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 Author Topic: How did they calculate that 744,408 BTC are missing from Mt. Gox?  (Read 1526 times)
chalker
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 February 27, 2014, 02:08:22 AM

Like the subject says:  how did they calculate that 744,408 BTC are missing?

I've searched unsuccessfully for an analysis / answer to this question (and apologize if it's obvious somewhere else - please just point me to it).  I also realize this is somewhat of an academic exercise since there isn't much official information (although there obviously is information being shared privately via back channels, as evident by the joint statement issued by other exchanges).

Looking at the "Crisis Strategy Document" (http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft), which is 'more or less true', on page 2 it explicitly says "744,408 BTC are missing".  However the assets and liabilities table on page 5 doesn't seem to make sense.  It lists the following liabilities:

624,408 BTC(Customers)
+120 000 ( MtGox)
-80 208 BTC From banned or suspicious accounts

(Of note might be the fact that those last 2 numbers don't have a comma separator, while ALL the other numbers in the entire document do.  Perhaps these were added by someone after that fact that got confused?)

Note if you explicitly do the math, 624,408+120,000-80,208 = 664,200.  You only get the 744,408 number if you ignore the 3rd item.

The first item I assume is just an easy tally of all the user account totals and seems reasonable based upon the estimate of 1.1 M accounts with 550,000 verified customers. (although note how that number is exactly half of the previous one, likely indicating this was a ballpark estimate.  This is also a reasonable extrapolation from the 60,000 accounts they said they had in June 2011 (https://bitcointalk.org/index.php?topic=18858.0;all)

The third item is obviously subtracting out the totals of 'bad' accounts.  The second item is the confusing one to me.  Why would 'MtGox' owe 'MtGox' another 120,000 BTC?  Anyone have any ideas?  One hypothesis I'd suggest is that this is actually the 'cold storage' estimate and it was accidentally put into the liability column when it should have been in the assets column.

While I'm at it, the income statement calculations on page 8 seem odd too (unredacted version available at http://i.imgur.com/u9aP9Hg.png).

First as a baseline, in April 2012, "Mt. Gox was receiving between \$5 million and \$20 million in incoming transfers each day, while paying out somewhere between \$300,000 and \$1 million" (http://www.wired.com/wiredenterprise/2013/11/mtgox/all/).  Worst case, that's a net of \$4M per day.  While I'm sure that didn't keep up long and is likely somewhat of an exaggeration, even 10% of that would still result in a significant net income over a year.

Bitcoincharts (http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgSzm1g10zm2g25zv) shows that for the past year, a total of ~16M BTC traded last year (average of 45K BTC per day).  At a normal fee of 0.53%, that's 85K BTC in fees (236 BTC / day average).  If they converted those fees everyday automatically into USD, that would amount to \$17.7M from fees (\$50K / day average).  However I doubt they actually do that.  Most of it is probably kept as BTC.

Compare that to the second column of the income statement sheet, which shows net sales of \$10.7M for the current year and \$1.3M for the previous year that includes April 2012, which doesn't match up very well with the data above.  Am I missing something? My suspicion is that they tried to keep a lot of company assets in BTC after the issues with DHS and Coinlab in May 2013 in order to 'keep them off the books' so to speak.  Alternatively they just have no clue what their actual finances are or were grossly faking a lot of trade volume data.

Any thoughts from people more financially savvy then I am?
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5thStreetResearch
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 February 27, 2014, 02:10:21 AM

The should know how much in BTC deposits they should have had in reserves.  They were 744,408 shy of that number.  Seems like the easy to calculate it to me.

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Legendary

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Reverse engineer from time to time

 February 27, 2014, 02:13:35 AM

The should know how much in BTC deposits they should have had in reserves.  They were 744,408 shy of that number.  Seems like the easy to calculate it to me.
Is it confirmed by MtGox that 700k are missing?

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notig
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 February 27, 2014, 02:15:22 AM

It's not confirmed but karpeles said that the document was "more or less"
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Reverse engineer from time to time

 February 27, 2014, 02:18:53 AM

It's not confirmed but karpeles said that the document was "more or less"
Ok but tell me, how do 700k go missing? Where did they go? If a hacker got them, shouldn't we know with the hundreds of bitcoin gurus stalking the blockchain all day long?

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arallmuus
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 February 27, 2014, 02:26:25 AM

Its a company , they have record
notig
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 February 27, 2014, 02:27:37 AM

the thing is not many people know the whole truth because mt gox was basically just run by  1 or 2 people. Karpeles and that other guy. I think Karpeles was a bad coder and I think he was also a coward. I think mt gox was robbed some time ago and has been acting with fractional reserve since then and because of that they haven't kept close track of their auditing so...... that allowed even worse things to happen. I stole that from the kraken guy. That's also probably why the coinlab deal fell through.
kolev
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My name is Nikolay and am a webaholic.

 February 27, 2014, 03:18:03 AM

Like the subject says:  how did they calculate that 744,408 BTC are missing?

I've searched unsuccessfully for an analysis / answer to this question (and apologize if it's obvious somewhere else - please just point me to it).  I also realize this is somewhat of an academic exercise since there isn't much official information (although there obviously is information being shared privately via back channels, as evident by the joint statement issued by other exchanges).

Looking at the "Crisis Strategy Document" (http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft), which is 'more or less true', on page 2 it explicitly says "744,408 BTC are missing".  However the assets and liabilities table on page 5 doesn't seem to make sense.  It lists the following liabilities:

624,408 BTC(Customers)
+120 000 ( MtGox)
-80 208 BTC From banned or suspicious accounts

(Of note might be the fact that those last 2 numbers don't have a comma separator, while ALL the other numbers in the entire document do.  Perhaps these were added by someone after that fact that got confused?)

Note if you explicitly do the math, 624,408+120,000-80,208 = 664,200.  You only get the 744,408 number if you ignore the 3rd item.

The first item I assume is just an easy tally of all the user account totals and seems reasonable based upon the estimate of 1.1 M accounts with 550,000 verified customers. (although note how that number is exactly half of the previous one, likely indicating this was a ballpark estimate.  This is also a reasonable extrapolation from the 60,000 accounts they said they had in June 2011 (https://bitcointalk.org/index.php?topic=18858.0;all)

The third item is obviously subtracting out the totals of 'bad' accounts.  The second item is the confusing one to me.  Why would 'MtGox' owe 'MtGox' another 120,000 BTC?  Anyone have any ideas?  One hypothesis I'd suggest is that this is actually the 'cold storage' estimate and it was accidentally put into the liability column when it should have been in the assets column.

While I'm at it, the income statement calculations on page 8 seem odd too (unredacted version available at http://i.imgur.com/u9aP9Hg.png).

First as a baseline, in April 2012, "Mt. Gox was receiving between \$5 million and \$20 million in incoming transfers each day, while paying out somewhere between \$300,000 and \$1 million" (http://www.wired.com/wiredenterprise/2013/11/mtgox/all/).  Worst case, that's a net of \$4M per day.  While I'm sure that didn't keep up long and is likely somewhat of an exaggeration, even 10% of that would still result in a significant net income over a year.

Bitcoincharts (http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgSzm1g10zm2g25zv) shows that for the past year, a total of ~16M BTC traded last year (average of 45K BTC per day).  At a normal fee of 0.53%, that's 85K BTC in fees (236 BTC / day average).  If they converted those fees everyday automatically into USD, that would amount to \$17.7M from fees (\$50K / day average).  However I doubt they actually do that.  Most of it is probably kept as BTC.

Compare that to the second column of the income statement sheet, which shows net sales of \$10.7M for the current year and \$1.3M for the previous year that includes April 2012, which doesn't match up very well with the data above.  Am I missing something? My suspicion is that they tried to keep a lot of company assets in BTC after the issues with DHS and Coinlab in May 2013 in order to 'keep them off the books' so to speak.  Alternatively they just have no clue what their actual finances are or were grossly faking a lot of trade volume data.

Any thoughts from people more financially savvy then I am?

How can he say 80K bitcoins are no liability, because he decides that somebody is "suspicious" or got "banned"?!

Bitrated user: nikolay.
vpitcher07
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 February 27, 2014, 04:07:04 AM

It's not confirmed but karpeles said that the document was "more or less"
Ok but tell me, how do 700k go missing? Where did they go? If a hacker got them, shouldn't we know with the hundreds of bitcoin gurus stalking the blockchain all day long?

This. I find it hard to believe that someone managed to smuggle 700k btc and disperse it evenly throughout the blockchain without raising eyebrows. Unless those million dollar transactions that were popping up were just that...

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Epinnoia
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 February 27, 2014, 04:53:13 AM

Go back to when he supposedly lost the 500,000 BTC a couple years ago. That was no heist. That was Mark Karpeles sweeping coins out of old accounts that never changed their passwords. He undoubtedly released the password file into the wild as cover — much as he leaked this crisis report into the wild as cover.

People are speculating that is the wallet involved. I don’t see it. That sure as hell doesn’t look like a slow leak to me. It looks like a wallet that drops to 0 again and again over time. Given the largeness of the amount of BTC, I think it’s probably an exchange wallet. Perhaps even GOX. But where’s the leak? And I notice it dipped below 0 twice — which seems rather odd.

If Karpeles stole these from people, it’s not the first time. If you go back a couple years ago, he did it before. 500,000 BTC that time. Criminals generally get emboldened by each successful crime. Those initial users had unsalted passwords. Many of them never changed their passwords after the salting was added. And who, better than Mark, would know how to exploit that? All he had to do was release the database information into the wild (just like that crisis paper) to make it look like it was hacked, and then sweep those coins right out of those accounts himself.

http://www.dailytech.com/Inside+the+MegaHack+of+Bitcoin+the+Full+Story/article21942.htm

My first miner -> ATI 4550 (7.2 Mh/sec):
Epinnoia
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 February 27, 2014, 04:56:41 AM

``<MagicalTux> Well, technically speaking it's not "lost" just yet, just temporarily unavailable"``

Interesting. Why did he put in that 'just yet' part? The sentence would have made sense without it. He makes it sound like they're dangling over a cliff waiting for rescue...

What's the difference between these two sentences:

Well, technically speaking it's not "lost" just yet, just temporarily unavailable

vs.

Well, technically speaking it's not "lost", just temporarily unavailable

What meaning is added by including 'just yet'? Is he saying the decision is out of his hands?

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Laosai
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 February 27, 2014, 04:59:43 AM

by record i guess

nimda
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0xFB0D8D1534241423

 February 27, 2014, 05:02:04 AM

``<MagicalTux> Well, technically speaking it's not "lost" just yet, just temporarily unavailable"``

Interesting. Why did he put in that 'just yet' part? The sentence would have made sense without it. He makes it sound like they're dangling over a cliff waiting for rescue...

What's the difference between these two sentences:

Well, technically speaking it's not "lost" just yet, just temporarily unavailable

vs.

Well, technically speaking it's not "lost", just temporarily unavailable

What meaning is added by including 'just yet'? Is he saying the decision is out of his hands?
That's more of the same empty speech like we see on the website:
Quote
We will be closely monitoring the situation and will react accordingly.

As though they are passively waiting for the coins to be returned.

I recommend asking me for a signature from my GPG key before doing a trade. I will NEVER deny such a request.
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