Were there counterfeit Bitcoins on the live Bitcoin network? No. Were "phony" Bitcoins sold to crash the price? Technically, yes.
Actually, no. No "phony" Bitcoins were sold in any way. REAL coins were sold, but from a hacked account. Big difference. One could say the sale was phony, but not the coins.
That's not what I read. I read what elggawf suggests, that the hacker simply added a row to the mtgox database that says "me, +1,000,000 BTC" and then started selling them. Phony within mtgox's database, but no counterfeit coins on the network.
Citation for that?
Everything that I read about the mtgox thing said that it was a readonly attack. They got a copy of the database table with the hashed passwords, and started cracking them until they had an account with a large balance.
I can cite
https://en.bitcoin.it/wiki/History although that page itself has no citation.
June 19, 2011
Someone was able to access an admin account* at MtGox and issue sell orders for hundreds of thousands of fake bitcoins
*not just a regular user account.
