You Money Has Been Deposited…aaand Now Its Gone
I sincerely hope none of you readers out there put any of your money into the Tokyo based currency exchange Mt Gox, the world’s biggest exchange for the virtual currency Bitcoin. Recently, Chief Executive Mark Karpeles reported that Mt Gox had for a lack of a better word “lost” approximately $500 million dollars.
Yeah they just lost it. Karpeles blames the gargantuan loss of currency on hackers breaking into Mt Gox’s computer system, admitting there was a weakness in the system that left the exchange vulnerable to hacking. Clients were not happy to say the least.
Unfortunately for Bitcoin users who used Mt. Gox, what makes the currency so unique and potentially appealing to clients also makes it a huge risk. Since Bitcoin operates outside of the banking industry, there is no regulation or official control by countries and their financial institutions. But no government regulation means that there is no way to insure funds that are deposited with Mt. Gox.
This means the clients of the virtual currency have been left with nothing and no way to get back the money they lost. After the loss of funds, a lawyer for the currency exchange announced that it was filing for bankruptcy protection.
End of Bitcoin?
There are still investors in Bitcoin who believe that the virtual currency will be able to survive this crisis and continue to grow. Even those who lost their money in Mt Gox believe that this is just an obstacle to overcome. Ken Shishidio was one of the 10,000 Mt. Gox investors in Japan that lost their Bitcoins. He lost about a tenth of his investment that he had put into Bitcoin. He doesn’t expect any of the lost money back, and yet he sees the losses as growing pains in Bitcoin’s attempt to revolutionize global currency. He compares Bitcoin to the rise of the automobile at the turn of the 2oth century.
In the early days of the automobile, there were traffic accidents because you didn’t have traffic lights or pedestrian crossings. But we didn’t ban automobiles
While investors are putting the onus on Karpeles and Mt. Gox, many of them are still have positive forecasts for the Bitcoin currency itself. Karpeles himself said Bitcoin industry was healthy and would continue to grow despite this fiasco with Mt Gox.
But not everyone is ok with seeing the collapse of Mt. Gox as growing pains for Bitcoin. An American Bitcoin investor named Gregory Greene filed a lawsuit on behalf of Bitcoin users on Thursday. He accused Karpeles and Mt Gox of negligence and fraud because they did not have proper safeguards for the currency exchange to combat theft.
To quote Green; Mt. Gox intentionally and knowingly failed to provide its users with the level of security protection for which they paid.
Whether this lawsuit will be successful remains to be seen since Mt. Gox has applied for bankruptcy protection. If the application is approved, the currency exchange will be given time to get it’s affairs in order as it works to repay a long list of creditors. And since the company is insolvent and devoid of funds, the lawsuit may not get that much for it’s clients.
It will be interesting to see how this whole Mt. Gox situation plays out and what the future of Bitcoin will be, if there even is one. Bitcoin’s US stock price has predictably dropped over 20% since the Mt. Gox collapse and it doesn’t look like it will recover soon. What do you guys think? It’s an interesting topic and I don’t think its going to go away soon or quietly. Stay tuned for updates folks. Enjoy your weekend.