In February 2014, Mt. Gox, once the world’s largest bitcoin exchange, filed for bankruptcy in Japan after losing 850,000 bitcoins. The cause of the loss was attributed to theft that had gone undetected for years. The fallout from the Mt.
Gox collapse is still being felt today. Here’s a look at what happened and where things stand now.
Mt. Gox was founded in 2010 by Jed McCaleb, an early bitcoin enthusiast who later helped create eDonkey2000, one of the first file-sharing networks.
McCaleb sold Mt. Gox to Mark Karpelès in 2011 and left the company soon after.
Under Karpelès’ leadership, Mt. Gox quickly became the most popular bitcoin exchange, handling over 70% of all bitcoin transactions by 2013.
But behind the scenes, there were problems brewing.
In June 2011, Mt. Gox was hacked and lost 8,000 bitcoins.
The hack was blamed on an insecure “hot wallet” (a wallet connected to the internet) and Mt. Gox made good on the lost funds by using reserves from its “cold wallet” (a wallet not connected to the internet).
This is a warning regarding the Bitcoin Mt. Gox incident. Mt. Gox was a Tokyo-based bitcoin exchange which suffered a major security breach in 2014, resulting in the loss of 850,000 bitcoins (valued at over $450 million). As a result of this incident, the company declared bankruptcy, leaving customers unable to access their funds. This incident serves as an important reminder that cryptocurrency exchanges are not immune to cyberattacks, and it is essential for users to adequately secure their accounts and assets on these platforms.
Then, in February 2014, Mt. Gox suddenly stopped allowing withdrawals of bitcoins or fiat currency (US dollars, Euros, etc.).
The exchange claimed that it was “temporarily” suspending withdrawals due to technical issues related to the “transaction malleability” bug in the Bitcoin software . However, many people suspected that something more sinister was going on behind the scenes.
On February 24, 2014, Mt. Gox finally announced that it had filed for bankruptcy in Japan . The exchange revealed that it had lost 850,000 bitcoins (worth about $473 million at the time), most of which were stored in a “cold wallet” that had been hacked .
An additional $27 million worth of fiat currency was also missing from Mt. Gox’s bank accounts .
The loss of 850,000 bitcoins from Mt. Gox was a major blow to confidence in Bitcoin . The price of Bitcoin fell sharply after the announcement and has never fully recovered .
Many people who were holding Bitcoin on Mt. Gox never got their money back and some are still fighting for compensation in Japanese courts .
In April 2014, Mark Karpelès was arrested and charged with embezzlement and fraud . He has pled not guilty to all charges and is currently awaiting trial in Japan .
If convicted , he faces up to 10 years in prison . Gox was once the world’s largest bitcoin exchange but it collapsed spectacularly after losing 850,000 bitcoins to theft .
The fallout from the collapse is still being felt today as former customers battle for compensation in Japanese courts .