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Comment by ck2 | Hacker News Reader

It's easy to be angry at them and/or see how stupid they were about accounting, security, etc.

But I guess on the other hand we do have to realize they are victims of massive theft, as far as we know this massive loss was not due to their own profiteering or internal theft, it was an organized outside force targeting them.

It occurs to me it is like blaming someone for getting mugged, although they were stupid enough to walk down a really bad street at a bad time of night with their cash out in their hands, it did take a criminal to make the crime happen, not the victim.

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You are running an antique accessory business. You have a van to carry all the valuable stuff you borrow from people to sell in their name. Your van starts to leak oil. You figure out how to fix it yourself. Check engine light of the van is still blinking though, but you happened to put a post-it in your dashboard blocking it. By the way, you also never have it serviced. You keep driving for years while the situation in your engine gets worse and worse. Finally, you end up causing an accident. You didn't have anything to protect your cargo even from a bumpy ride, let alone a crash. You lost too many of your antiques because you were carrying them around with you everywhere. You also don't have resources or any insurance to cover the expenses. You think it may be a good idea to hide this fact from your customers because the antique business in your town is still new and you don't want them to lose trust for the whole sector. You first tell your customers they can't sell or take back their stuff. Then you take off your signboard. Then you sell your van. You eventually close down your shop as well. Meanwhile, you keep telling them there is something wrong with how the van is designed, so you may have lost some valuables here and there. You end up filing for bankruptcy.

Would this be just negligence?

Sounds like the definition of gross negligence to me.

Indeed. However, the whole point of crypto-currencies is decentralization: you give up both (some of) the constraints and (most of) the protection that goes with government-backed currencies. Choosing who you trust then becomes your own problem, your fully personal responsibility.

So yes, MtGox is at least criminally negligent, and maybe simply criminal. But the (largely libertarian) crowds who chose to trust them are fully responsible for their own poor assessment of MtGox' trustworthiness. That's the flip-side of choosing deregulation.

Sounds like customers should have judged by themselves it wasnt a safe van to put your valuable antiques in.

Hindsight is 20/20

Foresight too, e.g. I didn't do it. Because hosting BitCoins in an online wallet looks like a scam from a hundred miles. In a foreign country. On a website.

Hosting my emails in Gmail doesn't look safe either, to be honest, but at least it's not plain money and Google still needs to keep their reputation. For now.

In addition to this being the usual hindsight horseshit, it also displays startling ignorance of how markets work.

If every time I want to buy a pack of gum I have to investigate every entity in the production and distribution chain, then I will never buy gum because the transaction cost is well above the value.

This is why businesses, who have substantial lobbying power, are generally ok with government regulation and often impose substantial self-regulation.

For example, take food. Restaurants here in San Francisco are all obliged to display their latest health department score. Almost everybody loves the system. Consumers love it because it tells them how safe their food is. Well-run restaurants love it because they can prove that their place is well run. Badly-run restaurants probably hate it, but that's fine; they're not good marketplace participants in the first place.

So your notion that you should go and check the oil level on every vehicle that ever contains any of your stuff is ridiculous. It's a handy way for you to feel smug blaming people who are suffering, not a reasonable suggestion for marketplace design.

I'm not talking about checking every screw of the truck. I'm saying that an unmaintained truck with lots of valuables in it is suspicious, and you should tust it for what it is.

I'll get negative poins again just because people don't like to be told what they should have known:

Bitcoins smell like a Ponzi scheme and, until they have proven themselves opposite, you should remain very wary of the money you put in. Do you invest in penny stocks? Nope. Why? Because they smell bad, even if their promoters make it look like they've quadrupled their value in just 4 months!

An online safe with millions of valuables? Shouldn't you wait for the proof it's good? Or do you assume it's a good safe as is? Is it really wise to assume something is safe? Oh I see negative HN points will rain on me. Not wise from me to put people in front of their responsibilities.

I'm sorry for people who lost money. Some of them will have a hard life. Losing money is never a good experience, I myself lost a quarter of my savings when the Australian dollar dropped. But do I blame the Australian gov? The EU gov? The regulators? Nope. It's my job to know when the AUD drops. Even if i can't inspect all parts of the economy. As a revenge, give me negative points.

Personally, I think Bitcoin is currently a tulip bulb mania, not a Ponzi scheme. (It might one day also be an interesting payment mechanism, but that's not why most people at MtGox bought Bitcoin.)

That said, I don't think the average investor has the chops necessary to fully evaluate a bank, which is effectively what MtGox was. The information asymmetries are just too severe. In this case, depositors didn't lose money on Bitcoin itself, but in what was basically a bank collapse due to negligence or fraud. (Or both; we don't know yet.)

One solution is to always blame the victims. You can't go wrong there! But the solution that I prefer is to regulate banks, and forbid unregulated banks from operating in the regulators' jurisdictions. This oops-the-money-is-all-gone horseshit is exactly the kind of thing an auditor or a bank regulator would have spotted in their first week.

Any 10-minute Google search over the past year would reveal that Gox had been having absurd problems for awhile and that there were several more reputable exchanges available to would-be day traders. Over the past year, a visit to any bitcoin forum wouldn't be complete without a highly visible 'Gox screwed up and their support sucks. Stay away!' thread. Unsurprisingly, the Gox market share had shrunk to a fraction of its former might months ago. Sad as it may be for those affected, this is how a market learns to value one competitor over another. The free-market result of the Gox situation is that exchanges and other custodial companies in the space are now differentiating themselves with enhaced security, transparency and 'proof of reserves' features. No cumbersome regulatory framework required.

Isn't it more like walking down the same bad street every night with other people's cash in their hands, getting mugged repeatedly, not telling anyone and still taking more money?

This is a very good point.

But they were also dumb enough not to realize they were getting mugged, or so they claim.

Maybe I should have used "pick-pocketed" instead of mugged as an example.

I am not trying to give them an excuse but we don't seem to have enough anger against the criminals that caused this.

> But they were also dumb enough not to realize they were getting mugged, or so they claim.

This is what I don't get, and which makes it hard to trust that they indeed "lost" this many coins. At the very least one would expect that for a company like this, they would regularly reconcile what the blockchain states the content of the wallets they control is, and what their internal customer records says should be there.

That's the very barest minimum I'd expect anyone to do. And the moment they found a discrepancy they should have suspended everything until they'd figured out why there was a discrepancy.

If they've truly managed to keep losing coins over years, it means they had no effective audit mechanisms in place at all.

Whoever took these coins certainly also is to blame, but if they've managed to lose the coins that way, this ought to be criminal levels of negligence.

It seems it is too early to state with any certainty that MtGox are also a victim here.

http://falkvinge.net/2014/02/28/the-gox-crater-crowd-detecti...

http://letstalkbitcoin.com/the-ghost-in-the-machine-at-mtgox...

These are very interesting reads if only for the facts they lay out in detail.

The allegation that an address that MtGox's controls still holds all the Bitcoins but that they've lost the key is fascinating.

If true, how can MtGox prove it lost the key? If he walks away, he can wait 10 years and then transfer the funds out and spend them.

But if false, can we demand he produce the key?

What if someone else entirely different has the key?

It's all fascinating.

Another POV from Greg Maxwell (a Bitcoin core developer):

Claims that MTGox has a lot of coin so far look completely spurious to me.

https://www.reddit.com/r/Bitcoin/comments/1z3v4k/claims_that...

In Falkvinge's case, it may be wishful thinking. He has also posted that he had 160 BTC and 1500 euros on Mt.Gox

Your analogy is terrible. They are actively in the financial services industry, and by default protection from criminals is one of their mandates. People put money into mtgox expecting them to be secure. They claimed to be secure.

For them to turn around and lose 750,000 BTC is not analogous to being innocently mugged. It's more like a taxi driver guaranteeing a safe trip, actually driving drunk, then crashing and killing the passenger.

The point is that you should be prepared for this type of loss due to the speculative nature of Bitcoin. Here is a note from Morgan Stanley on alternative investments:

Investing in alternative investments is speculative, not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment, which can include: -loss of all or a substantial portion of the investment due to leveraging, short-selling or other speculative investment practices; -lack of liquidity in that there may be no secondary market for the fund and none expected to develop; -volatility of returns; -restrictions on transferring interests in a fund; -potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized; -absence of information regarding valuations and pricing; -delays in tax reporting; -less regulation and higher fees than mutual funds; -funds of hedge funds often have a higher fee structure than single manager funds as a result of the additional layers of fees; -risks associated with the operations, personnel, and processes of the manager.

Almost all theft at financial institutions is internal theft.

There is not one single official statement from anyone to the effect that there has been an external theft from Mt. Gox. No one has reported a theft to police.

There is zero basis to believe an external theft has occurred.

If Mt. Gox does file a police report, at least then someone has done something (with official penalty for false statement) indicating that they believe a theft has occurred, and some possibly-accurate information would be available. But for now, there is nothing to stand behind a claim of external theft.

Not really.

When someone gets mugged it's simple to be sympathetic to what's happened.

When someone gets mugged and you gave them assets to hold and/or transfer, and they didn't take due care of the security of these assets, this makes them culpable and negligent.

Yes, MtGox are probably having a really shit time right now, and yes I'd feel sorry for anyone who'd just fucked up this royally (assuming there was definitely no intent to defraud on their part), but that sympathy is tempered by a recognition that they've made the world vanish from under thousands of peoples feet as they see assets they trusted with the exchange float away into the ether.

This is why managing risk and having rules that protects consumers is so useful. Everyone's a hedgefund investor until suddenly the rug gets pulled out from under their feet.

I would have some sympathy for them, if they had shut down immediately after realizing they would not be able to pay their debts. Instead we were fooled with "everything is ok, we are reopening soon" PRs while massive insider trading was going on. Victims or not, the way they handled this is probably criminal.

The word you are looking for is negligence.

Negligence is when I forget to set my alarm.

"they are victims of massive theft,"

What leads you to believe this?

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