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Tuesday 23 September 2014

Bitcoin exchange blames hack theft

Published 03/03/2014 | 08:52

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Mt Gox chief executive Mark Karpeles posted the announcement on the company's website (AP/Kyodo News)

The Tokyo bitcoin exchange which filed for bankruptcy protection has blamed theft through hacking for its losses and said it is looking into a criminal complaint.

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Mt Gox's chief executive, Mark Karpeles, posted the announcement on the company's website today, outlining the events that resulted in insolvency and saying there was a "high probability" that theft was behind the disappearance of bitcoins.

He said a huge number of transactions must be investigated, but efforts are under way to bring Mt Gox back into business to repay its debts.

Mr Karpeles has said 750,000 bitcoins from users and another 100,000 belonging to the company disappeared.

Mt Gox was unplugged last week as rumours of its insolvency swirled, adding to fears about bitcoins overall.

Mr Karpeles said illegal access in early February abused a bug in the computer system.

Mr Karpeles said: "We will make all efforts to ensure that crimes are punished and damages recovered."

He added that Mt Gox will try to resume business as a way of increasing repayments to its creditors.

Its woes are a setback for bitcoin, a virtual currency that has grown in popularity since its 2009 creation as a way to make transactions across borders without third parties such as banks.

Bitcoin has also become a highly speculative form of investing, but it has comes with risks, as the Mt Gox case has illustrated, partly because bitcoins are not regulated by central banks or other financial authorities.

It said "large discrepancies" were found between the amount of cash held in financial institutions and the amount deposited by users, meaning that about 2.8 billion yen (£16 million) was unaccounted for.

Mt Gox set up a call centre at a Tokyo telephone number, open during business hours Monday to Friday, to answer any queries.

Mr Karpeles promised to co-operate with the authorities in Japan and overseas in investigations, and said an expert had been asked to investigate a possible criminal complaint.

"All efforts will now be made to restore the business and recover damages to repay debts to creditors. We hope for the understanding and co-operation of all," he said.

Bitcoin proponents have insisted that Mt Gox is an isolated case caused by the company's technological failures.

Mt Gox said its liabilities totalled 6.5 billion yen (£38 million), while its assets were 3.8 billion yen (£22 million).

A class-action lawsuit was filed in a US federal court in Chicago last week, which claims users were not properly protected from the exchange's security breach and were instead knowingly told false information, causing the loss of millions of pounds of their bitcoins.

Press Association

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