Mt. Gox, once the world’s largest Bitcoin exchange, filed for bankruptcy in Japan, focusing attention on the digital currency’s risks.
The company, which had revenue of 135 million yen ($1.33 million) in the year ended March, applied in Tokyo District Court today with debt exceeding its assets by 2.7 billion yen, Mt. Gox said in a statement. The exchange discovered on Feb. 24 that it had lost 750,000 Bitcoins belonging to users and 100,000 of its own, it said.
The collapse follows weeks of turmoil amid reports that hackers had pilfered the missing $473 million in Bitcoin from Mt. Gox, leading the company to halt withdrawals on Feb. 7. The regulation of Bitcoin, let alone derivatives of it, is an unresolved question in many parts of the world.
Mt. Gox Chief Executive Officer Mark Karpeles said his company lost Bitcoins because its computer systems were weak, according to remarks broadcast on NHK today. The firm had 6.5 billion yen in debt.
Companies from San Francisco to London as well as the virtual currency’s industry group, the Bitcoin Foundation, have been seeking to assure Bitcoin users that their funds won’t disappear due to theft or mismanagement.
The digital currency was introduced in 2008 by a programmer or group of programmers under the name Satoshi Nakamoto and has since gained traction with merchants around the world. Bitcoin has no central issuing authority, and uses a public ledger to verify transactions while preserving users’ anonymity.
Mark Karpeles, chief executive officer of Mt. Gox, leaves the Tokyo District Court in Tokyo.
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Mark Karpeles, chief executive officer of Mt. Gox, leaves the Tokyo District Court in Tokyo.
Even as regulators and investors struggle to grasp Bitcoin’s many uses -- including investment vehicle, payment-processing system and money-laundering tool -- they are now confronted with the complexities of an emerging derivatives market where entrepreneurs say current rules don’t apply.
George Samman, a former Wall Street investment adviser who in May helped start a platform for betting on Bitcoin’s price swings, saw trading on his BTC.sx website grow to more than $35 million by Jan. 21. After the shutdown at Mt. Gox, BTC.sx suspended trading because it had to find another exchange partner for its customers.
“It is semi-Wild West, but that’s only because it’s new,” Samman said before the Mt. Gox shutdown.
In the U.S., states are wrestling with how digital-currency businesses could be regulated as money transmitters. Russia has said Bitcoin is illegal under current law, while China has stopped financial institutions from dealing in it, even as trading continues.
Mt. Gox customers hold placards while protesting outside a building housing the headquarters of Mt. Gox and its parent company Tibanne Co. in Tokyo. Close
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Mt. Gox customers hold placards while protesting outside a building housing the headquarters of Mt. Gox and its parent company Tibanne Co. in Tokyo.
Mt. Gox’s missing 850,000 Bitcoins are worth $473 million, based on current prices shown on the CoinDesk Bitcoin Price Index.
To contact the reporter on this story: Grace Huang in Tokyo at xhuang66@bloomberg.net
To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
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