How in the name of Satoshi do you manage to lose 800k Bitcoins?

[cdb000]

Let's think about this question, because I can't even begin to understand what must have happened.

We assume the MtGox kept an offline wallet with the bulk of Bitcoins in it. If anything else is true, the someone should simply string Karpeles up by the neck.

For 800k or so Bitcoins to vanish from an offline wallet scares me. I have my own (somewhat more modest) stash on Bitcoins in an offline wallet. If Gox can lose offline coins, has someone found a way to raid offline wallets? How? How?

Alternatively, if those Bitcoins were moved into the Gox hot wallet, we must assume that this took a fairly large number of moves. You would think that, for example, after 10k Bitcoins had been moved to the hot wallet a few times somebody would have asked some questions and started investigating. It is hard to see any scenario where 800k Bitcoins are moved from the Gox offline wallet to the hot wallet without Karpeles or someone else at Gox becoming aware that there was a serious Bitcoin leak.

So maybe the hint Karpeles gave in an IRC interview carries some truth. The Bitcoins are still there, but cannot be moved for some reason. For this to be true, the keys for that offline wallet must have become unavailable. Now, I have few Bitcoins compared to MtGox, but there are 3 backups of my offline wallet, one of which is stored in another country - we have to assume that an exchange would have better backups than an individual Bitcoin miner. Is it possible that Karpeles got careless with backups and something silly happened, like a USB stick became corrupt? It seems unlikely.

So... I cannot think of any sensible explanation for the apparent loss of appx. 800k Bitcoins.

In the absence of a credible explanation for the loss of the Bitcoins, my conclusion is that there is more to the story than we have been told, and Karpeles is being, if not downright dishonest, very economical with the truth. Can anybody think of any credible way for Gox to lose appx. 800k Bitcoins or to have had them stolen?

Can anything be learned from the blockchain? If enough people who have, at one time or another, moved Bitcoins to or from Gox were to publish transaction IDs maybe patterns would emerge - maybe we could find some of the Bitcoin addresses for the Gox offline wallet and see whether large numbers of Bitcoins have been moved out of it.

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[pleiotropik]

 

It totally befuddles me how at this stage of the game people will still try to believe the lies of M.K.

"Doge ate my BTC" is his next lame lie/excuse.

Much theft frappucino man much wow.

[cdb000]

It totally befuddles me how at this stage of the game people will still try to believe the lies of M.K.

I am not trying to believe what we have been told, nor disbelieve it. The objective here is to try to understand what could have happened and what could not have happened so as to be able to start to separate the lies from the half truths from the truths. The reality appears to be that there is a lot of speculation flying around and very little real verifiable information. We do not actually know with any degree of certainty whether Bitcoins were actually stolen, or whether keys were lost, or whether this whole mess is the result of a badly executed attempt at fraud, or something else entirely. Having a feel for what is actually possible might help to enable us to disregard some of the more wild speculation and maybe come to some understanding of what really happened.

And maybe to consider whether or not any exchange should be trusted with more than 1 Bitcoin.

[LostDutchman]

Let's think about this question, because I can't even begin to understand what must have happened.

We assume the MtGox kept an offline wallet with the bulk of Bitcoins in it. If anything else is true, the someone should simply string Karpeles up by the neck.

For 800k or so Bitcoins to vanish from an offline wallet scares me. I have my own (somewhat more modest) stash on Bitcoins in an offline wallet. If Gox can lose offline coins, has someone found a way to raid offline wallets? How? How?

Alternatively, if those Bitcoins were moved into the Gox hot wallet, we must assume that this took a fairly large number of moves. You would think that, for example, after 10k Bitcoins had been moved to the hot wallet a few times somebody would have asked some questions and started investigating. It is hard to see any scenario where 800k Bitcoins are moved from the Gox offline wallet to the hot wallet without Karpeles or someone else at Gox becoming aware that there was a serious Bitcoin leak.

So maybe the hint Karpeles gave in an IRC interview carries some truth. The Bitcoins are still there, but cannot be moved for some reason. For this to be true, the keys for that offline wallet must have become unavailable. Now, I have few Bitcoins compared to MtGox, but there are 3 backups of my offline wallet, one of which is stored in another country - we have to assume that an exchange would have better backups than an individual Bitcoin miner. Is it possible that Karpeles got careless with backups and something silly happened, like a USB stick became corrupt? It seems unlikely.

So... I cannot think of any sensible explanation for the apparent loss of appx. 800k Bitcoins.

In the absence of a credible explanation for the loss of the Bitcoins, my conclusion is that there is more to the story than we have been told, and Karpeles is being, if not downright dishonest, very economical with the truth. Can anybody think of any credible way for Gox to lose appx. 800k Bitcoins or to have had them stolen?

Can anything be learned from the blockchain? If enough people who have, at one time or another, moved Bitcoins to or from Gox were to publish transaction IDs maybe patterns would emerge - maybe we could find some of the Bitcoin addresses for the Gox offline wallet and see whether large numbers of Bitcoins have been moved out of it.

I think it took careful planning.

My $.02.

[HeliKopterBen]

That would be 1000 btc a day for over 2 years.  Sounds about right...

[LostDutchman]

That would be over 1000 btc a day for over 2 years.  Sounds about right...

"Softly, softly, catchee moneky"

Lord Robert Baden-Powell.

Was Gox a long con?

Enquiring minds want to know!

My $.02.

[grifferz]

I am not trying to believe what we have been told, nor disbelieve it.

Yet despite the many lies told by Karpeles, you choose to believe that he had a cold wallet and coins were stolen from it.

Everyone else believes that to be impossible.

How to square the two statements?

At the moment you have to go with whatever is the simplest explanation, which is that Karpeles is lying and/or extremely confused.

Revise that assessment as verifiable info emerges.

[LostDutchman]

I am not trying to believe what we have been told, nor disbelieve it.

Yet despite the many lies told by Karpeles, you choose to believe that he had a cold wallet and coins were stolen from it.

Everyone else believes that to be impossible.

How to square the two statements?

At the moment you have to go with whatever is the simplest explanation, which is that Karpeles is lying and/or extremely confused.

Revise that assessment as verifiable info emerges.

Explanation?:

Shit happens?

I dunno.

My $.02.

[fasmax]

I also don't see how this loss could occur.
I had to send a lot of documents to trade at MtGox .
Should they not have the thief's information and know who was getting paid twice?

[achillez]

Answer: he stole it .

I have an email from MtGox 2 weeks ago. They said my coins are safe, there is no way for them to take my coins. That was 2 weeks ago. Prior to that I had emails about cash withdrawals basically saying the same thing. Mark is about as corrupt as they come, he's probably linked up with the mob. The guy is disgusting both physically and mentally. Karma is a bitch and it will come back and pay him in spades.

[grifferz]

Should they not have the thief's information and know who was getting paid twice?

There's a lot of things that fit in the category of "should"

e.g. They should

• have noticed the loss of BTC1000 per day immediately/in hours/in days, not after years
• have shut down trading completely as soon as they knew there was a problem
• have explained the previous theft of BTC500,000
• have told the truth as soon as people started asking if their bitcoins were safe
• …

Where do you feel "should be keeping proper records of resubmitted transactions and customer ID documents" fits in the priority list?

In any sane world yes they'd have the documents and be able to work out who did what, but right now we don't even know for sure if the theft story is true, by what means it happened if true, or what records they have of that.

[cryptoanarchist]

A lot of them started moving around here, in late 2011:  https://blockchain.info/tx/478ea915aa3a2e54503c43e1c5659722b42a784412423a05394c83a44affb805

[Peter R]

How in the name of Satoshi do you manage to lose 800k Bitcoins?

Cross posted from https://bitcointalk.org/index.php?topic=492393.msg5438572#msg5438572(refer here for more details on the theory that Gox had been reluctantly running a fractional reserve since 2011 when the actual theft occurred.)

Answer:  People are amazed that 750,000 BTC could be stollen.  However, if we assume the theft happened in the summer of 2011, then this is actually very believable and perhaps Mark was more "unlucky" than negligent or incompetent.  Remember, in April of 2011, bicoin was trading at about $1, and in October 2010 at $0.10.  So, 750,000 BTC would have only had a value of about $75,000 when Mark wrote the original code.  

At $75,000, I can see a lot of people saying "oh, just leave the keys on the server."  Then suddenly the price starts to rally hard and months later the price is $30 per BTC and those coins are worth $22.5 million.  Mark is working frantically to code a more secure system because he doesn't want to lose $22.5 million!  But his business grew too fast and he couldn't get it all done.  

And then "bam!"  As he's working to implement better bitcoin security in the summer of 2011 to protect what are now millions of dollars of coins, the theft occurs.  A few years later and the 750,000 BTC that he stored on his server at $0.10 a pop are suddenly worth $400,000,000!

And that's how you go broke with a bang ladies and gentlemen!

[redhawk979]

A lot of that BTC is still sitting in wallets with amounts of 50k BTC per wallet, from right after Karpeles did that shit where he moved like 424242 btc to prove he still had them. Bet he forgot the private keys.

[HtotheIzzo]

I think karples is sitting pretty fat right now. 

[Vod]

I think karples is sitting pretty fat right now. 

Yep.  You don't lose 800,000 bitcoins.  You move them into a personal wallet and sit on it until things calm down.

He is sitting pretty.

[BitButt]

someone puts a gun to your head.
so you give them the keys.
then waffle around and make up bullshit in a poor attempt to cover it up.

[mysidia]

A lot of that BTC is still sitting in wallets with amounts of 50k BTC per wallet, from right after Karpeles did that shit where he moved like 424242 btc to prove he still had them. Bet he forgot the private keys.

So if you're exchange, there are two manners in which you might "lose" bitcoins.

(1) You might lose possession of the actual coins, by thieves making sneaky transfers out.

(2) Your exchange might, without any large amount of coins leaving the exchange's wallets.... have a net liability in Bitcoins incurred, by additional "claims against the coins"  in their wallet being created.   In other words ----  instead of Bitcoins in your vault going down by 850,000, the  total Bitcoins you owe  to customers and various creditors go up by 850,000:   through trades that appear to be legitimate and indistinguishable  from normal trades.

An exchange could "lose" bitcoins, or have a shortfall, while still having secure possession of a large number of coins  and highly effective hacker protection.

Possibly through the transfer of positions on the exchange,  and transfers of Bitcoins between users.

For example: if thieves who found some mechanism to make double-withdrawls of Bitcoins by taking advantage of transaction malleability,  later  re-deposited BTC back, to     conduct some manner of "legitimate trades",  and then eventually  repeat the exploit,  ad nauseum --- in order to compound their ill gains.

The "BTC owed to customers" could become distorted

[BitButt]

So it's an inside job, or it's an outside job.
1 or the other.

Incompetance/lost keys/gun to head - these would still be an inside job.
Getting hacked from the intrnet would be an outside job.
If the government walked in and kiped it all...that's an outside job
cause it didn't really originate from a person inside gox.