my theory about Mtgox fiasco

[theomar]

My theory about the Mtgox fiasco is this:

Karpeles used mtgox's clients (fiat /btc) deposits to manipulate the market. He probably was doing that with the help of bots. For example, if he wanted to increase the price he was "borrowing" fiat from mtgox's depositors and with that fiat he was buying btc, creating an uptrend. As more mtgox's clients were buying bitcoins there was a moment when the clients who had fiat in their accounts and wanted to buy bitcoins couldn't  because Karpeles had already bought bitcoins with their money. So, at that point Karpeles had to sell the bitcoins that he had already bought in order to give the Mtgox's clients fiat to buy also. ( this also explains the huge lag, he needed time to do this).

So this strategy should had given Karpeles a lot of profit because he was buying cheap bitcoins with borrowed money (which caused an uptrend) and when he was forced to sell bitcoins (which were more expensive) to cover his clients needs, he was selling less, so he had profit in bitcoins.
But this is not true because there is also one more parameter, the liquidity. When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.

[1714837881]

1714837881

[1714837881]

1714837881

[blatchcorn]

No offence, but that is more of a guess than a theory

[frankh13]

My theory about the Mtgox fiasco is this:

Karpeles used mtgox's clients (fiat /btc) deposits to manipulate the market. He probably was doing that with the help of bots. For example, if he wanted to increase the price he was "borrowing" fiat from mtgox's depositors and with that fiat he was buying btc, creating an uptrend. As more mtgox's clients were buying bitcoins there was a moment when the clients who had fiat in their accounts and wanted to buy bitcoins couldn't  because Karpeles had already bought bitcoins with their money. So, at that point Karpeles had to sell the bitcoins that he had already bought in order to give the Mtgox's clients fiat to buy also. ( this also explains the huge lag, he needed time to do this).

So this strategy should had given Karpeles a lot of profit because he was buying cheap bitcoins with borrowed money (which caused an uptrend) and when he was forced to sell bitcoins (which were more expensive) to cover his clients needs, he was selling less, so he had profit in bitcoins.
But this is not true because there is also one more parameter, the liquidity. When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.

Good theory, but what do you think about buying mtgox now? Some company freezed a lot of acc's.

[Scoremaster]

My theory about the Mtgox fiasco is this:

Karpeles used mtgox's clients (fiat /btc) deposits to manipulate the market. He probably was doing that with the help of bots. For example, if he wanted to increase the price he was "borrowing" fiat from mtgox's depositors and with that fiat he was buying btc, creating an uptrend. As more mtgox's clients were buying bitcoins there was a moment when the clients who had fiat in their accounts and wanted to buy bitcoins couldn't  because Karpeles had already bought bitcoins with their money. So, at that point Karpeles had to sell the bitcoins that he had already bought in order to give the Mtgox's clients fiat to buy also. ( this also explains the huge lag, he needed time to do this).

So this strategy should had given Karpeles a lot of profit because he was buying cheap bitcoins with borrowed money (which caused an uptrend) and when he was forced to sell bitcoins (which were more expensive) to cover his clients needs, he was selling less, so he had profit in bitcoins.
But this is not true because there is also one more parameter, the liquidity. When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.

he damn sure maniuplated the market. look at what the price went to, and now that no one is doing it, it geos back down to what it should really be.

[gnode]

My theory about the Mtgox fiasco is this:

Karpeles used mtgox's clients (fiat /btc) deposits to manipulate the market. He probably was doing that with the help of bots. For example, if he wanted to increase the price he was "borrowing" fiat from mtgox's depositors and with that fiat he was buying btc, creating an uptrend. As more mtgox's clients were buying bitcoins there was a moment when the clients who had fiat in their accounts and wanted to buy bitcoins couldn't  because Karpeles had already bought bitcoins with their money. So, at that point Karpeles had to sell the bitcoins that he had already bought in order to give the Mtgox's clients fiat to buy also. ( this also explains the huge lag, he needed time to do this).

So this strategy should had given Karpeles a lot of profit because he was buying cheap bitcoins with borrowed money (which caused an uptrend) and when he was forced to sell bitcoins (which were more expensive) to cover his clients needs, he was selling less, so he had profit in bitcoins.
But this is not true because there is also one more parameter, the liquidity. When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.

he damn sure maniuplated the market. look at what the price went to, and now that no one is doing it, it geos back down to what it should really be.

You give him too much credit, he couldn't run a company let alone manipulate the market.

[fairlay]

this is our theory, based on the latest Gox investigations:

first Karples does not play a prominent role in it. Instead someone just found a possibility to create accounts with (fake) fiat money. He then bought LOTS of Bitcoin - that caused the raise last November - and chased them out.

With sources and a little bit more details here: http://blog.fairlay.com/2014/08/connecting-the-dots-a-possible-connection-between-the-raise-in-november-mtgox-disaster-and-recent-price-drop/

[theomar]

@fairlay

Your theory does not explain the missing fiat. Although it is a good explanation for the missing btc.

[fairlay]

actually we think it is only a explanation for the missing fiat - not for the missing BTC.

Since in this theory only more fiat has been created and the Bitcoins has "flown away" regularly.

This does not match to the reported missing 600k Bitcoin - but it does fit to the fiat withdraw problems of Gox.

[allthingsluxury]

Mt. Gox has been a huge disaster, this was a long time in the making.

[theomar]

@fairlay

Aaa ok understood now thanx!

[gog1]

this is getting old, we should put mtgox behind us

[jjc326]

this is getting old, we should put mtgox behind us

Why, so it can happen again?  People need to be told over and over how it looked like Gox was the biggest and safest for years and no one really knew what was going on with it.

[fairlay]

And the hole story is still far away from be completely understood...

It is really to early to close this chapter.

[SnakePlisken]

Decent theory, I have no doubt Karpeles was misusing customer funds. Most likely he is tied into the theft somehow as well.

Also most likely we will never know what really went on.

[puwaha]

So does anyone have any good links as to what happened to Mt. Gox?  Not looking for speculation, just what was observed from the outside (or inside, if it exists).

I'd rather not wade through tons of forum posts to piece it together.... call me lazy if you will. 

[DrApricot]

this is our theory, based on the latest Gox investigations:

first Karples does not play a prominent role in it. Instead someone just found a possibility to create accounts with (fake) fiat money. He then bought LOTS of Bitcoin - that caused the raise last November - and chased them out.

With sources and a little bit more details here: http://blog.fairlay.com/2014/08/connecting-the-dots-a-possible-connection-between-the-raise-in-november-mtgox-disaster-and-recent-price-drop/

Your theory does help adequately explain the price rise in November, yet not the subsequent crash in December. However, were bitcoins acquired with the fake fiat balances subsequently sold off, then that could--by making the floating supply suddenly spike up and the price drop. In other words, the sell off was probably engineered--not to provide needed liquidity for customers, but rather to profit.

Buying bitcoins through gaming Mt. Gox with funny money, and then selling them off would constitute theft, unless these bitcoins were later replaced with ones bought on the cheap after the crash. Perhaps, the recent sinking of the price below $500 demarks the end of repurchasing to replace those bitcoins sold off by the perpetrators after last November's peak. In other words buying back those bitcoins has been supporting the price all along since last February.

The need to repay the "borrowed" bitcoins, that had subsequently been sold off, may also explain the seeming endless cover-up, delays and lack of transparency once bankruptcy had been declared and why Mt. Gox's missing bitcoins are still unavailable. It takes time to repurchase all those bitcoins gradually so as not to reignite another big price rise.

[theomar]

Karpeles arrested...

http://www3.nhk.or.jp/nhkworld/english/news/20150801_05.html

[ajareselde]

It was obvious that there's foul play involved as soon as there was a backlog for withdrawals created. And even just by observing the
market price movements at gox one could see that it's highly unrealistic. They tried to manipulate the whole market, but failed miserably in hiding the facts.
I for one am glad m.k. is arrested, and i hope he will serve long time.

cheers

[n2004al]

My theory about the Mtgox fiasco is this:

Karpeles used mtgox's clients (fiat /btc) deposits to manipulate the market. He probably was doing that with the help of bots. For example, if he wanted to increase the price he was "borrowing" fiat from mtgox's depositors and with that fiat he was buying btc, creating an uptrend. As more mtgox's clients were buying bitcoins there was a moment when the clients who had fiat in their accounts and wanted to buy bitcoins couldn't  because Karpeles had already bought bitcoins with their money. So, at that point Karpeles had to sell the bitcoins that he had already bought in order to give the Mtgox's clients fiat to buy also. ( this also explains the huge lag, he needed time to do this).

So this strategy should had given Karpeles a lot of profit because he was buying cheap bitcoins with borrowed money (which caused an uptrend) and when he was forced to sell bitcoins (which were more expensive) to cover his clients needs, he was selling less, so he had profit in bitcoins.
But this is not true because there is also one more parameter, the liquidity. When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.

Maybe I am uninformed well or my knowledge about Mt Gox and its story are outdated but my memory tell me that there were a hacking tentative in this company which has stolen thousand of bitcoins. I am not reading nothing about this. Mark has its faults and maybe have manipulated the market but without the hacking nothing would happen. Mt Gox would be live and in health even this day.

[g1974ak]

That' true. The problems of Mt Gox began with the hacking of thousand of bitcoins, and then after a probably second one which gave the knock down all the Mt Gox. Mark surrender his duty at MT Gox but not the other duty at another his company on which continue to work silently. Then I don't have info what happened except today when learned that was arrested. If arrested then it was something wrong on its work. Let's pay if have made something wrong. There are to many people that has lost their savings on its company.

[DrApricot]

My theory about the Mtgox fiasco is this:

When he was forced to liquidate bitcoins he might had to sell more bitcoins than he had bought if liquidity was very low.  So the extra bitcoins had to be created from thin air which caused a btc fractional reserve. Same logic applies if he wanted to create a downtrend with a fiat fractional reserve as a consequence.

Maybe I am uninformed well or my knowledge about Mt Gox and its story are outdated but my memory tell me that there were a hacking tentative in this company which has stolen thousand of bitcoins.

Both the theories that Mt. Gox had been operating on a so called "fractional reserve" for some time [not genuinely possible since it never loaned bitcoins back out as a fractional reserve bank might do], or that it had suffered a major loss through hacking have been cast into serious doubt by the recent justification used by the Tokyo police in arresting Mark Karpeles:

"Police suspect Mark Karpeles padded his bitcoin outstanding balance by illegally manipulating his company's computer system.

His Tokyo-based company, MtGox, suddenly stopped all trading in February last year and filed for bankruptcy. Karpeles announced that 650-thousand bitcoins, worth more than eight billion yen at that time, had disappeared.

He claimed the exchange collapsed after hackers stole most of his clients' Bitcoins. But police say most of the bitcoins held by the company were sent to another account.

Police believe Karpeles knows what happened to the virtual money." [emphasis added]
See: http://www3.nhk.or.jp/nhkworld/english/news/20150801_05.html