Mt. Gox unofficially confirms that they will file for bankruptcy

Mt.Gox LogoA shocking bit of news has been circulating the web this morning. Mt Gox, the BitCoin marketplace, has shut down all points of contact online as they go into PR crisis mode and unofficially confirm their pending bankruptcy. The reason? Over $375 million potential BitCoins lost in a theft.

The news of a potential theft was released a week ago, but nothing was confirmed and the source wasn’t clear. Now unverified reports of over 750,000 lost BitCoins have surfaced, and the sudden shutdown of Mt. Gox appears to confirm it.

We have no idea where the original source came from, but The Two-Bit Idiot, a BitCoin expert and blogger, said that the report comes from someone who has otherwise been reliable. It states:

Publicly, MtGox declared that “transaction malleability” caused the system to be subject to theft, and that something needed to be done by the core devs to fix it. Gox’s own workaround solution was criticized, and eventually a fix was provided by The truth, it turns out, is that the damage had already been done. At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years. The cold storage has been wiped out due to a leak in the hot wallet.

Unverified or not, with Mt. Gox deleting their Twitter feed, shutting down their website, announcing the bankruptcy and circling the wagons, you can pretty much assume the report is correct. Which spells a catastrophic blow against the already controversial emergency currency. Here’s what they say on their official page:

Dear MtGox Customers,

In light 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

On the other side the prominent figures in the BitCoin industry are already distancing themselves from Mt. Gox, though they had started doing so last year when the US seized $5 million and accused the company of operating illegally within the country.

So, what happens now? There is a real possibility that this could be the end of the currency for awhile. With so much pressure on it to perform, and being in its infancy, it could prove to be too much scandal to survive. Especially given an already nervous public who have lost money.

But in a joint statement released by companies who operate on BitCoin, they claim this isn’t the case.

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.

Only time will tell.

Source: Coinbase Blog, The Two-Bit Idiot, Re/code

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