Mt. Gox has posted a new update
mtgox.com
mtgox.com
Uh, no. I formally advise against this course of action as "hilarious." Who on god's green earth is going to bank their coins in MtGox 2.0?
Keep on trying to make this a viable business and they will burn through more and more of their assets paying lawyers, accountants, consultants, directors, and managers. If you are one of those latter group, I see why this would be valuable to you.
Creditors who are in stage 1 (denial) or stage 3 (bargaining) may still be trying to recreate this as a viable business, but it's like trying to make up for your losses at the roulette table by making bigger and bigger bets.
In all seriousness, no one really knows, but likely not.
...
> We believe that there is a high probability that these bitcoins were stolen as a result of an abuse of this bug
I find the insistence that this catastrophe was brought on by a protocol bug very suspicious. A recent post on HN by an expert elaborated on why transaction malleability wasn't likely to have been the source of this exploit [1]. Meanwhile Mt. Gox is insisting that they were robbed by a bug in the protocol.
This could be the position advised by Mt. Gox's legal representation, in a sort of "that's my story and I'm sticking to it" sort of way. If this line is actually true, then either the transaction malleability issue is much much bigger than we anticipated, or the bitcoin protocol has some vulnerability that we don't know about.
That's scarier than a paltry exchange collapse.
[1] http://hackingdistributed.com/2014/03/01/what-did-not-happen...
True, this post contains speculation on some matters, but if a professor at Cornell whose work focuses around distributed systems who authored the selfish mining attack isn't an "expert," then I don't know who is.
It was all speculation, and it is inconsistent in its inputs -- on the one hand it disbelieves what MtGox claims, but on the other it takes historic claims of security (that keys were in cold storage) as proof of other conclusions.
Speculation that is based upon cherry picked belief and disbelief might yield the conclusions that one wants, but it adds little to the information pool.
And regarding claims that keys were in cold storage: Maybe, but one thing I think we're all learning from these amateur hour platforms is that a lot of claims aren't backed by reality. They have "Top men" working on their security. "Top men".
The kind of incompetence involved here borders on mental retardation.
In the bailout $245B was given to private banks and $187B was given to fannie and freddie, money was also handed out to GM, insurance cos. etc. to a total amount of $610B.
As of 2014, >$380B was returned in cash, >$235B was returned through dividends, the current "loss" to tax payers is approximately $12B. Which is expected to turn green very soon and generate substantial profits for "we the people".
Most large banks refunded the govt. with substantial profits, so did the insurance cos. The TARP also saved a ton of jobs.
At best the whole situation in 2008 was a bank run[0] caused by a freeze in global liquidity.
Sure the financial institutions made some risky speculation that lost them some money. Losses were big in absolute terms but quite tiny relative to the assets under management and profitability.
a. Do I agree with (any company) functioning in the grey area. -- No.
b. Do I agree with bailouts of any kind. -- No.
c. Can I ever agree with people who ignorantly believe $20B in a recoverable overnight line of credit is more valuable than >$600B in assets and >$10 trillion loss in market capitalization. -- No.
There ought to have been some convictions but none were related to the TARP directly or indirectly.
Unfortunately, most quoted "crimes" were caused by human incompetence, a large number of other ones are caused by public ignorance and confusion about market making.
Designated market makers were regulated and were required to stand opposite to their own clients when necessary. This was by design and regulation. I quote this because invariably someone is going to cry about how these designated market makers bet against their clients.
Indeed, given the string of multi-billion dollar Wall Street settlements over the last few years, suggesting that there were no laws broken leading up to TARP implies that the banks were atypically clean.
This financial crisis is significantly worse and we've had virtually no effort put into finding out the root causes. If nothing else we have internal e-mails from banks like Bank of America acknowledging that they knew they were selling junk bundled as AAA rated bonds which amounts to fraud. There's all sorts of evidence of collusion in the industry around getting those bond ratings and around selling them as something they were not. And that's just the stuff an armchair investigator can pull out of news articles over the years. Nothing compared to what a forensic accountant could determine.
It's of course unrelated but when it was found that HSBC was found guilty of laundering money for drug lord the DOJ decided not to prosecute because doing so was a systemic risk. It doesn't take much to understand that there were no prosecutions from the banking crisis because of a fear of systemic risk.
The root causes are quite well known. The primary reasons were:
a. Recent changes to how credit rating agencies (Standard & Poor's, Moody's etc.) calculated ratings - Specifically they started using the stock price to increase credit rating's - this has little to do with actual quality - it was all good when it was a bull market, they were to short sided to see that a sell off would cause the ratings to collapse, which is exactly what happened. This resulted in the initial liquidity crisis.
b. Repealing the Glass-Steagall Act in 1999 that was introduced in 1933 to limit affiliations between commercial banks and security firms. This resulted in excessive leverage being given by banks in 1999-2000 for purchasing investments (also contributed majorly to the greater portion of the bull run and pop of the tech bubble - explained in point d. and e.) which later morphed into sub-prime mortgages being offered in the early 2000's by the people who were not allowed to conduct these activities under Glass-Steagall.
c. The Community Reinvestment Act of 1977 aggravated the situation - but this is overlooked as it leads to political finger pointing. I will skip over it too as it would make me sound too much like the GOP. Though if you do research it, factor the effects of point b. into the analysis.
d. Rapid increase of Fed Rate in the months/year following repealing Glass-Steagall made it too expensive for investors to carry their investment loans and turn a profit. This lead to rapid liquidation of investments and popped the tech bubble. It's really that simple.
e. Following the tech bubble burst the fed rates dropped rapidly which made it easier for people with sub-prime credit ratings to qualify for mortgages. As it dramatically affected qualifying using the Gross Debt Service and Total Debt Service ratios.
f. Once the rates started increasing the only choice was for banks and security firms to structure them into exotic investments i.e. Credit Default Swaps. When ratings dropped due to erroneous credit rating algorithms (point a.) this became a huge issue. (Anyone ever wondered how anyone could have been confused by the risk of something with "Default" in its name?)
g. The most important reason of them all. All of this would have been a blip and not gone out of control at all if it unfolded in 2006-2007 or 2009. That is if it was not an election year with a guaranteed change of a President.
This crisis was caused by bad timing and the shortsightedness of both parties, the law makers, the independent regulators and of the feds. The real systematic risk comes from ending all their careers.
Sure they made a good investment with TARP, but it could have all been avoided if they had not deliberately let Lehman Brothers go bankrupt that resulted in erosion of $10 trillion in market capitalization in a matter of weeks.
I'm not saying the banks are innocent, nor do I accept the "it's all fair in capitalism" argument.
The one thing I haven't been able to wrap my head around is why the lawmakers found it necessary to repeal Glass-Steagall if they did not want financial institutions to conduct the very activity that the Act forbade.
Awful paraphrasing but the upside potential of them stealing their customers' coins should not be dismissed so easily.
I'd have thought that being in control of these exchanges you could pretty much extract as much money as you'd ever need by front-running or other manipulations. The fluctuations in market value coupled with the acceptance of week or 2-week transaction periods means you can get a few percent of each transaction doesn't it.
AS you pointed out, it makes no sense, which gives him the perfect cover. He can empty the coffers and claim it was a hack because of a technical glitch. He takes it all, declares bankruptcy and he's gone with the wind.
Now, with a hefty stash, he can start another BTC exchange, and then rinse and repeat as necessary. It's about as close to a perfect crime as you can get.
Maybe he just wanted a quick payday and get out of the business?
The guy doesn't seem to have a track record of making great decisions and he didn't seem to take the business very seriously. Not to mention we are talking about hundreds of millions of dollars. Theft is a possibility worth looking into.
I suspect they're still analyzing their logs to find the full story themselves.
The number of coins involved in malleable TXs does not add up to MtGox's loss.
I'm trusting my gut feeling on this one; mtgox was in trouble months before this txmalley thing hit them.
Perhaps they do accounting differently in Japan but surely a loss of bitcoins would result in a reduction of assets not an increase in liabilities?
Called for about 5 minutes. Queue wait time was short, below 30 seconds.
That could also explain why they are so eerily silent and not forthcoming. That is, either they are hiding something or earnestly investigating and don't want to tip off the insider(s) in question.
Was going to buy back bitcoins for the money if it ever became low enough. Just saw today that they had shut down.
Now I can't access my account. Is there any chance in hell I will get my money back? Where do I turn?
It's just silly to only post a Japanese message on the site.
They are crazy to think it will work. But that's what they want.
Certainly they are not telling the truth about the transaction malleability. They have now dug their feet in on that explanation but it does not make sense given what we know about transaction malleability (the kind they are talking could not possibly have cause 850,000 bitcoins to disappear from allegedly cold storage without them noticing, and probably not without some social engineering.)
It seems likely that if the bug was involved somehow, it was because an intruder performed an attack from inside Gox . How else would they also be able to get fiat deposits out of Mt. Gox? Wouldnt that require initiating bank transfers?
It doesn't make sense as an explanation, especially given that we now know that some Russian clowns also had database access.
If you had a verified account you could ask for any limit you wanted up to 10k BTC, with a trusted account I think there was no maximum— I've talked to people who say they had 50k limits.
There was a 200 BTC maximum per withdraw however, at least in recent times.
> as the consistent Gox bug was only triggered by 0.8.0 being released
Even that wasn't consistent, only ~1% of signatures were invalid DER encodings with their code.
Wsn't aware of that, I only ever saw 200BTC being mentioned. Did Mt Gox seriously keep 10,000BTC+ in their hot wallet for this to work, or were manual withdraws like a bank where you make a cash request for the next day?
That's certainly believable. My limit was 10k, IIRC, and I haven't used Mt. Gox since 2011.
Big Red Shoes, Inc.? ClownCarDB?
Clowns.
At what point, given normal business conditions, would you need to hold 100% of deposits? You only need enough to cover withdrawals; ignoring the MtGox issues 60% seems quite reasonable.
The only time you'd need to worry about 100% is if you're anticipating a total run on deposits or you're going to close the bank.
At the point where you're not a lending bank, which Gox is not. They shouldn't have been running a fractional reserve at all.
See http://two-bit-idiot.tumblr.com/post/77988833128/the-final-g... for a link to the document and for more information.
Rather than attempting to rebuild value to return a higher proportion of cash/goods to all customers, or paying debtors according to contractual priority.
I think you're unlikely to get your wish.
As soon as the company knows it has 60% of the needed funds, then it is required to not allow anyone to withdraw their money. Instead, the insolvency process tries to treat everyone equally, so that they would pay out everybody 60% of their share, instead of some people getting all their money and some losing everything.
It is not optional, and not a choice that the company is allowed to make - they can affect the process on how exactly that happens (i.e., liquidating, restructuring as a running business, etc), but they can't simply pay out money to arbitrary debtors, that would open up many trivial ways of looting all the remaining money by insiders.
No, there are a number of parties that get their money first, like the liquidator, the tax man, privileged creditors, etc. Which usually means that the concurrent creditors should be happy to get a few percent of their claims (the average here in the Netherlands is 3%).
Not disagreeing with your point, in fact reinforcing it - the proposal of the GP is preposterous under the law, and a flagrant violation of bankruptcy law across the world.
For a case the size of Mt.Gox the average is higher. Remember DSB Bank? They even got above 100%, just took a long time to sort it all out.