to three months, with 21 percent waiting for over three months. The relaunch document (seen below) claims that the company has $22.4 million and 2,000 BTC in the company's custody, with another $10.5 million held by CoinLab and the US Department of Homeland Security. It lists 624,408 BTC in customers' wallets, 120,000 owed to the exchange itself, ad 80,208 BTC suspended from banned or suspicious accounts. It expects to need $55 million in cash, but this may be aggravated if the value of a BTC increases.
Today's domain sale, plus what now appears to be a legitimate relaunch document, may point a way out of the problem for Mt. Gox, but the struggle for legitimacy continues. The relaunch document notes that the exchange's problem are "massive robbery and poor BitCoin accounting" but in the long term, the lack of trust -- even after a post-Gox relaunch if it ever happens -- may be the biggest issue and a thorn in the side for the currency as a whole.