Bitcoin Forum

What is the Mt. Gox endgame, and why? Put forth your arguments with facts and sound point by point logic.

Thank you.

https://bitcointalk.org/index.php?topic=469628.0

court ordered liquidation.

No need to speculate. Just sit back and watch it first hand.

Andreas weighs in: https://soundcloud.com/mindtomatter/e85-mtgox-and-malleability#t=45:28

Likely prison time.

You can't be a custodian and then say that you lost all the money or BTC.

That is criminal behavior.

is it something wrong with Mt Gox? :)

This... plus


its obvious.. the price will drop to zero on gox and the lights will go out. Mark will either be hiding, or in bankruptcy court but wherever he is you can bet on him having major stacks of bitcoin hidden from all of us.

People seem convinced Mt. Gox won't come back. But I haven't seen any real hard proof of that to date.

not sure guys, if fiat doesn't go out and coins don't go out, where should all the funds have gone?  ???

unless they have been robbed by malleability, which is impossible with cold wallets and all the manual checking they do, the funds should be there. maybe not 100% but most of them.

believing that they STOLE the money and ran off, is bullshit imho - there is no place on this planet where someone like that can hide safely

Mark is a celebrity

He is also probably a whale

A celebrity whale making tons of money, stealing some more money so he winds up on the FBI most wanted list?

No. I would estimate, a 80%-95% solvency but also 80-95% incompetence.

Delaying an insolvency, is a serious crime  and stealing money from customers beforehand, is even worse - probably in Japan as well. It is a difference between being insolvent or going to jail for a few years! Not something a whale would do either.

There is a good read here

http://www.tomeika.jur.kyushu-u.ac.jp/insolvency/3_Liquidation.html

Of course it is possible that some employee ran off with funds and they are trying to cover that up... ::)

Soon we will know  :D

Buy customer coins at discount prices, sell on other markets, repeat until all MtGox coins are purchased, resume business as normal.

uhm...

might be ... but this is breaking the law, and if that fact would be a fact indeed, and we would find it out gox will die forever. So perhaps there is a chance that they are not doing this :)

That is what appears to be happening now. 

Mt.Gox needs to hold down the price long enough for their fiat to be transferred from whatever other exchange they are using.   

If you watch the markets closely, you notice there appears to be selling pressure on the exchanges.   Could this be Mt.Gox selling the coins that it got at deflated prices?

Exactly.

They could be using abandoned customer accounts with withdrawal functionality enabled. I'm sure there are thousands of accounts that haven't been used in years. Just log in from a TOR node and you're setup to make millions a day in trades. The fact that the trading engine is still running is what makes me think there may be some hanky panky.

Any responsible exchange would have shut down the trading engine until deposits and withdrawals were working.

Agree entirely,  Mt.Gox has no business running trades while they can't allow their customers to withdraw.

In addition,  any reputable exchange would have halted trading due to the massive discrepancy of their price with what other exchanges are quoting.

Good point. In the US the profits of such trades would be seized but in Japan?

But is that unethical? People sell at these prices, nobody is forced to do so.

And blaming them for leaving the engine running is moot - people here would complain even more if they would stop trading, too.

If Gox had any common sense they would show the public keys of some of their (cold) wallets right on their front page so to soothe the market.  >:(

Unethical because if you sell BTC that isn't really backed by real BTC, then you can certainly squash the price.  Furthermore, by not allowing BTC withdrawal, there is no way to verify if the BTC anyone purchases is real.

Why would they need to do that. Isn't running an exchange a profitable enough business on it's own (especially when you have large market share)?

How many people do you know that are buying Mt. Gox bitcoins? What is the profit potential if Mt. Gox survives?

Ok, on a 100% probability scale, let's get people's best estimate on the probability that Mt. Gox survives. I say 65% chance of survival, but it is a total guess. I know most people have been saying lower.

I think this is really interesting.

Given the incredibly low market price I'm starting to think that Mt. Gox doesn't have the coins.  The only thing that puzzles me is why the huge volume on the site?

It is possible that someone is making a large amount of money from this.

How high is the volume. Is it higher or lower than normal? I would think everyone would be selling, but how do people even sell if selling is frozen??? Is all of the volume buy volume? I don't get it.

If I was the owner of the largest bitcoin exchange, I would do something drastic to get everyone upset and sell off their coins until the price dropped to <$100, then I would secretly buy everyone's coins and subsequently release a statement, "problem fixed." Then viola, I'd be rich!!

No one could get away with that I think.

1. Who regulates the exchanges?

2. Although bitcoin is semi-anonymous, can you tell from the blockchain where in the world etc. a transaction occurred (or other potential identifying information)?

But MtGox is completely shut off from the outside world. So the only people buying the coins owned by MtGox clients, are other MtGox clients. Honestly, if all the MtGox clients are selling, then WHO is buying? Probably the executives, and secretly they're saying to themselves, "Haha suckers!!!"

... maybe it didn't go down like this, but if you had that kind of power, it sure would be tempting ...

1)Buy panicked customers coins from their own exchange at $0.2 on the $1
2)Transfer and sell the coins at another exchange at market price while prevent everyone else from doing so
3)Rinse and repeat until the hole is filled and with a very nice profit in mark's pocket
4)Innocently reopen the btc transfer citing technical issue resolved...after wiping out majority of customers holdings
5) Retire and enjoy a wonderful life

mark karpeles is an absolute scum and thief, he would be in jail right now if this is any other currency but bitcoins.  I truly hope they catch this criminal.

sounds plausible ... MtGox just hit $95

Endgame is happening now as I type.. to ZERO with a Bullet.

$91.50

I wish I could buy a bitcoin for $91.50 ... but all the other exchanges are still above $500

Plausible??!  Entirely possible.  Nothing prevents MtGox from taking advantage of this arbitrage opportunity.   Their BTC withdrawal problem are just a ruse to prevent people from discover Mt.Gox massive short position.

Now the current price at Mt.Gox is allowing them to again cover their short.   It was the same in April, when it hit $50.  Mt.Gox made up a technical glitch because they were massively short.

Mt. Gox is incompetent, broke, or crooked. The endgame depends on which.

If Mt. Gox is crooked, at some point Karpeles will try to make a run for it. He can't just hide in Japan; he's a gaijin and there are lots of pictures of him. Getting out of Japan would be iffy for him. I would not be at all surprised if he's been quietly informed by some part of the Japanese government that trying to leave the country would be frowned upon. (Japan runs on "suggestions" like that.) It's too late for "take the money and run". He might have gotten away with it at the top a few months ago.

If Mt. Gox is broke, they can try stalling some more, but it's not going to work this time. They have zero credibility now and everybody who reads any major  news source from the Wall Street Journal to Russia Today knows it. At some point, they'll be faced with a demand to pay up or submit to an audit from someone who can make them - a big creditor, a bank, the Japan Financial Services Agency, or the Seattle court in the Coinbase case. One very likely possibility next week is that whatever bank handles their inbound wire transfers will dump them. Mt. Gox has always had "problems" with withdrawals, never deposits. (That's why the "US government is stopping them" argument is bogus. The US government can stop banks from dealing with non-US parties for a number of reasons, but when they do, it stops transactions in both directions.) If there's a "hiatus on deposits", assume their bank dumped them.

If customer funds are missing, Karpeles is going to jail in Japan.

If Mt. Gox is not broke, but merely incompetent, there's a chance Mt. Gox might get out of this situation. But it will be really difficult. If they're not broke, they could hire an outside audit firm and publish a financial statement to restore their credibility. (A video of Roger Ver won't cut it.) They'd need to hire a controller. someone respected, with experience. (A "controller" in a company is in charge of financial controls, banking relationships, cash management, signing checks, budgets, and all that boring stuff that's keeps a company from going broke. There's no indication that Mt. Gox has one.) That might restore enough credibility to get their problems fixed and withdrawals fully functional. If they actually paid out every requested withdrawal quickly, they might make a comeback. If they try to stall further, it's going to backfire. That unwinds the same way as being broke.

How will this be actually sorted out to determine what is happening and happened? What is the proper and best way to do that??

Live MtGox Protest:

http://www.ustream.tv/channel/mtgox-protest

They are probably not doing that, imo.
I think they have money and will recover eventually as a "top 5" exchange.

although we don't know the full outcome of this debacle , wouldn't it be great to have Mark Karpeles featured on an episode of American Greed ?

It's an unregulated exchange. Their motive to remain "proper" includes a desire for future profits and wanting to stay alive.

http://www.ustream.tv/channel/mtgox-protest

Live right now

What honest exchange would leave the trading engine running under these conditions. This is the biggest giveaway for me.

it won't, there will probably be some civil suits which mtgox will settle and make it go away by throwing a few pennies at them.  In the real financial world if such event occurs, the BOJ will step in and perform a full audit to determine if any laws (the equivalent of the glass steagall act in the us)  are broken where the firm performed trades using client's money without their consent, but there is no such regulations/controls for bitcoins in japan or anywhere.  

So those criminals like mark karpeles will get away free and clear, also with a good legal case in court, while a massive amount of customer's wealth is wiped and much worse - the reputational damage it will inflict on bitcoin as a whole as anyone outside - the mom&pop shops and ceos of retail companies will only read the headlines "bitcoin crashing, exchange shuts withdraw etc.." without understanding the actual details.

I can't believe mark is still on the bitcoin foundation board, i lost a tremendous amount of respect for the foundation and will not be donating anything going forward to them, it is crystal clear as day what this criminal is doing to his customers and to bitcoin as a whole, yet the foundation remains static.

Exactly.  The current BTC price at Mt.Gox is designed to rip-off customers. 

That's a good idea. Are there any similar shows in Japan?

The reason that MtGox "fix" their system so slowly with various kind of excuses of delay is that, it is very clear that after this crisis, MtGox will lose at least 80% of its customers, due to the harm it made to the bitcoin market, it may not be able to continue its business. Mark will not allow this to happen, he will never give you the chance to abandon it. Since now the money and coins are at his hand, he takes the control first.

What is going to happen is, in the next few weeks, MtGox will continue arbitraging from GoxBtc and real Btc, to make big profit as well as their trading fees, when they don't have huge volumns any more, and other exchange's bitcoin rates are similar to theirs so there is no chance for arbitraging, then they will make the final decision, to allow withdrawal with limits, and then close the business, with the piles of dollars, they will disappear from bitcoin world.

I'm more concerned someone walks away with the hot wallet and cold wallet while the protestors go to get their license, that said the livefeed is down while they get a license to protest in Japan.

Fairly friendly police in my opinion all other things considered
Contrast that with US police at a peaceful protest lol.

It seems to me that the key and fundamental issue here (or at least one of them) is that no one seems to really KNOW FOR SURE what is going on with Mt. Gox, so there is a lot of speculation.

If the exchanges were regulated, Bitcoin could be at $2000 today because TRUST is the key issue keeping the price down.

The exchanges must be transparent and it is up to us as the Bitcoin community to band together to insure that that happens.

If we want Bitcoin to survive.

We should go to Washington en masse and demand that the exchanges be regulated (but not overegulated either in a way that kills them that way).

If the Bitcoin community does not take control of cleaning up the bad actors, past, present and future BY HAVING SYSTEMS PUT IN PLACE WHICH PREVENT ABUSE WITH BITCOIN, then bitcoin will not survive, nor should it survive if we do not care enough about it to take collective decisive positive action as a community.

Right now we are blaming everyone else, including Mt. Gox, but at a certain point that becomes wasted energy. There are so many bad (and/or incompetent) actors, perhaps, that it shows that we have not done our job as a community to make sure that there is a police force to catch the bad guys, and set up the system so that it becomes almost impossible to cheat or do bad things in the first place.

No one gets good things in life unless they earn them. Bitcoin is in the communities hands, to a large degree, I believe, in regard to whether it survives or fails, and we have collectively been an utter failure at that so far, as circumstances and events illustrate.

what gox is doing makes absolutely no sense if the reasons gox is giving for their behaviour where true.

there is obviously something going on which is not talked about in public.
whatever it is it is important enough to let conspiracy theories and accusations of criminal behavior against gox be worth it.

most people would see a classic mix of greed and incompetence as the most plausible reason,
but there are several other options which could explain the gox behaviour.

e.g.:
criminal investigations inside:
 linked to sr1 and funding of other illegal activities (think guns, drugs or simply money laundry - there is obviously a giant market for that) are going on inside gox - investigators just go through all accounts and see who has more money (or btc) than they could possibly explain. They have gox by the balls as non-compliance can be used as a prison-time threat against mk.

the survival of the gox exchange or even the survival of the btc itself is probably considered less important than catching terrorists and mafiosi.

either way, in a system which is based as much on trust as btc, it keeps surprising me on a daily basis how anyone would want to do business via gox after the fiat withdrawal problems started and where never fixed.

so again it is greed and ingnorance, but also on the client side.

I agree.  Just like the regular stock market, it's the uncertainty which is driving the prices down.

ok, so what can we do about it?

KEEP
CALM
AND
SEE
WHAT
HAPPENS

;)

Never put your destiny in other's hands. It may seem smart but is a loser's strategy.

The market is saying, based on the current BTC price,  that the probability is 20% of survival.

Think deeper. What is the market in this case? Who might control or influence it?

Until we define our terms, and market is a critical term, we don't really know what we are dealing with.