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Comment by steven2012 | Hacker News Reader

steven2012

I'm not convinced this is real, and I happen to think that MtGox is going to go bankrupt. But this doesn't smell right to me.

If it's a hoax, then it's well done. I would guess it's something done by an investment banker who knows how to write documents up like this. But the write up is far too melodramatic for me to believe this was written by someone actually involved in the situation.

"At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public." "This isn’t about saving MtGox anymore."

Why is there only a single line on preventing a run on MtGox? That to me would be the most pressing issue once MtGox opened up the floodgates.

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He has to be hyperbolic, he is asking for a huge favor. He is asking that bitcoin owners essentially donate coins to mt gox in order for them to clear their losses. So in essence he is asking for tens of millions of dollars (at least, maybe hundreds) of free money. And not for charity, but for a profit based enterprise.

This is a rather bold request. So to back it up he says the entire fate of bit-coin depends on this.

There is only a single line about preventing a run on mtgox, because (a) trading will only start when mtgox is (mostly?) re-capitalized and has most people's bitcoins. And the prevention of a run on mtgox is pretty straightforward and non-controversial ... just limit the amount of withdrawals.

I am pretty sure this document is the real thing. But one thing I cannot yet decide is whether he stole all or some of the coins or really lost them. The idea that he lost over 700K of coins over the years without noticing is very hard to believe. On the other hand if he did steal the coins, and now is asking for the community to donate them back to him, then he has an immeasurable amount of chutzpah.

That really does illuminate an angle of the U.S. bank bailouts before...

..that "too big to fail" really is not about jobs or anything like that, but about maintaining faith in the currency.

and stopping riots

Name one historical instance of bank runs leading to riots.

Wasn't it the case in Argentina ?

The riot was because the government froze deposits so people weren't allowed to withdraw money from the banks. My original (implied) point was that bank runs themselves don't necessarily cause the chaos they're made out to, so if anything this supports my case: if the government had allowed the bank to collapse, there may not have been riots.

I don't see how whether they cannot withdraw because the government blocked withdrawals or because the bank has no money to give away matters. The riots are caused by inability to withdraw money in any case.

No, they weren't. To quote the Wikipedia[1] article on the riots: "The uprising was a predominantly middle-class uprising against the government of President Fernando de la Rúa, who had failed to contain the economic crisis that was going through its third year of recession".

1. http://en.wikipedia.org/wiki/December_2001_riots_%28Argentin...

Argentina in 2001 following the implementation of the "corralito" fiscal policy. But this seems like a very pedantic quibble you have here.

That wasn't the bank run causing riots. That was the government policy which froze deposits, to avert a bank run, that caused riots.

I stand corrected, you weren't being pedantic at all. I guess all those people lined up outside the bank, ready to riot, were waiting for the government to give them their money back.

To quote the Wikipedia[1] article on the riots: "The uprising was a predominantly middle-class uprising against the government of President Fernando de la Rúa, who had failed to contain the economic crisis that was going through its third year of recession".

"The unrest started when Economy Minister Domingo Cavallo introduced restrictions to the withdrawal of cash from bank deposits, intending to stop the draining of deposits that had been taking place throughout 2001 and had reached the point where 25% of all the money in the banks had been withdrawn." People had were previously gradually withdrawing money over time.; no 'bank run' had occurred. The Corralito occurred, which among other political factors lead sections of the populace to riot. Read the article.

1. http://en.wikipedia.org/wiki/December_2001_riots_%28Argentin...

Customers turn violent as Zimbabwe bank runs out of cash

http://www.independent.co.uk/news/world/africa/customers-tur...

Riots Hit Cyprus Bank After Accounts Frozen

http://www.endalldisease.com/riots-hit-cyprus-bank-after-acc...

Panic of 1837

Moreover, the panic unleashed a wave of riots and other forms of domestic unrest. The ultimate result was an increase in the state's police powers, including more professional police forces.[17][18]

http://en.wikipedia.org/wiki/Panic_of_1837

Baltimore bank riot

The Baltimore bank riot of 1835 was a violent reaction to the failure of the Bank of Maryland in 1834. The riot, which lasted from 6-9 August, was aimed at the homes and property of a number of former directors of the bank, who had been accused of financial misconduct and fraud

http://en.wikipedia.org/wiki/Baltimore_bank_riot

The Cyprus riots were not due to a bank run; they were due to the government's decisions to prevent citizens from withdrawing their money. From the article you linked: "Riots are now being reported in Cyprus as citizens are furious at the Troika’s decision to rob the citizens to pay for the bad debts of banks."

I'll give you the others, however. The fact that two are from over a century and a half ago however seems to support my implication that bank runs don't necessarily lead to riots (and more specifically, that not bailing out banks won't necessarily lead to riots).

I'm growing increasingly convinced that this is in fact true, and that the global financial system dodged a major asteroid in 2007. Possibly not a planet-killer, but one that would have set things back a long ways.

The problem remains that the bailout didn't just manage to shore up faith in the currency and banking system, but grossly enriched many of the same bankers who'd, if not caused the crisis, played a major role in precipitating and enlarging it.

You seem to know a lot about this. Why didn't the US government, in all the bailouts, completely wipe out existing shareholders in order to not provide an incentive to do this again?

This was exactly my reaction to reading this document.

It mirrors "too big to fail" startlingly well.

It's melodramatic because it sounds like it was authored by, not MtGox, but an in-the-know bitcoin stakeholder who needs to convince other probably reluctant big stakeholders to help bail out MtGox.

I'm reminded of the Federal Reserve calling in every major Wall Street bank CEO and demanding that they chip in to help rescue the imploding hedge fund Long Term Capital Management, lest it take down the entire market.

http://en.wikipedia.org/wiki/Long-Term_Capital_Management

First time I'm ever seriously considering just cashing out all my coins...

If I had any BTC, I'd be cashing out right the hell now. This doesn't bode well for the short term future of bitcoin. Long term, it might overcome it, but I wouldn't take that bet right now.

Check the plummeting price, down to $488 and sinking. Long term it will of course overcome, MtGox was no longer the big market mover it used to be. Their constant incompetence no longer 'goxed' the price like it once did on a regular basis when they were the only major option if it did BTC would be worth pennies again like back in 2011.

Longterm things like colored coins are looking good for Bitcoin, plus exchanges not run by complete assclowns

Why is there only a single line on preventing a run on MtGox?

Because preventing one at this point is impossible.

If they have truly lost almost everything (2000 BTC remaining), they have nothing, and those USD funds are probably frozen or to be frozen in various investigations. On the contrary, I find this document incredible because it actually envisages keeping mtgox open under new management. That's not going to be possible. Because of massive trust issues with anyone willing to go near this company, at best it's going to close down in an orderly fashion. Putting more money into it now is a lost cause, and without an audit by outside accountants, why should anyone trust them, no matter who the CEO is?

If they actually have lots of USD (I am doubtful), the best outcome for them is a precipitous crash in the bitcoin price down to almost zero, at which point they can pay out all their customers in bitcoin easily by purchasing new bitcoin and walk away with millions of USD. They seem to have done their best to engineer this by being completely opaque about their situation, but I suspect that's just incompetence and panic.

If they don't have accessible funds in USD, and have lost their BTC (as seems likely), no-one will get anything and the company will be wound up. Payouts have been glacial or nonexistent for months, so something has been badly wrong for quite some time.

The best bet for customers now is to apply to financial authorities immediately to have the company shut down and investigated.

Wiping their tweets and leaving it to now to shut down the website then showing a blank page shows you what level they are operating on - I suspect they have no appreciable assets available and are running on fumes, if not they would be acting in a far more rational manner and reassuring customers.

They will not survive this panic and this will end badly when the financial authorities step in.

Definitely real. Joint statement just released on Coinbase.

http://blog.coinbase.com/post/77766809700/joint-statement-re...

Edit: and now the MtGox website is totally down.

Weird, Coinbase just updated the post to remove “insolvency”, implying they don’t actually know if Gox is insolvent, or at least they don't want to be the ones to announce it: http://blog.coinbase.com/post/77766809700/joint-statement-re...

I may have just overlooked it since I am reading on a small screen, but I don't see anything in there that said anything about the legitimacy of the leaked document. This could just be a general statement on the Gox situation.

The statement doesn't imply anything about a insolvency

The original title specifically said "Insolvency of MtGox"

I've been watching the discussion here for the past few hours.

Mt Gox failing doesn't surprise me. The number of people stepping up and saying this is a hoax or fake does surprise me.

Over 2 months ago I responded to a poster on another bitcoin story who said they had waited over 5 months for their withdrawals. That means Mt Gox has not been solvent since at least last summer.

How can there be a run on a bank you can't get your money from? While the recent freezes of USD and BTC withdrawals were only recently announced it appears that you couldn't really get your money out before either.

I'm going to take a guess. An investor received this document, was appalled and published it.

If I was an investor in Mt Gox and received a document like this, which is clearly an admission of very illegal activity, I would publish it publicly and forward it to the FBI. I don't think there will be a gox.com, but I do think someone will end up on an Interpol list in a few days. Mt Gox wasn't run by people who should be celebrated, it was run by criminals who knowingly took monetary deposits for their insolvent for-profit business.

You are incorrect. I got some money in January 2004 from MtGox. The transfer took 22 days. After that it has been much slower... :)

2004?

Quit living in the past! ;)

20 days, 22 days, any entity thats solvent should be able to issue a withdrawal very quickly. It sounds like everyone was delayed, some far more than others for whichever reasons.

I received a SEPA withdrawal from them last week, it was 20 days over due, but clearly authorized during the whole fiasco.

Not only does it put a bigger focus on bitcoin as whole than MtGox, it is extremely negative about the company. I don't know what the intended audience for this is but it wouldn't do a good job of selling the company as a good investment or as good rallying cry for the troops. It reads like it was written by someone who believes in BTC but was burned by MtGox.

Probably targeted toward Gox's investors who are going to be the ones that have to deal with this mess.

It reads like someone's idea of what "should" be done, sort of an 'open letter' type approach. Time will tell.

It also uses "robbery" in a really unbusiness-like way. Still, there's only a few things here and there that are kind of out-of-line, and might be of the sort I'd expect for a intended-to-be-internal document.

Maybe, maybe not.

But Mt. Gox isn't a business. It's an unregulated exchange, so there's really no point in taking for granted that they would meet some standard of professionalism which by definition they don't have to.

It most certainly is a business. They have employees, charge fees, and make a profit (or are supposed to). Exchanges are businesses, and MtGox is most certainly both an exchange and a business.

Fair enough I guess, but I could have an office with a secretary at the front desk and charge people money to extract their teeth, yet that wouldn't actually make me a dentist.

I meant Mt.Gox isn't a business in the sense that businesses, typically, have regulatory frameworks they have to follow, and standards to meet. Particularly when they deal with currency.

Maybe I should have said there's no reason to expect them to act like professionals.

I could have an office with a secretary at the front desk and charge people money to extract their teeth, yet that wouldn't actually make me a dentist.

Sure you would, just not a licensed one.

They're a business. Just not a good one.

It's not even particularly well done. Doesn't pass even a cursory inspection. It's fake.

Care to shed any light on your reasoning?

I've found a potential inconsistency.

The document states their USD assets are $22.5M liquid and $10.5M seized/locked ($33M total) and USD liabilities of $55M.

How is this $22M deficit possible when the balance sheet on page 8 (look for the non-redacted version in this thread) shows a positive income for both the 2012 and 2013 fiscal years?

They gain transaction fees on both sides of the trade, half in USD/etc and half in Bitcoin. It is possible that they valued their Bitcoin at e.g. market for the purpose of preparing the accounting reports, but did not actually sell it on their own exchange or otherwise. It was, therefore, part of the 120,000 they report as owing themselves, which (if you believe the document) was looted along with the bulk of customers' coins.

It's been 4 hrs and not a peep from MtGox, so I might be wrong about this being a hoax...

It's a clever way to get some $400-$500 BTC

But that took some time to manufacturer if fake.

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