Gox Crisis Management Plan Confirmed Legitimate

[Lloydie]

The only question on my mind is: how long before Karpeles is in jail for insolvent trading/fraudulent conduct/gross negligence?

[anth0ny]

The only question on my mind is: how long before Karpeles is in jail for insolvent trading/fraudulent conduct/gross negligence?

That'd be my second question, with the first one being "Is it really true that 750,000 BTC just disappeared?"

I find it rather hard to believe. That said, I never did trust Mt. Gox.

[RandyMarsh]

I don't understand how people could have withdrawn bitcoins, used transaction malleability to make gox think there was an error and resend the coins... to the tune of 750,000 BTC without mtgox noticing something was wrong... am I missing something? or is the loss related to something else?

[anth0ny]

I don't understand how people could have withdrawn bitcoins, used transaction malleability to make gox think there was an error and resend the coins... to the tune of 750,000 BTC without mtgox noticing something was wrong...

Screams out "inside job" if that's really what happened. If that's what happened, someone had to have been on the inside cooking the books. (There have to have been books of some sort, right?)

[Lloydie]

I don't understand how people could have withdrawn bitcoins, used transaction malleability to make gox think there was an error and resend the coins... to the tune of 750,000 BTC without mtgox noticing something was wrong... am I missing something? or is the loss related to something else?

Crazy Rabbit's theory is that they never had the 700k in coins to start with.  Gox may have been selling non-existent coins all along as the transactions were off blockchain.

Gox thought they were making money but actually due to malleability issue, they were getting continually drained of real bitcoins.

So the liability side to customers kept getting bigger and bigger and bigger.  

I would say that Karpeles is a genius retard... IMHO of course.

[fcmatt]

I don't understand how people could have withdrawn bitcoins, used transaction malleability to make gox think there was an error and resend the coins... to the tune of 750,000 BTC without mtgox noticing something was wrong... am I missing something? or is the loss related to something else?

Crazy Rabbit's theory is that they never had the 700k in coins to start with.  Gox may have been selling non-existent coins all along as the transactions were off blockchain.

Gox thought they were making money but actually due to malleability issue, they were getting continually drained of real bitcoins.

So the liability side to customers kept getting bigger and bigger and bigger.  

I would say that Karpeles is a genius retard... IMHO of course.

That does not compute. You query the btc balance of every user. Check.
You then check you hot wallet balance in bitcoind. Check.
You then check your cold wallet money has not moved. You still control it. Check.
Do the simple math.

[DeathAndTaxes]

I don't understand how people could have withdrawn bitcoins, used transaction malleability to make gox think there was an error and resend the coins... to the tune of 750,000 BTC without mtgox noticing something was wrong... am I missing something? or is the loss related to something else?

Gross incompetence on a scale which goes magnitudes beyond what MtGox's harshest critics could ever possibly imagine.

I mean in accounting the absolute most basic reconciliation is to balance the chart of account against the actual funds.  The books say we should have x BTC and we check and yup we have x BTC.  The books say we should have y USD and yup we have y USD.  This isn't to say accounting should end there but this is the absolute most basic check and for the story to be believed they simply never did it for years.

[Draino]

I don't understand how people could have withdrawn bitcoins, used transaction malleability to make gox think there was an error and resend the coins... to the tune of 750,000 BTC without mtgox noticing something was wrong... am I missing something? or is the loss related to something else?

Gross incompetence on a scale which goes magnitudes beyond what MtGox's harshest critics could ever possibly imagine.

I mean in accounting the absolute most basic reconciliation is to balance the chart of account against the actual funds.  The books say we should have x BTC and we check and yup we have x BTC.  The books say we should have y USD and yup we have y USD.  This isn't to say accounting should end there but this is the absolute most basic check and for the story to be believed they simply never did it for years.

Not to mention community out-cry for a confirmation that this most basic level of accounting was done, also for years.  How many extra-large cups of chocolate-caramel-topped heavy-creamer does a guy need to suck down before things like this stop being a concern?

[Notanon]

My other question will the bitcoin devs face a lawsuit eventually for knowing about the transaction malleability issue and not making a serious effort to address it?

[fcmatt]

My other question will the bitcoin devs face a lawsuit eventually for knowing about the transaction malleability issue and not making a serious effort to address it?

Nope. Open source software uses a license that covers them from pretty much everything.

[Lloydie]

I don't understand how people could have withdrawn bitcoins, used transaction malleability to make gox think there was an error and resend the coins... to the tune of 750,000 BTC without mtgox noticing something was wrong... am I missing something? or is the loss related to something else?

Crazy Rabbit's theory is that they never had the 700k in coins to start with.  Gox may have been selling non-existent coins all along as the transactions were off blockchain.

Gox thought they were making money but actually due to malleability issue, they were getting continually drained of real bitcoins.

So the liability side to customers kept getting bigger and bigger and bigger.  

I would say that Karpeles is a genius retard... IMHO of course.

That does not compute. You query the btc balance of every user. Check.
You then check you hot wallet balance in bitcoind. Check.
You then check your cold wallet money has not moved. You still control it. Check.
Do the simple math.

What you say is correct.  I don't think MtGox was able to query btc balance of every user.
The hot wallet would've been running low.  I don't know if it was topped up and how many times.
I think cold wallet is still somewhere but most likely has been shifted for "security reasons". 
MtGox was unable to do the maths, it would appear. 

[eldentyrell]

http://www.cryptocoinsnews.com/2014/02/26/irc-chat-with-mark-karpeles-confirms-leaked-documents-authenticity-mt-gox-currently-seeking-bail-out/

So .. 750,000 coins actually are "missing" from Gox.  Hoe lee sheet.

Misleading headline.

When asked if the plan was legit, Karpeles' reply was "more or less … this document was not produced by MtGox".

I think "more or less [legitimate]" easily encompasses "yes, most of it is true, except the numbers were grossly exaggerated".  At this point I don't think he can comment on anything numbers-related, even to point out that they are the part of the document that is "less" legit.

[eldentyrell]

It all seems so shady. Magicaltux aint that dumb. Why is he playing dumb now?

Probably because he's under subpoena and very likely to be extradited.

[eldentyrell]

So .. 750,000 coins actually are "missing" from Gox.  Hoe lee sheet.

Sounds deflationary. The M1 of bitcoin just went down by 750,000 BTC (6%), no?

If they have never been sold and never will be, then sure.

If they exist (which I doubt) they've either already been sold or else won't be sold for several years.  Both scenarios are deflationary.

But honestly the only way this 750k number can be real is if they were fractional reserving and that was their phony ledger entry backed by only 75,000 coins.  That's deflationary too, though only because of the widespread perception that goxcoins were real.

[traderCJ]

http://www.cryptocoinsnews.com/2014/02/26/irc-chat-with-mark-karpeles-confirms-leaked-documents-authenticity-mt-gox-currently-seeking-bail-out/

So .. 750,000 coins actually are "missing" from Gox.  Hoe lee sheet.

Misleading headline.

When asked if the plan was legit, Karpeles' reply was "more or less … this document was not produced by MtGox".

I think "more or less [legitimate]" easily encompasses "yes, most of it is true, except the numbers were grossly exaggerated".  At this point I don't think he can comment on anything numbers-related, even to point out that they are the part of the document that is "less" legit.

Oh for crying out loud ..

[10:58] <JonWickedFire> Is that Crisis Strategy Draft even legit?
[11:04] <MagicalTux> more or less
[11:05] <MagicalTux> as the name suggests it’s a draft, and it’s a bunch of proposals to deal with the issue at hand, not things that are actually planned and/or done
[11:06] <MagicalTux> this said this document was not produced by MtGox

He's obviously seen it before and it was written by some sort of crisis mitigation team.  That team didn't just pull numbers out of their asses.  They based it on some information provided by Gox so they had something to work with.  Notice how in the crisis slides, this is bolded: "At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years.".  So you're telling me he reads this thing, sees the bolded 744,408 BTC and doesn't mention to the media that the big, glaring, scary figure in bold is wrong?  Hogwash.

[anth0ny]

But honestly the only way this 750k number can be real is if they were fractional reserving and that was their phony ledger entry backed by only 75,000 coins.

Like Madoff or Enron, both of which probably had much more scrutiny than Mt. Gox. It's certainly possible.

Fractional reserving, "borrowing" the funds, hoping to pay them back off the rise in $/BTC, and then when $/BTC falls 50% and doesn't come back, and you're about to get caught, try to blame the losses on transaction malleability. Also possible.

Hopefully there will be an honest investigation and one day we'll know what happened, and how it happened, and who is responsible.

[derpinheimer]

True. But we know Mr Karpeles is always very evasive. Even when he could say something not damaging to himself and his company, he'd rather say nothing, at least it seems.

I mean, really.. 750k coins? There were that many HODLERS on gox?

Lets say 700k of the theft occured when bitcoin was <$10. This is probably how it did go down.

How will that work out? I'm trying to think it out and it seems like regardless of the point in time the theft took place, its still valued at 300m USD now, is that correct? So how on earth did they remain operational at all from 2013 onwards??? Hard to wrap my head around it...

[lyth0s]

If Gox's accounting book included fake coins (goxcoins) then they could potentially continue to see that their amount of bitcoins is continually increasing (via the books and thus look like they are making money) while their actual amount of real bitcoins is declining (but not able to see this via the accounting books so that less people know about gox being a fractional BTC reserve). The whole problem about having to continually having to manually refill the hot wallet from the cold wallet could easily be explained if they actually don't have a cold wallet, rather just a few hot wallets that are all linked and auto-refill the main hot wallet when the hot wallet becomes low.

[hostmaster]

http://www.cryptocoinsnews.com/2014/02/26/irc-chat-with-mark-karpeles-confirms-leaked-documents-authenticity-mt-gox-currently-seeking-bail-out/

So .. 750,000 coins actually are "missing" from Gox.  Hoe lee sheet.

hard to believe.

[anth0ny]

So how on earth did they remain operational at all from 2013 onwards???

Lessee...

"On 22 February 2013, following an introduction of new anti-money laundering requirements by Dwolla, some Dwolla accounts became temporarily restricted." "The funds were finally returned on May 3, more than 3 months later". (And following a 400% or more increase in the $/BTC exchange rate.)

"Mt. Gox suspended trading on 11 April 2013 until 12 April 2013 2am UTC for a 'market cooldown'."

"Mt. Gox suspended withdrawals in US dollars on June 20, 2013. On July 4, 2013, Mt. Gox announced that it had 'fully resumed' withdrawals, but as of September 5, 2013, few US dollar withdrawals had been successfully completed."

"On August 5, 2013, Mt. Gox announced that they have incurred 'significant losses' due to crediting deposits which had not fully cleared. Mt. Gox announced that new deposits would no longer be credited until the funds transfer to Mt. Gox is fully completed."

"Wired Magazine reported in November 2013 that customers were experiencing delays of weeks to months in withdrawing funds from their accounts."

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I have a hard time feeling any sympathy for anyone who made significant deposits to Mt. Gox after February 2013.