How Mt. Gox could be making huge profits by suspending withdrawls

[vaccinesaregood]

Gox could be screwing over their customers in two easy steps.

1. Buy a bunch of BTC for $250.
2. Move them to another exchange and sell them for $600.

The owners of Gox obviously aren't bound by the "no withdrawls" rule.

Maybe this strategy could make them solvent again.  Maybe they are screwing their customers for huge profits. Maybe they are too incompetent to even see this as an option.

[Barek]

Gox could be screwing over their customers in two easy steps.

1. Buy a bunch of BTC for $250.
2. Move them to another exchange and sell them for $600.

The owners of Gox obviously aren't bound by the "no withdrawls" rule.

Maybe this strategy could make them solvent again.  Maybe they are screwing their customers for huge profits. Maybe they are too incompetent to even see this as an option.

No need to move them anywhere. Just announce withdrawals are open again and sell on your own exchange. Fiat ain't going nowhere, the Gox premium will be back.

[rmines]

Have a look at this url: http://www.reddit.com/r/Bitcoin/comments/1y247y/mtgoxs_plan_is_simple_and_genius/

Step 1. Notice that there isn't enough BTC or USD to handle even the pending withdrawals

Step 2. Halt BTC withdrawals, causing a massive crash on MtGox

Step 3. Buy BTC on MtGox at the reduced price

Step 4. Sell this cheap BTC (which they have access to, of course) on other exchanges, making a massive profit

Step 5. Blame a well known bug in BTC for the delay. Continue this process for weeks until enough profit has been made.

Step 6. MtGox now has: a ton of cheap bitcoin, a ton of profit made from selling the cheap bitcoin, and a ton of profit made from the trading fees during the panic. Re-open withdrawals of both USD and Bitcoin, solvency problem is solved.

Your story is more or less a simplified summary

[vaccinesaregood]

Hah.  I should browse /r/bitcoin more.  He beat me by 6 hours.

[pleiotropik]

I have 4 BTC stucked there, i hope they give my coins back, its a big joke.

Usually this sort of "jokes" should send CEO's to court to face endless litigation and possibly some jail time. But Karpeles has taken a cue from Blankfein, Dimon and Corzine: immaculate theft, because they are "doing God's work" as Blankfein so glibly confesses.

[gamersglory]

My biggest concern would be that couldn't a bitcoin exchange like mt. gox comment something like a 51% attack. I mean any place where so much of the worlds bitcoin goes through couldn't they manipulate things in there favor like they have now? It sure seems like that?   

[grifferz]

My biggest concern would be that couldn't a bitcoin exchange like mt. gox comment something like a 51% attack.

The concept of a "51% attack" has a very specific meaning in this community, and this isn't it. So it's best not to use that phrase carelessly.

Read this to understand what a 51% attack actually is:

https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power

MtGox isn't a mining pool.

I mean any place where so much of the worlds bitcoin goes through couldn't they manipulate things in there favor like they have now? It sure seems like that?   

Yes, of course any exchange has the ability to cheat its customers and manipulate the market.

[smoothie]

Wouldn't this be the same as insider trading?

You basically have all the info to make the best trading decisions.

[grifferz]

Sure. But I suspect it would be difficult to have them prosecuted under those laws, if you ever did manage to prove they had done that.

[coffemakesmesick]

Trading on MtGox is based on the risk of the exchange shuting down vs the risk of it coming back to life. If it shuts down, it is better to have the committed funds in fiat, if it comes back to life then it is better to have your funds in bitcoin. Insiders at MtGox know what the outcome will be and are probably capitalizing on the information.

[bananas]

Trading on MtGox is based on the risk of the exchange shuting down vs the risk of it coming back to life. If it shuts down, it is better to have the committed funds in fiat, if it comes back to life then it is better to have your funds in bitcoin. Insiders at MtGox know what the outcome will be and are probably capitalizing on the information.

That's a wrong thinking, money is not nominal, the risk is the same. The legal process to recover money or bitcoins(or the equivalent in fiat) is the same, but bitcoins are worthing more than gox fiat.

[grifferz]

money is not nominal, the risk is the same. The legal process to recover money or bitcoins(or the equivalent in fiat) is the same, but bitcoins are worthing more than gox fiat.

Okay, can you point to an example of a US business prosecuted for any form of fraud and as a result having bitcoins (or USD equivalent funds) returned to their US-based customers?

Hopefully you agree that we need not hunt for examples of US businesses being legally compelled to return USD, as this is fairly common.

Since you seem to be asserting that the process is the same, and since there have been many cases of stolen bitcoins, there should be many examples of people getting their bitcoins back through legal means, right?

Then there is the extra wrinkle that MtGox is based in Japan, of course, but let's start with the easy case of US business and US customers.

[bananas]

money is not nominal, the risk is the same. The legal process to recover money or bitcoins(or the equivalent in fiat) is the same, but bitcoins are worthing more than gox fiat.

Okay, can you point to an example of a US business prosecuted for any form of fraud and as a result having bitcoins (or USD equivalent funds) returned to their US-based customers?

Hopefully you agree that we need not hunt for examples of US businesses being legally compelled to return USD, as this is fairly common.

Since you seem to be asserting that the process is the same, and since there have been many cases of stolen bitcoins, there should be many examples of people getting their bitcoins back through legal means, right?

Then there is the extra wrinkle that MtGox is based in Japan, of course, but let's start with the easy case of US business and US customers.

We need to find who hired a lawyer...

Those cases usually are of "private law", it means you have to hire a lawyer, it is up to you only.

Even when one of those cases that fit "public law", the State will only do criminal investigation and consequent prosecution(if the individual or company is formally accused), you still need a lawyer to get your money back.

[grifferz]

So what you're saying is that despite your assertion that bitcoins and fiat are equally easy to return with the help of the law, you aren't personally aware of any case where bitcoins or their fiat equivalent have been.

[bananas]

So what you're saying is that despite your assertion that bitcoins and fiat are equally easy to return with the help of the law, you aren't personally aware of any case where bitcoins or their fiat equivalent have been.

They are not "equally easy", because it is just not easy to have anything returned! Smart insolvent people disapear with everything, even real estate.

Have been returned? No, i'm not aware. But if you hire a lawyer and can prove what belongs to you, the only chance of not having it returned is if the individual/or company does not really have it or can't be found. Bitcoins are easier to "disapear", actually one can just deny having any, but then you have a right for the equivalent money anyway or a property that can be auctioned to pay it.

[grifferz]

You keep saying that people can hire a lawyer and get their bitcoins or equivalent value returned, but you are not aware of a single case where this has happened. Conversely we are all aware of cases where judges have ruled that some company owes someone else some money when it was USD they were fighting over.

You don't seem to realise how big a deal it would be to the bitcoin community the day that a judge actually says, "it's clear that FOOCORP has defrauded you of X amount of these bitcoins so FOOCORP shall now return those X bitcoins or the amount of Y USD which is the equivalent as of today"

Until that actually happens, it seems far from clear to me that "they are equivalent" in the eyes of the law of the US, let alone Japan, and I can fully understand anyone who believes they are legally safer to argue over USD rather than BTC. There is a very long list of massive thefts of BTC and a list of precisely zero entries of people who got legal remedy for that.

In the case of MtGox my personal belief is that if they walk away with the funds, no one will get anything back, in any currency, except maybe Yen.

[bananas]

I just wanted to make clear that it depends of private action. The State wont do that on their own as your post was suggesting. I don't know of any case, do you know of any case that a lawyer was hired? If not, you just could not expect to hear " "it's clear that FOOCORP has defrauded you of X amount of these bitcoins so FOOCORP shall now return those X bitcoins or the amount of Y USD which is the equivalent as of today", it just can't happen by itself.

You keep saying that people can hire a lawyer and get their bitcoins or equivalent value returned, but you are not aware of a single case where this has happened. Conversely we are all aware of cases where judges have ruled that some company owes someone else some money when it was USD they were fighting over.

You don't seem to realise how big a deal it would be to the bitcoin community the day that a judge actually says, "it's clear that FOOCORP has defrauded you of X amount of these bitcoins so FOOCORP shall now return those X bitcoins or the amount of Y USD which is the equivalent as of today"

Until that actually happens, it seems far from clear to me that "they are equivalent" in the eyes of the law of the US, let alone Japan, and I can fully understand anyone who believes they are legally safer to argue over USD rather than BTC. There is a very long list of massive thefts of BTC and a list of precisely zero entries of people who got legal remedy for that.

In the case of MtGox my personal belief is that if they walk away with the funds, no one will get anything back, in any currency, except maybe Yen.