Detailed extensively by Reuters today, Bitcoin exchange Mt. Gox has halted all trading and the owners have replaced the site with a splash page. If you are unfamiliar with the concept of Bitcoin exchanges like Mt. Gox, the structure somewhat resembles how a traditional bank operates. People that purchase Bitcoins can deposit the digital currency at exchanges and convert it into the currency of other countries like U.S. dollars for instance. Investors that deposited Bitcoin at Mt. Gox currently have no way of accessing their currency and are extremely unhappy at the moment.
Targeting the message to Mt. Gox customers, the splash page on the now defunct site reads “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.”
In addition, the company’s Toyko-based office is now empty. Providing an incredibly vague statement to Reuters, Mt. Gox CEO Mark Karpeles said “We are currently at a turning point for the business. I can’t tell much more for now as this also involves other parties.”
These recent events can be attributed to an alleged theft in which Mt. Gox lost approximately 744,000 Bitcoins or approximately $409 million based of the current exchange rate of around $550. Detailed within a crisis management document allegedly leaked by a Mt. Gox insider, Mt. Gox management is attempting to handle the theft starting with reducing liability by pursuing a bailout from other Bitcoin users and exchanges.
Other steps include announcing the departure of CEO Mark Karpeles blaming poor organization and technology for the security issue, moving the exchange to a new country, rebranding the exchange on social networks as Gox rather than MtGox and setup an entirely new management team. The target date for setting up the rebranded exchange is April 1, 2014 or later. When Gox is launched, trade limits will be put in place on both Bitcoin and cash withdrawals.
Picketing outside of Mt. Gox for the last week, bitcoin trader Kolin Burgess has been attempting to get back approximately $320,000 in Bitcoins from the exchange. Speaking with USA Today, Burgess said “I may have lost all of my money. It hasn’t shaken my trust in Bitcoin, but it has shaken my trust in bitcoin exchanges.”
Interestingly, some Bitcoin investors believe that the fall of Mt. Gox will only lead to a more stable future for the currency. In an interview with Bloomberg, George Mason University technology director Jerry Brito said “It purges the final vestige of the first generation of infrastructure companies, Who’s left? It’s the serious people, who are doing this right.”
Other popular Bitcoin exchanges and businesses, such as San Fransisco based Coinbase, attempted to shore up support for the digital currency with a joint statement released yesterday. A portion of the statement reads “This tragic violation of the trust of users of Mt.Gox was the result of one company’s actions and does not reflect the resilience or value of bitcoin and the digital currency industry. There are hundreds of trustworthy and responsible companies involved in bitcoin…As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. “