My communication with Mark and Mt. Gox -- questions on what happened

[BruceFenton]

When the Bitcoin withdrawals were halted I contacted Mark and offered capital and help to fix the exchange.

At the time I assumed it was only a technical and management challenge and the conversation with Gonzague and Mark didn't indicate anything other than that.

They provided me with financial statements and I talked over the need for Mark to step aside and a real and professional management team to step in and fix the PR issues, the outstanding US lawsuit issues and of course the technical issues.

My simplest plan was to see if this could be transported to another exchange in a mass migration effort, entirely scrapping the old Gox programming, fire Mark as CEO and install a real team, immediately settle the lawsuits and immediately go on a road show communicating with customers about the exact status of their accounts.

We figured if we could retain even a third of the customers and build back trust with a new team and brand it would be a win.

I've got a lot of experience in tech and especially finance, brokerage and money management but fixing something as messed up, complex and broken as Gox (even though I didn't realize it was more messed up than I thought) quickly is beyond my skills alone.

I talked to one of the top Bitcoin geniuses who is a large holder to see if he was interested in helping (he said he had too much on his plate) and I talked to a leading VC firm who mulled it over but then figured the logistics of moving from Japan to the US as well as outstanding broken issues combined with over Bitcoin volatility was too much of a mess.   They did put me in touch with another very major Bitcoin player who I spoke with and we agreed, in principle, to try to save Gox if Mark was willing to step aside and not be bull headed about valuation (which we felt was almost nothing now beyond assets)

I talked to Gox again but we didn't really move forward.

A few days ago, when the anonymous memos started surfacing I emailed a few times asking for them to give more clarity to customers.  I got a note from Mark which said "we will have an announcement on Friday".  We now see that.

Like Charlie and others have said, the entire time it did not seem at all that Gox had lost the coins.   Why would they have bothered even talking to me?   Surely they didn't think an investor would cover the coin losses (by the way, sadly, no, no investor would bail out Gox like this, there would be no way of getting an ROI on that investment) --

Part of me is still optimistically hoping that Mark is just being profoundly bad with PR and trying to under-promise and over-deliver and has at least a good chunk of coins and will try to "fix" things.   His behavior and manner and communications were not at all like that of someone who either 1) lost 800,000 coins or 2) was pulling a major con.

I don't get it.  There are many unanswered questions.  How exactly can 800,000 coins disappear?  What manner of thief could do such a thing?  When was this noticed?  By what mechanism?  What exactly did he say in the press conference?  Did he say hack or thief?  Did he simply lose the keys and is covering from embarrassment?  Could someone have threatened him into giving them up?  Could there be some other third party in play here?  (When you talk about hundreds of millions of dollars even grand conspiracies of mafia, terrorists or government are not off the table) 
Why was he trying to program the transaction issue?  Are these Gox wallets people tracked real?
So many questions.   Hopefully we get answers.

I won't give any info on contact for Mark or any Gox employee -- his life could be in danger and I won't be responsible for giving that info, sorry -- he reached me though a response to his regular contact form ....I also won't answer any questions about the other parties because these conversations were private.   Typically I never release any information about any business conversation ever....however this is such an odd case with so much at stake for so many I feel I need to give whatever info I can which could in some tiny way give some insight.

I am really sorry to all who lost coins, I also lost a small amount of coins.  Fortunately not a huge amount for me --

This episode is a sad chapter for Bitcoin-   I feel like my good friend and little buddy Bitcoin has been punched in the head.   It's so sad to see this blow to the reputation of our new technology.

Of course I still completely believe in the tech and this issue doesn't shake my confidence in Bitcoin itself much, but I'm sad to see that thousands had such a bad experience and the inevitable press and other issues which will arise from this.

Good luck to all.

For those of you who lost coins, please keep a big picture view -- it sounds annoying perhaps but every day when I travel I meet people who can never afford even the most basic needs like food.   Whatever hard times you have in life will pass.

I believe that those who lost greatly will in general recover and hopefully stronger and I believe Bitcoin in general will recover and both the currency and technology will change the world and grow beyond most peoples dreams.



Edit/ note:    To be clear they never at any point said there was a problem with cold storage or indicated losses at all, I thought this was clear in the OP.  The reason I am not wildly out calling the liars is because I am giving the benefit of the doubt until we hear more on the off chance that there is a govt gag order, they still have the coins or some other explanation.

[serje]

Mark is this you?

[rat]

you spoke to a dishonest person, who proved that with his first lie about TM.

then he lied about another technical issue halting the exchange.

then he lied saying that all trades would resume.

then he lied about insolvency.


and you want to give him the benefit of the doubt that he "lost" the coins to negligence?



and you're a lawyer?

[Skoupi]

I don't understand the meaning of that wall of text.
Does it add something to the story?

[rat]

no. he just feels bad for mark.

[btcrich]

Interesting.  Would definitely like to see some answers to all your questions.

Can we see those financial statements they provided you with?

[Puppet]

Im fairly sure Peter R has the answer to all your questions:

https://bitcointalk.org/index.php?topic=488058.msg5397869#msg5397869

TL;DR: the coins were lost many years ago when its dollar valuation was still in the single or low double digits. Ever since Gox has been operating as a fractional reserve bank, trying to recover the lost BTC through trading fees. Which might have been doable when a bitcoin was worth $5 (x ~500K lost BTC is "only" $2.5M)  and but became untenable when its price went ballistic.

[Minimaxa]

The situation has me in awe.

Where do they go from here follow the bitcoin trail and where will the coins end up laundered then traded on another exchange after being stored for years?

Is there an investigation or do the authorities just shrug there shoulders and move on because it is bitcoins?

Wouldn't this have some sort of charge being placed for negligence or mismanagement of client funds?

Is there going to be a detailed explanation as to how the coins were compromised or does everyone just get a sorry about that we were hacked.  

Who benefited? crocodile tears...

[yenom]

Also posted here http://www.reddit.com/r/Bitcoin/comments/1z6phy/my_conversation_with_mark_from_mt_gox_my/

[peterle]

Can you call him for a minute and ask him to say that in your phone. I just like the sound of hisrecorded voice.

[BruceFenton]

no. he just feels bad for mark.

Me?  Not sure how you get that

[BruceFenton]

Interesting.  Would definitely like to see some answers to all your questions.

Can we see those financial statements they provided you with?

I don't feel comfortable releasing them because I'm not authorized to -- now this may seem silly if they turn out to be as fraudulent as they seem to be....but in the sadly unlikely event that there is some reasonable excuse like a seizure, gag order and they still have the coins then I'd be the bad guy to release them and breech trust.    If someone is a fraudster then I have no problem breaching their trust because the premise of all agreements was false and I no longer would consider conversations private....this may be the case with Gox but I wouldn't do so without absolute certainty.

[Jeronimus]

You should have asked him for the cold storage addresses the exchange had before it got robbed, so we can follow the trace from there. See when exactly it happened etc...

Why didn't you?


How could a gag order possibly prevent him from showing us the cold storage wallet addresses the coins got stolen from? There seems no plausible reason for this.

Name a plausible reason why a gag order would prevent him from doing this please.




edit: This is what makes me wonder even more, how is it possible people close to him come up with well written articles, suggesting they are not idiots, yet they seem to forget to ask the most straightforward questions....

[BruceFenton]

You should have asked him for the cold storage addresses the exchange had before it got robbed, so we can follow the trace from there. See when exactly it happened etc...

Why didn't you?

If we had proceeded with discussion end then clearly before any contract was made and certainly any ownership or money changed plans we absolutely positively without question would have made him very clearly show the addresses and control and prove it.

[Jeronimus]

You should have asked him for the cold storage addresses the exchange had before it got robbed, so we can follow the trace from there. See when exactly it happened etc...

Why didn't you?

If we had proceeded with discussion end then clearly before any contract was made and certainly any ownership or money changed plans we absolutely positively without question would have made him very clearly show the addresses and control and prove it.

no, i mean... why don't you just call him on the phone and ask him which the cold storage btc addresses were, since you seem to have the means to contact him and you pretend to be concerned about peoples' lost coins.

It would be worth a shot, wouldn't it, if you were really that concerned. I doubt such a question would step on anyone's toes unless he has something to hide. It's not like anyone can rob the cold storage wallets just by knowing the public addresses.
edit: (we can see all addresses on the rich list anyway, we just don't know exactly which are related to gox)

I can also not see how the US gov if they put him under a gag order would have any issue with him revealing the former cold storage wallets before the supposed theft occurred.
Why would they?

[BruceFenton]

You should have asked him for the cold storage addresses the exchange had before it got robbed, so we can follow the trace from there. See when exactly it happened etc...

Why didn't you?

If we had proceeded with discussion end then clearly before any contract was made and certainly any ownership or money changed plans we absolutely positively without question would have made him very clearly show the addresses and control and prove it.

no, i mean... why don't you just call him on the phone and ask him which the cold storage btc addresses were, since you seem to have the means to contact him and you pretend to be concerned about peoples' lost coins.

It would be worth a shot, wouldn't it, if you were really that concerned. I doubt such a question would step on anyone's toes unless he has something to hide. It's not like anyone can rob the cold storage wallets just by knowing the public addresses.
edit: (we can see all addresses on the rich list anyway, we just don't know exactly which are related to gox)

I can also not see how the US gov if they put him under a gag order would have any issue with him revealing the former cold storage wallets before the supposed theft occurred.
Why would they?

Oh, I see.

I don't think he'd talk to me now.

I've reached out for the last week and the only reply I got was on Wed which said there'd be an announcement Friday.

I don't have special access or relationship with him....if I did I drag him by the collar and get him to give some answers.

[Jeronimus]

I don't have special access or relationship with him....if I did I drag him by the collar and get him to give some answers.

When the Bitcoin withdrawals were halted I contacted Mark and offered capital and help to fix the exchange.

At the time I assumed it was only a technical and management challenge and the conversation with Gonzague and Mark didn't indicate anything other than that.

They provided me with financial statements and I talked over the need for Mark to step aside and a real and professional management team to step in and fix the PR issues,

hmmm, no special relationship i see....

you told him to step out and all that, offered him financial help. They provided you with financial statements and all this stuff,

but you are not able to ask him a simple question..

sounds legit

[BruceFenton]

hmmm, no special relationship i see....

you told him to step out and all that, offered him financial help. They provided you with financial statements and all this stuff,

but you are not able to ask him a simple question..

sounds legit

Umm yeah it does.

Think about it.   Mark and Gox dealt with hundreds of people I am sure.  Them communicating with me on this does not bind them to me for life, I have no special phone that can force people to answer.   I never even communicated with them once in my life until 16 days ago or so.

Do you really think that because someone communicates with someone that it always means they will forever?  Especially in a case like this with one of the most high profile and bafflingly non-transparent events in recent history?

You really think Mark is sitting there saying "Gee, people want to kill me, a million account holders are after me, no one even knows if a half billion dollars is missing or whose control it's under and I've been totally and completely opaque and secretive and unclear about the whole thing, every reporter on earth is calling me and people are stalking me....I know what I'll do!  I'll call that guy Bruce who I never heard of in my life until two weeks ago and I'll tell him everything and clear this whole thing up because otherwise Jeronimus on the chat board will be scratching his head!"

Seriously it's amazing how fast and loose some people on boards like this jump to making ridiculous statements questioning someone's very character and reliability without the tiniest amount of thinking going in to their statement.

[Jeronimus]

hmmm, no special relationship i see....

you told him to step out and all that, offered him financial help. They provided you with financial statements and all this stuff,

but you are not able to ask him a simple question..

sounds legit

Umm yeah it does.

Think about it.   Mark and Gox dealt with hundreds of people I am sure.  Them communicating with me on this does not bind them to me for life, I have no special phone that can force people to answer.   I never even communicated with them once in my life until 16 days ago or so.

Do you really think that because someone communicates with someone that it always means they will forever?  Especially in a case like this with one of the most high profile and bafflingly non-transparent events in recent history?

You really think Mark is sitting there saying "Gee, people want to kill me, a million account holders are after me, no one even knows if a half billion dollars is missing or whose control it's under and I've been totally and completely opaque and secretive and unclear about the whole thing, every reporter on earth is calling me and people are stalking me....I know what I'll do!  I'll call that guy Bruce who I never heard of in my life until two weeks ago and I'll tell him everything and clear this whole thing up because otherwise Jeronimus on the chat board will be scratching his head!"

Seriously it's amazing how fast and loose some people on boards like this jump to making ridiculous statements questioning someone's very character and reliability without the tiniest amount of thinking going in to their statement.

See, this is exactly what puzzles me. You seem well articulated and smart, and it is not about if or not Karpeles WOULD HAVE answered you, but why you did not ask at all.
At the same time, you were keen enough to tell him to step out of his position when as you say this was the first time you met him.

You can be all defensive you want, but i am not buying this.

[BruceFenton]

See, this is exactly what puzzles me. You seem well articulated and smart, and it is not about if or not Karpeles WOULD HAVE answered you, but why you did not ask at all.
At the same time, you were keen enough to tell him to step out of his position when as you say this was the first time you met him.

You can be all defensive you want, but i am not buying this.

Like I said,  I asked MANY times over the last week by email etc:  Where are the coins?  Do you have them?  Can you provide the exact status?   People want and need clarity, can you explain?

We were going to have a call before Friday but I was traveling.

After Friday I sent emails asking about the status and clarity.  Crickets.