Mt Gox Insider trading?

[Nefario]

1. Zhou stated that he has a rule that he does not do any personal trading of bitcoin for something like 24-48 hours after seeing any privileged information in the database.

2. Nefario, where did you get 80k?  I heard 43k.  This is probably roughly on the scale of his profits, but like copumpkin said, I wouldn't be surprised if a backer is eating some of this loss.

3.  There is no evidence that Zhou is doing any insider trading or betting against his customers, and he has repeatedly asserted that he does not and never will do this.  Does he have the power to lie and steal from his customers? Of course, but until there is more evidence than just opportunity, I don't think its fair to be making accusations.

4.  I don't think "The Manipulator(s)" is Zhou, but I am pretty sure whoever they are- they use Bitcoinica (leverage makes manipulation easier).

1. Zhou also stated that all biticoin for bitcoinica is kept in MtGox and that they didn't actually touch the coins. What happened there? 43K went missing.

2. 43K is the actual loss from the heist, and another 43K that he's giving back to his customers, he takes a double hit.

3. There is no evidence of anything, I'm just after reading that bitcoinica's not even incorporated(on reddit, but is that true?).

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[copumpkin]

2. 43K is the actual loss from the heist, and another 43K that he's giving back to his customers, he takes a double hit.

What? he doesn't need to reimburse lost profits out of pocket. If I lent you $10 and someone mugs you and steals those $10, you still owe me $10, and you don't have $10, but I wouldn't say you lost $20.

Either way, I think it's very shaky reasoning to assume that just because he can afford to cover 43k lost customer coins, that he made that much in profit, and is thus trading against his customers.

Regarding his incorporation, he's said he'll announce details about it soon. I still believe that there's probably at least one fairly large investor behind all of this.

[Nefario]

2. 43K is the actual loss from the heist, and another 43K that he's giving back to his customers, he takes a double hit.

What? he doesn't need to reimburse lost profits out of pocket. If I lent you $10 and someone mugs you and steals those $10, you still owe me $10, and you don't have $10, but I wouldn't say you lost $20.

Either way, I think it's very shaky reasoning to assume that just because he can afford to cover 43k lost customer coins, that he made that much in profit, and is thus trading against his customers.

Regarding his incorporation, he's said he'll announce details about it soon. I still believe that there's probably at least one fairly large investor behind all of this.

Well it only becomes an issue if customers start to withdraw, which would mean we get into fractional reserve territory.

But point taken on the rest of your comment.

[triplehelix]

How can they do it?

I obviously have no more of an answer than you do, but are you aware that MtGox is running at a loss? This is probably because they have external private investors who are willing to foot the bill, making short-term losses in exchange for the promise of market supremacy when/if things take off.

The same is probably true of bitcoinica. I don't know who has invested in it, but zhoutong has made references to speaking to investors at various points, so it doesn't seem unlikely that wealthy backers would just decide to cover the cost in exchange for a larger stake in one of the most successful bitcoin ventures yet. The loss may have wiped out bitcoinica's profit, but I wouldn't necessarily assume that just just because they are willing to cover their losses out of pocket that they necessarily made all that money through their own business activities.

Another consideration is that large purchases of bitcoins (such as a wealthy external investor covering bitcoinica's losses) won't necessarily happen on mtgox or anywhere observable to us. I know of several large over-the-counter transactions that occur regularly.

where do you get the information that mtgox is operating at a loss?  is that a paper loss for tax reasons, or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

[copumpkin]

where do you get the information that mtgox is operating at a loss?  is that a paper loss for tax reasons, or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

All I have is this (rather informal) report they released a month or so ago: https://mtgox.com/press_release_20120201.html

[triplehelix]

where do you get the information that mtgox is operating at a loss?  is that a paper loss for tax reasons, or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

All I have is this (rather informal) report they released a month or so ago: https://mtgox.com/press_release_20120201.html

ok, just had a look at that.  where are you inferring a loss?

[copumpkin]

where do you get the information that mtgox is operating at a loss?  is that a paper loss for tax reasons, or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

All I have is this (rather informal) report they released a month or so ago: https://mtgox.com/press_release_20120201.html

ok, just had a look at that.  where are you inferring a loss?

5 million yen monthly operating costs = $60k a month to operate. Their yearly revenue was $337k. Yes, they also have coins, but they can't sell them easily.

[beardman]

where do you get the information that mtgox is operating at a loss?  is that a paper loss for tax reasons, or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

All I have is this (rather informal) report they released a month or so ago: https://mtgox.com/press_release_20120201.html

ok, just had a look at that.  where are you inferring a loss?

In revenue & operational costs (page 16) I'm seeing USD revenue of $337,000 over a year, 52,400 of BTC in a year ($277,720 at the current rate), and then ~5,000,000 yen in monthly costs, or ~$60,000 at current rates. That would mean revenues of 614,720 and costs of $720,000. That's ~15% loss, but its hard to tell considering there are 3 different currencies being used and two time scales, this is a very very informal report indeed.

[copumpkin]

where do you get the information that mtgox is operating at a loss?  is that a paper loss for tax reasons, or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

All I have is this (rather informal) report they released a month or so ago: https://mtgox.com/press_release_20120201.html

ok, just had a look at that.  where are you inferring a loss?

In revenue & operational costs (page 16) I'm seeing USD revenue of $337,000 over a year, 52,400 of BTC in a year ($277,720 at the current rate), and then ~5,000,000 yen in monthly costs, or ~$60,000 at current rates. That would mean revenues of 614,720 and costs of $720,000. That's ~15% loss, but its hard to tell considering there are 3 different currencies being used and two time scales, this is a very very informal report indeed.

Yeah, exactly. The bitcoins in particular are pretty illiquid from the point of view of paying employees and rent, too. But my basic point was that even if they aren't making a clear loss, they certainly aren't rolling in money, and there is a very real possibility of making a loss month-to-month, which someone would have to cover. I'd bet that someone is a private investor, or a few. And I'd be willing to bet that bitcoinica is in a similar situation.

[Sergey (imcex.com)]

2. 43K is the actual loss from the heist, and another 43K that he's giving back to his customers, he takes a double hit.

Have there been any loss taken by Bitcoinica?
Have anyone found that 43K transaction (set of transactions)?
Why would they use VPS for storing such amount?
Isn't it much safer to rent/setup physical server?
Couldn't it be easier to declare huge loss for promotion?

Are you still sure there was any actual loss?

I wish luck to Zhou but I have more questions than answers on this situation.

[triplehelix]

we don't know what the numbers represent.  its not a full accounting disclosure, so i don't think we can't draw any profitability information from what they have supplied.  we can draw the conclusions they are obviously trying to have drawn, but they mean nothing.

and the idea that 52k bitcoin a year is not easily liquidated is in my opinion, extremely incorrect.  you don't think they could move 1k bitcoin a week with ease?  seriously?  1k a day would still be easily exchanged to fiat.

[copumpkin]

we don't know what the numbers represent.  its not a full accounting disclosure, so i don't think we can't draw any profitability information from what they have supplied.  we can draw the conclusions they are obviously trying to have drawn, but they mean nothing.

and the idea that 52k bitcoin a year is not easily liquidated is in my opinion, extremely incorrect.  you don't think they could move 1k bitcoin a week with ease?  seriously?  1k a day would still be easily exchanged to fiat.

You're right; it is hard to draw profitability conclusions, but for now it'd appear that they aren't raking in huge amounts of cash, which would suggest that for any future expansion of the business, they'd need external investors.

Regarding getting rid of the bitcoins, I don't doubt that it can be done, but it'd be questionable for them to trade on their own exchange, and doing large OTC transactions is possible, but you're less likely to get a good rate for them.

[triplehelix]

why would it be questionable for them to trade on their own exchange?  if they receive fees in BTC, i can't think of any reason for them not to liquidate on their own exchange as long as they were selling at market, and not using large amounts of bitcoin to try and manipulate the market.

don't they currently use bots to trade?  i may have misunderstood something i read on the bots though.

[RaggedMonk]

1. Zhou also stated that all biticoin for bitcoinica is kept in MtGox and that they didn't actually touch the coins. What happened there? 43K went missing.

Initially Zhou stated this, but I believe he had to add a separate wallet to accommodate BTC deposits and withdrawals to get around MtGox withdrawal limits. My guess is that is what was hacked on linode.

[ElectricMucus]

I have plenty of suspicions against bitcoinica, them scamming us being not one of them.

But that would derail the discussion.

To contribute something: The way capitalism works (or its at least supposed to but we should assume bitcoin gets to the ideal form as close as it gets) it should be in the Brokers best interest not to intervene in the markets to not piss of their clients. Another factor is human nature or just social dynamics: Where there is betrail more follows, so chances some inside whistle-blower will reveal the fraud is very high.