World’s Largest Bitcoin Exchange Out $10 Million | Hacker News Reader

World’s Largest Bitcoin Exchange Out $10 Million

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76 pointssk2code40 comments

MtGox has put a lot of bitcoin users at huge risk. I've had a huge USD withdrawal from Mtgox pending for over 7+ weeks now (8 weeks on 21st September).

Every single time I email them asking how much longer it's going to take they just get back to me saying "We don't know, a few more weeks." It's incredibly frustrating! They always offer to cancel my withdrawal and credit the funds back to my Gox account (so I can buy BTC at their inflated rates ? Nu-uh!).

Another offer they made me after a lot of back and forth was a 5% fee on my withdrawal (for a 7 day turn around time). That is ABSOLUTELY insane. Imagine a $100k withdrawal - you'd be paying $5,000 as fees on that. OUCH!

So here I am (along with possibly tons of other bitcoin users) with my money stuck in Gox. I already started using other trading platforms but I have to somehow retrieve this cash... Maybe I'll just take a hit and convert back to bitcoin and move my BTC out ? I don't know.. there's about a 10% price difference between Gox and other exchanges. So I'd lose 10% if I were to convert back to Bitcoin now, sell them on another exchange and cash out there.

Gox has lost a LOT of customers because of their behavior so far.. it's only a matter of time before they lose all of them.

I suggest taking the 5% hit and getting your money out.

There's a reason why the SEC exists. These are the risks you have to put up with when you work with unregulated markets. When the SEC finally starts regulating BTC exchanges, that's when things will be safe enough for me to use.

You can't expect me to dedicate any significant amount of money to an unregulated exchange / market... when issues like this haven't been figured out yet.

1. There are other exchanges that don't have this restriction.

2. Exchanges should only be used to buy and sell so if you deposit money, buy your coins quickly and get them to a safe place and you don't to worry.

3. By the time further regulation exists and bitcoin infrastructure is fully developed (these are certainties) you will have missed the differential in profits.

For #3, you can certainly waste your money on it. But I see plenty of cracks in the BTC mechanism. We now know that BTC is not anonymous (Ron and Shamir gained a lot of information from public analysis of the blockchain: http://eprint.iacr.org/2012/584.pdf), we know that huge amounts of BTC are being horded (The paper tracked 90,000 BTC), and we also know that if BTC Guild weren't self-limiting themselves... they'd have enough hashing power to perform the fabled 51% attack against the BTC Network (http://mineforeman.com/2013/04/06/btc-guild-voluntarily-limi...)

So we know that the 51% attack is feasible within the BTC community... specifically by BTC Guild. Many "benefits" of BTC are flat out false, and simply the act of using BTCs often ends up getting your ISP's servers hacked like no tomorrow. (Linode hack and OVH hack)

And yet you think BTC has a stable future ahead? Don't kid yourself, there are major issues here that need to be resolved.

And if Mt.Gox falls, then the world's largest USD<->BTC conversion market will have failed. Sure, BTC-e might be available now... but are there any guarantees that BTC-e will survive the pressure in the long run?

almost sounds like a ponzi scheme.

This most definitely sounds like a ponzi scheme. If so, it's probably falling apart right now. Scary.

Having other people seize 10 million of your assets does not make anyone's business a ponzi scheme.

MTGox should be able to cover these costs by selling BTC onto their own market. The strange thing is that if they were doing this, it should drive bitcoin prices LOWER on MTGox than elsewhere, and encourage people to play the arbitrage game in reverse (depositing rather than withdrawing USD).

Maybe they are having deposit issues in addition to withdrawal ones.

Its only an exchange. A weakness in Mt.Gox does not create a weakness in the greater BTC network. It just means it is that much harder to find a BTC Exchange that you can trust.

Its like history unfolding again. Eventually, people will (re)learn that giving large sums of money to people you don't know requires major amounts of trust. Ex: What guarantees do I have that Mt.Gox isn't trading with my money?

I mean after all... Mt. Gox money is virtual currency. Maybe you can't withdraw your money from Mt. Gox because they're playing with it themselves.

You see? Its a trust issue. SEC is in charge of investigating this sort of behavior.

People said this when this Bitcoin started years ago, but nooooooo, it was different. ( they always are. )

...or PayPal.

The money is just not there my friend.

Are you predicting an Mt. Gox bankrun?

That might be a bit scary to see unfold...

They've already had a bankrun. You just can't see the other depositors, nor is there any regulator shutting them down and trying to reclaim cash for said depositors.

ha! and you thought a Libertarian paradise was the way to go with your money.

I would also suggest you get your money out for the 5%. If their Japanese branch starts giving them trouble (they don't have licensing in Japan), there's the risk your money will be seized.

I bought BTC with my cash there a couple of weeks ago, took the hit, and got out.

Mt. Gox has the distinctive feel that they have inadvertently slipped into Ponzi mode, perhaps as a result of the money they've lost. But, it "feels" like they are moving money around to pay people (whether from collecting additional transaction fees, selling their own BTC, or otherwise). They need more activity to continue cashing people out because they simply don't have the money.

I didn't want to be without a chair when the music stopped.

But, I suppose the more people who do what I did and get out, the better the odds that those who remain will receive their money.

I had no idea that they were sitting on such a large stash of bitcoins (from the article, 250K). This leads me to believe that they have been trading on their own exchange to keep the USD / BTC price depressed.

For example, if the "market" decided that there was a 50% chance Mt. Gox was never going to solve their banking problems and allow unlimited fiat withdrawals, then you would expect there to be a 100% price premium for BTC on Mt. Gox. However, that would send a VERY scary message in terms of their viability, which would quickly become a self fulfilling prophecy, so Gox could sell some of their stash to keep the price premium to say, 10%. If they tried to push it all the way down to a 0% premium, though, they would quickly run through all their BTC.

Since the price premium has been stable at almost exactly 10% for months, that suggests SOMEONE is manipulating it, probably to keep it low. Does anyone care to look in the blockchain and do the deobfuscation to see if my theory is correct?

There is value to BTC price stability, and it definitely isn't surprising considering a stable BTC price supports MtGox's bottom line.

One could argue that efficient price discovery supports MtGox's bottom line. If bitcoin ends as a currency, it looks like MtGox would be left holding the bag. Healthy exchanges should make money by facilitating transactions, not price support.

Of course, if MtGox wanted to underwrite a bitcoin community and then reap the future benefits as a major exchange, this is an efficient way to do it.

|if MtGox wanted to underwrite a bitcoin community and then reap the future benefits as a major exchange, this is an efficient way to do it.

wrong, the most efficient way would have been to offer discounts on their rates. That's the main clue that MtGox are not partaking in price manipulation.

Sidenote on the writing: Its obnoxious to end sentences with "U.S.", especially twice in two back-to-back sentences that don't clearly end.

What I'm talking about: "For months now, it’s been next to impossible for Mt. Gox to get money into the U.S. Bitcoin discussion forums are filled with complaints by Mt. Got customers, who have been unable to get their money into the U.S. Banks don’t want to do business with the Japanese exchange —or bitcoin companies in general — because they fear the glare of regulatory scrutiny."

That caught me too. Made me think of the discussion regarding singe vs double spaces over the weekend... (this was a case put forward where double spacing would make the end of the sentence less ambiguous).

I keep reading about how the banking of bitcoins is unstable. It's bad for the image of bitcoin because it seems like it can't be trusted, and lawsuits like these damage the credibility of the currency and the companies.

Except these issues are with companies that are using the currency not properly understanding local regulations. This had nothing to do with bitcoin as a currency or protocol.

Measuring the stability of BTC requires more consideration than simply the technological merits.

Unfortunately, this is true.

This is true of currency as a whole. Money only has value if people are willing to exchange things for it.

>Money only has value if people are willing to exchange things for it.

True, but, here we are talking about something different. That is, the value of BTC is not simply defined by its technical merits, but can be devalued if the ecosystem for managing/utilizing/exchanging it is unhealthy.

In other words, the value of money is also affected by whether people are able to exchange things for it.

Once you understand the regulations you uncover another issue: the cost of compliance may be more than your company's revenue for the first few years. How do you ever get started in that situation?

Relatedly, Mt. Gox is now counter-suing CoinLab. CoinLab wanted to cut corners on meeting their contractual obligation to obtain the necessary licenses, and argue that they did meet the regulations under the "prepaid access" FinCen exception.

http://www.coindesk.com/mt-gox-countersues-bitcoin-incubator...

Oh man. I just got my employer to pay me in bitcoins instead of dollars. I'm sure this will blow over and the good times will roll again. Just everyone be cool and stuff.

Mt.Gox is not the one true exchange(tm).

I'm curious about how you and your employer would report your income for tax purposes. As far as I know, an employer can't write "50 bitcoins" on your W-2 or 1099 form.

I have zero trust in Bitcoin, and I can't really figure out why, except that it seems so utterly fragile. Like it's built on hopes and dreams - almost like a ponzi scheme, like someone else suggested.

Sure, if you're feeling lucky, go right ahead. But color me conservative.

I always thought of the bitcoin's purpose as being an independent currency.

All the problems started when people started wanting to exchange it for "real" money instead of other services accepting bitcoins.

How exactly did the US feds "Seize" 5 million in bitcoin? I thought the whole point was that it wasn't seizable unless you got the encryption keys, which would be weird since MTGOX is based in Japan, no?

> How exactly did the US feds "Seize" 5 million in bitcoin?

Presumably, if they wanted to seize bitcoin, they'd produce a demand to turn the bitcoin over along with stating the legal authority for the demand and the legal consequences of failing to comply with it; lots of actual seizures work that way.

But if you read the article, the $5+ million seized from Mt.Gox by the US government was US dollars (not bitcoins) ($2.9 million from Mt.Gox's account with Dwolla, and $2.1+ million from two Wells Fargo accounts), so "how can you seize bitcoins" is irrelevant.

Running a business costs money? I am very disappointed.

I think most people are unaware that MtGOX is an acronym for "Magic the Gathering Online Exchange."

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