Bitcoin Forum

if I read the report right, one account was compromised and the selling of those coins was what cause the crash
why should mtgox revert everything because one guy was dumb enough to get his account stolen? or is there another story behind all of this. is this going to happen every time some hoarder gets taken advantage of-everyone else having to throw away a hard days work of bit-trading? isn't the action that mtgox is taking essentially the opposite of what bitcoin stands for? I understand there is concern for the overall security of the exchange but they can't just bend over every time a hacker sells some coins

The market crashed to $.01. This is a little bit more than "one person getting hacked". It cause chaos and confusion for many traders and bots trying to follow the moment that was effectively a glitch in the system. 

the entire mtgox user database was compromised.  it is very likely that the attackers had their choice of accounts and found the one with the largest balance.

I thought it was fun and from what I understand only one account was selling off a huge amount

that could all have happened if the legitimate owner of the account that was allegedly hacked decided to sell everything at once. would you advocate for a 'rollback' then?

No. Would you advocate a rollback if it was a system glitch, or a typo?

I started out supporting the rollback and almost changed my mind; Want to try to help me answer any of these?

...why should mtgox revert everything...

1) Buyers were not able to place new bids during the meltdown, so it was unfair to all of those people. The whole thing could be called a computer glitch, and in those cases sometimes "real exchanges" do roll-back trades.

2) The big account smells very fishy. Why would anyone have such a huge amount of coins in an online account. You obviously cannot sell them all at once, unless you are setting up to intentionally crash the market, correct?

3) (Not an accusation, just a question) Maybe MtGox is really run by enemies of BTC?

What do you think?

The owner sold his/her Bitcoin for $0.01 a peace. Obviously it wasn't a legitimate transaction.

1) Some buyers report that they were. I'm not sure if I believe them since I could not, but indeed, it seems that the whole system locked up with such an unusual request.

2) I don't think the account was as big as it seems. I think a lot of panic sellers and bots joined the selling frenzy as they hit stop-loss amounts. But there was the 260K+ bitcoins at the end for .01, that must have been from the hacked account. Still a lot. It is very curious.

3) No, quit being silly

a typo made by a user? no

a glitch in the mechanics of the exchange? yes

this wasn't a problem in the mechanics of the exchange. it was theft, followed by the thief doing something naughty in an exchange. the exchange functioned perfectly; mt. gox failed only as a fiduciary or broker.

mt. gox is doing something here that's primarily self-motivated, and i feel like they ought to be called on that. a rollback is for them, not for anyone else, except perhaps their customer from whom funds were stolen.


if someone wanted to cash out entirely from bitcoin and placed an order to sell everything, and that person owned several hundred thousand coins, that's exactly what would happen. presumably that possibility is what motivated people to put in long-term buy orders at $0.01 per bitcoin.

If you want anyone to click you should not use address shorteners.

I don't see the distinction between this and a glitch. This is behavior that was not supposed to happen. I was a very complicated glitch the used some actual people on the way, but a glitch none the less.

#2 makes a great discussion. Can you think of any reason to have so many coins at MtGox other than setting up to intentionally crash the market?

With so much money you can probably control the market. If it's true that the 400k transaction is the money that MtGox moved in a secure place, it's probable that it's nearly all the BTC money of MtGox, so 230k is more than half. What can you do with more than half the BTC of a pool? You can make the market "stable" and gain from its micro-movements, stopping the macro-movements. So the "stableness" of the last week could have been enginereed with this money.

i agree that that's the right kind of question to be asking, but all that happened here (reportedly) is that funds were stolen and then dumped. breaking trades isn't an appropriate (or possibly even legal) response either to theft or to dumping. it's a fine response to a glitch in the actual mechanism of exchange (if, for example, every order placed for 2.50 bitcoins was treated by the system incorrectly as if it was for 250 bitcoins).

suppose someone stole 500,000 bitcoins outside of mt. gox and then made these trades. suppose mt. gox then said to everyone who happened to buy at $4, 'sorry, we're not going to honour that trade. we'll give you your $400 back instead of the 100 btc you bought'. nobody would accept that, correct?
then what difference does it make that the theft happened to occur inside a mt. gox account rather than just before being transferred to mt. gox?

as this analogy suggests, there's a very good argument that what mt. gox is doing is entirely unjustified and amounts to anti-contractual theft from its own paying customers. it's one thing if it wanted to make up the loss; it's another to deny customers the benefit of a trade merely because they, as broker, permitted a theft to occur.

A possibly legal (or illegal) response?
You (we) are dealing with an unregulated exchange, and most of the members know about that status, so talking about a legal response is a bit odd, IMO.
MtGox can do whatever they want, and their customers can ether stay (like I am) or leave.

no matter how many times people repeat that, it's just untrue. mt. gox might wish to exist in an unregulated anarchist utopia, but it's subject at least to the laws of japan and very likely to other laws that apply under treaty obligations. at the very minimum, customers of mt. gox have contractual rights against it, and contractual rights very definitely exist even in the absence of express contractual terms; usually gaps in contracts are filled in with implied terms based on trade usage and practice.

you're right that one option a dissatisfied customer has is to leave. but if the customer is not just dissatisfied but wronged, another option is to sue. i'm not an expert on japanese contract law, but if the exchange existed in the united kingdom or the united states (two legal systems with which i have experience, even though not a lawyer), a legal claim by someone whose profits were disgorged as part of a 'rollback' would, in a situation like this, very likely be weighty. at a minimum, it would not easily be dismissed as frivolous or obviously wrongful.

again, in case it's not clear, a 'rollback' here would be identical to the following situation:  someone steals 500,000 btc and transfers it into mt. gox. they sell at low prices, and someone buys a number of bitcoins at $4. subsequently, the exchange rate rises to $13. mt. gox decides, however, that the trades are illegitimate, reverses them, and keeps the spread for itself. or, it turns over the money voluntarily to the authorities, or to the party it believes was the 'rightful' owner of the 500,000, in its own legal or ethical judgement.

in all those cases, what mt. gox would have done is very literally 'theft', and users would almost certainly have legal claims against it. i cannot distinguish that case from this one, substantively. surely mt. gox's position is no better merely because it, or one of its customers, was the party that was stolen from. its response is equally wrongful and self-serving in this case as in the ones above; it just happens to be allocating its portion of the illicitly recovered 'profit' from other people's trades back to one of its chosen customers.

Its simply really. MTGOX should roll it back because they are responsible for the security breach

if so, that explains why they should find a way to reimburse their customer whose funds were stolen. it doesn't mean they should roll back trades an impersonator of that customer made with others.

i suspect they'll go through with the rollback as they've threatened, but again, to imagine they're doing this out of a duty to their customers would be completely wrongheaded. they're presumably doing it to cover themselves because it seems to them to be the easiest way out of a mess they negligently created. that's very different from 'responsibility' or 'professionalism', and it helps only (1) them and (2) their one customer from whom funds were stolen.

when a hacker steals my 20 bitcoins I want the entire market frozen and every order to be reversed until I am satisfied

If it is only 20, then I'm sure they will just cover the loss themselves.

I do agree with you in the sense that MtGox has recently posted about their efforts to become fully legal in many countries.

You're the OP, are you now trolling your own thread?  :D

In previous hackings (all minor), Mt. Gox has refused to cover the losses of its users.
These losses have been small and no one would pursue legal actions over them. In this instance, Mt. Gox appears to be covering the loss of its user.
It seems very sketchy for Mt. Gox to make variable ex-post decisions about its contractual terms with users.

As Unk points out, cases where there are no explicit contracts are assumed to have implicit contracts which follow standard business practice.

Definitely would suggest consulting a lawyer if you suffered substantial financial losses in the 'rollback'.

I think its only fair to make amends for the fraudulent activity.

Sure some people are pissed that they cant get their cheap bitcoins, but those sell orders werent legitimate.

-removed-

You mean you lost your "on paper" value of thousands of bitcoins that you bought for $0.10? No one is going to have any less money then they had earlier that day. Unless you are counting the gains of stolen btc from a greedy hacker.

but just to be clear, the gains weren't from a greedy hacker. they were from completing a trade on an exchange where the counterparty happened to be a greedy hacker. if i make money selling fruit at a fruitstand for cash, the fact that the cash is stolen doesn't matter in any modern legal system that i'm aware of. again, that's true even in the united states, which adopts the relatively unusual legal rule that stolen goods can be returned to their prior owners even after an innocent purchase.

that said, i may in the zeal of argument have overstated my point. i don't mean to be accusing mt. gox of 'theft', and i wouldn't want what i said before to be construed that way. i'm really just calling for transparency and accountability, and my point is that mt. gox does not seem to have justified the propriety of a 'rollback' given the information that it has released so far.

if we're just toying around (which, to be fair, is the approach i, more than almost anyone else, take toward the currently prominent block chain, having mined more than ten thousand coins cheaply early on and not having the desire or comfort to sell them yet - or perhaps ever), that's fine, and we can treat whatever mt. gox does today or tomorrow as a mere experiment. but if mt. gox intends to be treated as a prominent, serious currency exchanger providing honest customer service, it should at least consider holding the trade proceeds from yesterday in escrow while turning over the matter to arbitration or at least a third-party financial audit. instead, it has apparently decided to summarily announce a course of action that it intends to take on its own, even while admitting that it won't make certain customers (who may have legitimate complaints) happy.

to put that differently, if i were a serious bitcoin speculator or investor rather than (with respect to bitcoin) a technologist focused on the protocol and the systems issues, i would probably insist that my currency exchange acted more seriously than mt. gox is apparently, from its announcements, intending to act. its disposition in this matter is questionable. its first statement was a heavy-handed one that almost sounded as if it was trying to manipulate the price ('The bitcoin will be back to around 17.5$/BTC after we rollback all trades'). its later statements amount to announcements of its intent without an attempt at justification, ethical considerations, or propriety.

it may be easy for some to dismiss the claims of people who 'made a quick buck' by putting on fortunate trades yesterday. but the point of the argument i'm making is that it is not that easy. the argument may not be persuasive, but at the very least people should think 'yes, he has a point' - and if so, that means that mt. gox's unilaterally announced course of action, canceling a large number of trades, is probably hasty.

i mean this as constructive criticism. i have nothing against mt. gox, even though as i've pointed out many times over the last several months, they have not earned my own personal trust.

For everyone that got a good deal, someone got a bad deal. I see know reason for mt gox to muck around figuring out who need compensation. Most of the trades were not authorized by the owner of the account, just as if a glitch had happened. Roll it back.

Glitches were happening because the network was so swamped with the unusual activity. It simply must be rolled back.

Judging from the prize movement  24 hrs until the flash dump, very little happened. Whats up with all these claims of lost profits ?
Can YOU prove, you are not an accomplice ?

Your welcome to express your megagreed after the rollback  :D

Dealing in stolen property is frowned upon in most civilized countries. The 500,000 bitcoins were stolen property that the hacker was selling on the cheap, and you want to get mad because the exchange can (and is) nullifying those trades? I imagine if someone stole all your stuff then immediately sold it that you wouldn't want the cops to recover it because of all the innocent people the bought your stuff for pennies on the dollar. Can't interfere with those trades.

So, how many $.01 bitcoins did you get?

I can prove I'm not an accomplice solely due to the fact that I am a financial wizard

You show me a contract you signed saying MtGox can't cancel trades and you might have a point. Otherwise you're building a castle out of air. There are clearly no implied terms saying they cannot - for those terms to be implied there would have to be wide agreement that fraud cancellation cannot happen. And as this thread indicates, there is very little agreement on that.

Edit: I also believe that buyers of stolen goods normally find themselves deprived of the stolen goods by the law. Sometimes the buyers themselves are even convicted of a crime. "In many countries, if an individual has accepted possession of goods or property and knew they were stolen, then it is usually prosecuted as a misdemeanor or felony, depending on value of stolen goods. If the individual didn't know the goods were stolen, then the goods are returned to the owner and the individual is not prosecuted." http://en.wikipedia.org/wiki/Possession_of_stolen_goods (http://en.wikipedia.org/wiki/Possession_of_stolen_goods)

If you, say, held a gun to someone's head so that they sold you their house for $10, you wouldn't be a financial wizard.

If someone else held a gun to someone's head so that they sold you their house for $10, you wouldn't be a financial wizard.

If someone broke into the bank, stole the deeds to someone's house and sold them to you for $10, you wouldn't be a financial wizard.

It's heartbreaking to see that your silly opportunistic bid of $10 for 1000 bitcoins that you left on Mt.Gox just as a bit of a joke that maybe, maybe one day someone might go mad and want to give away a load of cash, turn out not to be the lottery win you thought it was... BUT YOU WERE BUYING STOLEN GOODS.  Get over it.

Seriously, does anyone think they have an actual moral case for having bought these stolen coins?  Trades should be voluntary on both sides, these weren't.  You thought you were going to be instantly rich and it turns out you're not.  It's sad for you, but it's hardly unfair.

> In previous hackings (all minor), Mt. Gox has refused to cover the losses of its users.

This isn't true. He has covered everyone that had a loss due to an exploit in the site.

I wasn't  buying stolen goods. I bought goods that the market gave me for the price I hand picked.

According to the reference I linked to, what you thought you bought has no impact on whether the stolen goods will be confiscated or not (in the jurisdictions covered by the article). The fact that you didn't know means you're not on the hook personally for possession of stolen goods, but it does not mean you get to keep them.

I'd say that, although it will feel unfortunate for some - I had a lowball 'in case it crashes' bid open myself - there is neither moral nor legal standing for keeping the property.

Maybe bitbot should go to some other forum to be relevant, because 'his' logic here sure isn't.

If you could possibly think over the dull roar your empty skull contains, you'd realize out in the 'big world' exchanges bust trades that are erroneous all the time. Don't be all maudlin over it, just understand that is how it works.

Or just keep posting rants like a toothless beggar, up to you.

Yes; and I bought a Bluray player out of the back of some guy's car that he was offering at a price that I hand picked as acceptable to me.

I'm afraid your willingness to transact doesn't imply the willingness of the other party.  Your repetition that you are pleased with the deal does not change the nature of what you were buying: stolen goods.

that woudln't protect you if you bought a stolen car stereo/tv/whatever else

whether or not you knew the coins were stolen is irrelevant.

Hi Unk,

I really appreciate your posting history and your philosophy in general on the "state of bitcoin" at the moment as being better thought of as a preliminary experiment with blockchain technologies rather than The Perfect Currency Of The Future.

However, on this, I think you are wrong. First off, every major exchange I'm aware of has a history of rolling back trades for various reasons. I realize your point is that the trades in and of themself weren't a result of a glitch, however this need not be the case. Open market manipulation especially when undertaken by someone who does not actually own the coins involved and when the disruption is large enough the shake the entire market seems to be a clear cut case when it would be best for everyone if the trades were reversed.

I agree with you that exchanges need to move towards more transparency in terms of when/how funds will be frozen, what redress procedures are, when trades will be broken, etc. However, as you have noted numerous times, we are still in the preliminary days and have outgrown ourselves a bit in terms of what we are able to deal with. It's a shame that growth has not occurred in a slower fashion and that suddenly there's very real amounts of money at stake, (especially because, as you mention, it is going to strongly impede a willingness to throw the current block chain out the window and move to something better) but that's where we are at.

hi lemonginger,

first, thank you for the kind words.

i agree; i think a central problem is that growth occurred too quickly, and bitcoin as a result has likely suffered. hopefully it hasn't suffered in an unrecoverable way.

as to the propriety of a rollback, i think the difficulty here - the root of all disagreement - has to do with differing understandings of the business norms of financial exchanges. i've never seen a consensual broken trade as the result of a theft of funds on one side, and so my instinct is to imply a promise not to break trades in that manner on the part of the exchange. similarly, market manipulation is not usually sufficient to break trades; the typical response to that is legal, not unilateral.

that having been said, i recognise that the issue is not black-and-white, and there is room for reasonable disagreement. and i don't want to overstate my argument, which i might have done in the zeal of discussion. i'm mostly just trying to call for more transparency and disclosure, and less unilateral action. and i'm bristling at the 'trust' given to mt. gox when, realistically, they're a highly compensated oligopolist acting in their own self-interest.

you chose to buy hot electronics out of a shady persons' car

I didn't choose which btc to buy, the market did and because of that I am not liable for anything.

So you're saying that it's only immoral if you knowingly buy stolen goods?

Well you know the coins are stolen now.

Anyone with any decency would be offering to undo the trade voluntarily.

I just want to kiss my hot coins one last time before returning them to mt.gox's personal account

I think because the one user was an account set up to move everyone else's bitcoins to it, and they tried to drain all of Mt. Gox's bitcoin wallet from there.  The user probably doesn't exist.