Bitcoin Forum

$3 million was apparently seized from Dwolla accounts - what happens to it noone knows.

i'd like to bring to attention that mtgox made that much in fees in a month during that time period.

this means that most money is likely very safe and just unable to be withdrawn due to bank embargo or other issues facing them.
insolvency from that - not likely at all.

carry on bulls and bears.

of course everyone blames gox for everything - they are the big gorilla who's getting beat up bad. but, that gorilla may very well survive.

edit: updated with wells fargo account info

Money was freezed and not seized for what it's worth.

my bad - didn't bother thinking carefully about word choice -

Don't worry journalist neither: https://bitcointalk.org/index.php?topic=277817.0;topicseen

i did actually borrow their headline - heh - i'm no better than a journalist ><

At the time I posted somewhere that probably their turnover was so fast that what was in their Dwolla and Wells Fargo accounts at the time of the freezes was probably far less than what they made in fees within the first few days of increased volume following the news.

They earn on all trades, buys and sells alike. Of course they make more while prices are high, but they earn either way.

The money grabbed wasn't the issue. The interruption of transfers of USD was, big time. It still obviously is.

people question mtgox's "solvency" and some thought the funds seized were substantial to make gox fold without being able to pay out depositors

3 million isn't that a small number. Look at the orderbook ATH, it's shy over 20 million.

I don't think there is or was any significant amount above that ever on mtgox.

I don't believe mtgox has ever stated that they keep user's deposits in segregated accounts. Does anyone know if mtgox has ever released an external audit or any evidence that they have liquid money in reserve?

MagicalTux: I could comment on the fact that our income since April is around 8 million USD

haters gon hate and EM will never shut up or get his facts straight

Is that 8 million USD or 8 million mtgoxUSD?

haters gonna hate.

EM's PR tips for Gox:

Publish Bank statements of your USD funds, these don't have to include the funds you actually own just the ones of your clients.
Run a blog concerning all your current legal issues, you don't have to include every detail just keep everyone updated.
Change your system so that the amount of Bitcoin funds can be audited by everybody people need to know which addresses store their funds.
Don't ever invite Roger Ver again.

you could say the same thing to the FED

Common sense is, if things were all hunky dory, they would do just that.

Then why was a Seizure Order issued? Seems to me it was Seized

https://www.documentcloud.org/documents/701175-mt-gox-dwolla-warrant-idg-news-service.html

I dont believe that 2 to 3 million $ would make Gox delay withdrawals for as long as they have been.

Either their orderbook is a lie or there is another bigger issue/detail that has not been made public.

Agree



There is ... as I read they can't find another bank that will do business with them and their current bank appears to want out. That's the information more or less in the public domain from the transcripts relayed here.
There may very well be other issues too - they have intimated that there are some things they cannot reveal, presumably in order not to rock the boat and make the situation worse. Quite what boat is rocking I do not know ... but it is obviously one that has considerable power over Gox, or they would not be afraid of upsetting it.
There are big issues and the situation is both serious and shows no signs of improving in the short term
What it means for the medium term is anyone's guess, but the longer it goes on, clearly the more concerned people will become. Converting fiat to BTC becomes the rational choice at some point.

If $3mil is a month or more of revenue, then that is lot.  Think about staff costs, equipment costs, rent, other overhead, legal fees, paying out to contractors for the new trading engine (there were supposing getting in a large firm that handles large banking systems, that can't be cheap)...fk even their monthly dunkin doughnuts bill must run close to a mil.

And this is only the dwolla seizure...what about the "significant losses" from bank transfers being reversed (that they mentioned in the last press release).

The $3m that is seized does not belong to Gox - it belongs to customers
Stands to reason that this would only become a problem for withdrawals if Gox was down to it's last $3m. Given the size of the orderbook and their pofits, this seems highly unlikely, unless there is something we don't know about. I am not suggesting there is (solvency-wise)

I am assuming they do not have segregated customer accounts - if this were the case they could simply say to those whose money is in the dwolla account 'sorry, you cant get your money out for now til we sort this out'. Trading and transfers could then resume as normal for everyone else.

Dont' forget about whatever was in the WF account.

Also, how about the SWIFT deposits that were later reversed after gox credit customers accounts, bitcoins were bought and treansferred elsewhere...

Maybe because any money sent to US bank from MtGox is in danger of being freezed  :D

Gox is a pot of gold so I doubt they will really go boink.

But what about the lawsuit mess: http://gawker.com/massive-bitcoin-business-partnership-devolves-into-75-487857656 

no idea what will happen re that. however, that does not affect their going concern at the moment.

Bullseye.


The thing is, their 'clients' didn't enter their Business relationship voluntarily. In principle you are right and it even sounds much to ask from a common business perspective (even for gox)
However I think we can and should set a higher standard. After all this is supposed the future of finance, isn't it?

No they wouldn't. What company does that, ever? Owners/boards prefer not to operate like an open book. And Gox obviously doesn't want to invite the world to watch them bleed their business from the inside out any more easily than it already can by watching trade volume.

updated

but gox prolly cant withdraw its own money (not) ;D

however I am beginning to think that gox is fractional reserve USD and BTC....

I struggle to buy this can't withdraw usd any more"....its not plausible for some claiming xx million profit.

Income of gox is in btc.

I have big respect for gox to continue business under these circumstances.

am confused. so after gox's money was seized, they still credited trader accounts? that sound's stupid and possibly illegal.

they are a japanese company. what's so hard to understand? does every company in the world have to abide by USA's arbitrary decisions. please explain your "logic"

It's a pretty profitable business from what we can tell.  If I was MagicalTux, you would have to pry my cold dead hands off of the helm.  I'm sure they have investors that are pretty tenacious in the face of risk too, given their decision to invest in a currency that is still wading through regulatory muck worldwide.

This is not about the money in Japan that is supposedly backing user accounts.

This is about the money in the Dwolla account owned by "Mutum Sigillum LLC" which was being used to process Dwolla withdrawls and deposits. It was seized because Mutum Sigillum LLC is a US company not registered as a money transmitter, but which was acting as a money transmitter by being the middleman between Gox and its customers.

Turns out - apparently - that that Dwolla account only contained $5 million, which means that (putting aside for the moment whatever else might be questionable about Gox's situation) most of the funds are still in their Japanese bank accounts. Of course, at currently reported volumes, Gox is only making like $200k-800k a month, so that's still a troubling loss.

Yea but that dwolla account did contain trader funds that were on their way to the japanese bank, right? Those funds didn't make it to the bank. So, did Gox credit the traders, at its own expense?

This is full of a factual inaccuracies.

The 200-800k was calculates very roughly and is likey incorrect. Tux said they made 8mil in April I can't imagein them only making 10% of that last month....

Aso, dwolla account contained approximately 2.9mil, not 5.  The WF account had an additional 2.1 mil. Mark also had a personal account at WF that he was also likely using for customer funds, which we don't know the seized value of.

I'll admit that I was wrong about some stuff in that post. But as far as Mt. Gox's profit margins, you've got to remember that Mt. Gox makes their money in commissions per volume, and volume has dropped dramatically since April (when most of the bubble activity was going on).

Assuming everyone's paying full fees, and going by the volume from April as seen on bitcoincharts, 8 million sounds about right - they're grossing about 5.5 million from USD, 1.8 million from EUR, and some more change from less popular trading pairs. But, again, that's April. Current volume is like 15-20% of what it was at that time ($75M worth of exchanges in mtgoxUSD), which means that, yes, my $200-800k estimate was wrong. It's more like $1.5M this month.

That still means 3-4 months where all your money is going towards recuperating the cash that was seized.

Which, in the big scheme of things for company isn't really so bad. It sucks for sure, but if it takes only 1 business quarter to right your ship, then you just suck it up and move on. Not to mention they might get that money back at some point.

It is not critical to loose 5M for gox - if it were hidden looses. But since they are public it may activate chain panic withdrawals,  which is almost always death for money transmitter business.

mt.gox has not been processing withdrawals (usd) for months.

There is also the problem that having 5M frozen/seized by the government is going to be really harmful to their banking relationships, which could end up hurting them a lot more than the initial seizure.

I believe there's two likely scenarios.

Costs of business:
Employees: at least 20, ~$150,000/month (low estimate)
Office: tokyo (from past photos/videos, seems like pretty nice place) I know their address should be public somewhere, with which can be used to estimate monthly rental costs.
Server costs: ? no clue
Legal fees: ? no clue
Seized funds: at least $4.5 mil

Earnings:
Since March: MagicalTux was quoted in irc claiming a $8 mil earnings since March or April.
Before March: Let's assume $2mil

1. MtGox is becoming insolvent. In my own convo with him earlier this year, he claimed that before the bubble, they were barely breaking even. Writing off the $5mil that that were seized, it would surprise me that the company is overall profitable for the past 3 years. Before you read #2, estimate for yourself a numerical likelihood of this being true (say 70%).


2. Very likely as a last ditch effort, mtgox suspended withdraws. Either premeditated or not, they took advantage of the spread between themselves and other major exchanges and decided to arbitrage the discrepancy.
Supporting observations:
- Gox/bitstamp spread has been *almost* consistently at ~10% since May 15 (day of dwolla seizure)
- Two exceptions are: 1. June, the spread closes. 2. Around 2 weeks ago, the spread went as high as ~20%
So the questions that are hard to answer are:
- Why would the spread be so consistent at 10%, even though it seems more and more likely that gox is in some serious financial trouble? It's been over 2 months, and I'd expect the spread would grow in percentage.
- Why would the spread close in June, even though there were no verification of Gox processing withdraws again?

Added the fact that gox is clearly losing market share and the withdraw suspensions are likely delaying that process.
Liquidity has dropped significantly and general confidence is probably lower, yet rate on bitstamp has actually be following mtgox going up.

Holes in this hypothesis:
Why wouldn't the spread be closer to 1% if gox was arbitraging?
- There's probably a limited amount they are willing or able to trade at any given time. Any other exchange can freeze gox's accounts, ban them, or whatnot if suspected they were doing this. That would put a nail in the coffin. So to avoid getting caught/raising suspicion, gox is limited in its arbitraging opportunities.

Now, if #1 is true, I'd say #2 would almost certainly be true. If Gox is going down:
1. it can go down in flames and with nothing to show,
2. Take everyone's money and run, or
3. it can gracefully go down (relatively) without losing money and without blatantly stealing money.

I am sorta Bullish about the short term[~2 months] prospects of a price rise due to what's been going on.Irregardless of what people may think concerning Mtgox it is still seen as one of the main price points for BTC and with that fact limiting fiat withdrawal and the only way to get out is to buy BTC leaves me to believe that this price rally will only end when Mtgox is not considered the main exchange anymore.

Recall that June was only a little bit after timely withdrawls began to be a problem, and at the time, Gox issued a statement implying that things would be back to normal on the 4th of July. It's possible that some folks with deep pockets, speculating that everything was about to return to normal, decided to conduct arbitrage prior to actually being able to withdraw their money.

If such a scheme is going on, a consistent tight spread over months would give it away. Sooner or later speculative arbitrage will run out of money, which means the only way to keep the prices equal is a back-channel. Keeping it at 10% or so, in this hypothetical, better matches people's assumptions and gives them less reason to reevaluate.Why would any exchange in their right mind do that? If Gox wants to set up arbitrage to Bitstamp, for example, it's no skin off their nose. On the contrary - it would line Bitstamp's pockets with trade commissions and increase their volume. If Gox is doing this sort of trick, it's in the destination exchange's interest to let it continue. I'm not even convinced that it's unethical - Bitfinex does a similar thing, by "routing" trades to Bitstamp when they're better than the local ones.

If gox is in fact in serious trouble, the wiser move for bitstamp would be to put a nail in that coffin rather than skim the transaction fees. All the fees will be theirs if gox is gone.