In late February, MtGox disappeared from the internet. The website was wiped clean and Twitter accounts were closed as one of the most trustworthy of Bitcoin’s many exchanges crumbled. A leaked memo reveals some of the story: in what seems to be an unparalleled, multi-year hack, the exchange had been made insolvent and its reserves had been pillaged.

$450M OF BITCOINS ‘LOST’ BY MTGOX

Nearly 850,000 bitcoins – 750,000 belonging to users and 100,000 to the exchange – vanished; spirited away and protected by the pseudo-anonymity that Bitcoin offers. It is pseudo-anonymity, as opposed to complete invisibility, because Bitcoin’s global ledger is completely transparent, allowing anyone to see transactions that have taken place between Bitcoin wallets, but diving through the myriad of data is a forensic activity in itself.

Then, for much of February, customers were unable to complete withdrawals because of so-called ‘transaction malleability’ – a bug in the software that can be exploited to mask transactions to make it seem that they did not actually occur. It is this bug that many believe has drained MtGox dry and left it unable to complete legitimate withdrawals.

The second incarnation of the Silk Road has run into some trouble, with the administrator known as Defcon claiming today the site has fallen victim to a hack, and that all the associated accounts have been emptied. Judging by the blockchain records, attackers made off with roughly $2.7 million in bitcoin, the site's complete holdings. According to Defcon, the hack exploited the same "transaction malleability" bug that caused temporary shutdowns at Mt Gox and BitStamp earlier this week. He claims a vendor exploited the bug during a vulnerable moment in the site's relaunch process, initiating and hiding a flood of transactions until the accounts were emptied.

yantis also advised debonville that if a deal was not reached with ige, yantis had already put a network in place to compete with and destroy ige. yantis also stated that through the hiring of certain individuals who he had a long time relationship with, Yantis would sell currency that had been exploited or duped.

Exploing or duping is a process whereby an outsider hacks the game program into creating currency for the individual or duplicating an item and then selling it over and over which also results the creation of currency. Thes actions allow for the exploiter/duper to create an endless supply of currency without any real cost to that currency. This is something that Yantis had done in the past and had made large profits from. The exploiter/duper would typically receive a commission for any currency sold of about 40% of the sales price. Due to the currency being exploited, Yantis was and would be able to sell currency at a price significantly below market, since the cost of the currency sold was non existent. This also allowed for an infinite supply to be created in what could take as little time as a few minutes.

Yantis indidcated that this was also how he could turn the trading arm of IGE around and make it profitable, almost instantly. Pierce was aware of Yantis' intent to use these exploits. In fact, Pierce counted on them as part of the rationale behind why Yantis should be brought back to work for IGE.