February 25, 2014 12:17 PM
Mt. Gox Halts All Transactions in New Bitcoin Setback
Brief Statement Replaces Exchange's Usual Website
Bitcoin traders Kolin Burges, right, of London and Aaron, an American who gave only his first name, hold protest signs in front of the office tower housing Mt. Gox in Tokyo on Tuesday. Photo: Associated Press
By ELEANOR WARNOCK and TAKASHI MOCHIZUKI in Tokyo And MICHAEL J. CASEY in New York
Bitcoin suffered a major setback as the website of Mt. Gox, the once dominant trading platform for the virtual currency, was all but shut down.
The Tokyo-based exchange posted a brief statement to its website Tuesday that said it has stopped all transactions "for the time being in order to protect the site and our users." Investors have been unable to withdraw funds from Mt. Gox since the beginning of this month.
The wider bitcoin industry is seeking to both distance itself from Mt. Gox and offer reassurance about the virtual currency's future. The chief executives of six major bitcoin exchanges and other businesses pledged in a joint statement to coordinate efforts to assure customers of the security of their funds.
Mt. Gox has said that a flaw in the bitcoin software allowed transaction records to be altered, potentially making possible fraudulent withdrawals. No allegations have been made of wrongdoing by the exchange, but the potential for theft has raised concern that the exchange wouldn't be able to meet its obligations.
A report widely circulated online since Monday in the U.S. said Mt. Gox had lost almost 750,000 bitcoin to long-running theft. Though the value of the alleged loss is difficult to quantify because of bitcoin price fluctuations, that amount would represent about 6% of bitcoin in existence and a value of roughly $365 million at Monday's prices.
The report was published by San Francisco-based bitcoin entrepreneur Ryan Selkis, who blogs about bitcoin under the handle "The Two-Bit Idiot." Mr. Selkis said in an email he had authenticated his information with sources independent of one another. The report, which also said Mt. Gox was about to be acquired, couldn't be independently confirmed.
By midday Tuesday in Tokyo, Mt. Gox's website appeared to have been deleted. Attempts to reach the Mt. Gox home page yielded a response from the server handling the page but no data were displayed, indicating the server was functioning properly but the site had no content.
Later Tuesday, there were signs of activity on the site. The Web page still appeared empty, but its coding contained the phrase "put announce for mtgox acq here." It wasn't clear what the phrase referred to; it was only visible by using a command to view the coding of the Web page.
Late at night in Tokyo, the Web page was updated with a statement from "MtGox team" indicating that transactions had been halted "in the event of recent news reports and potential repercussions on MtGox's operations and the market."
Attempts to reach Mt. Gox for comment by visiting its offices, by email and phone were unsuccessful on Tuesday. Reina Matsushita, who had been handling public relations for Mt. Gox, said in an email to The Wall Street Journal, "I am not in charge of MtGox Press since yesterday." Ms. Matsushita couldn't be reached to elaborate on the email.
Outside the exchange's offices in Tokyo's Shibuya neighborhood, journalists and investors gathered Tuesday afternoon, including one London-based bitcoin trader who had held a protest there since Valentine's Day. The light was on in the Mt. Gox offices, but no employees were in sight. A few hours later, the offices were dark, according to one of the people watching outside.
Among those gathered was Karl-Friedrich Lenz, a professor of law at Aoyama Gakuin University in Tokyo, who attributed some of the Mt. Gox investors' plight to the lack of guidelines on how bitcoin trading should be regulated in Japan.
"This shows that it is necessary if you take deposits to have a license," he said. Japan's central bank, finance ministry and banking watchdog, the Financial Services Authority, have all declined to take responsibility for regulating bitcoin.
Bitcoin exchanges "aren't a subject to our regulatory oversight" an FSA spokesman told the The Wall Street Journal this week.
A Bank of Japan spokesman said Friday that the central bank "isn't in a position" to regulate bitcoin and its exchanges, while the Ministry of Finance said Monday that it isn't its job to supervise bitcoin and related services.
Tuesday's events came a day after Mt. Gox deleted all its Twitter posts, and Chief Executive Mark Karpeles resigned from the board of the Bitcoin Foundation, a trade group advocating for the virtual currency.
Amid the turmoil, some investors had started to attempt to make profits on the gap between the value of bitcoins on other exchanges and those stuck somewhere in the inner workings of Mt. Gox.
Until Tuesday, the Mt. Gox website continued to update the price of bitcoin, a sign that trading was going on there, but data from Bitcoin Charts, a provider of bitcoin-trading data, indicated that trading halted at 11 a.m. on Tuesday in Tokyo.
The price of bitcoin on two other major bitcoin exchanges, Bitstamp and BTC-e, also fell sharply Tuesday, according to CoinDesk, which publishes an index of the two exchanges' bitcoin prices. Tuesday afternoon in New York, the index showed bitcoin trading at about $515, compared with a high for the index at $979.45 in November.
In a joint statement, the executives of six bitcoin businesses—exchanges Bitstamp, BTC China and Kraken, as well as broker and payment processor Coinbase; payment firm Circle Internet Financial; and Blockchain.info, a provider of storage accounts, or wallets, for the currency—sought to differentiate Mt. Gox from the broader bitcoin community.
"This tragic violation of the trust of users of Mt. Gox was the result of one company's actions and doesn't reflect the resilience or value of bitcoin and the digital currency industry," the statement said. "As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today."
The firms' statement didn't offer specific details on what they would do to reassure bitcoin investors.
Reached by phone later Tuesday, BTC China CEO Bobby Lee said the latest signs of trouble at Mt. Gox were no surprise. "This has been in the making for a good six to nine months," he said.
He said he doesn't see Mt. Gox's difficulties as opening up more business for any particular exchange, given the way the bitcoin business is spread around the globe. He said BTC China trades about 10,000 bitcoin a day, which is up since January but down since December, when Chinese regulators restricted banks and payment platforms from engaging in bitcoin-related activities in China.
—Chao Deng in Shanghai contributed to this article.
Write to Eleanor Warnock at eleanor.warnock@wsj.com, Takashi Mochizuki at takashi.mochizuki@wsj.com and Michael J. Casey at michael.j.casey@wsj.com
Mt. Gox Halts All Transactions in New Bitcoin Setback
Brief Statement Replaces Exchange's Usual Website
Bitcoin traders Kolin Burges, right, of London and Aaron, an American who gave only his first name, hold protest signs in front of the office tower housing Mt. Gox in Tokyo on Tuesday. Photo: Associated Press
By ELEANOR WARNOCK and TAKASHI MOCHIZUKI in Tokyo And MICHAEL J. CASEY in New York
Bitcoin suffered a major setback as the website of Mt. Gox, the once dominant trading platform for the virtual currency, was all but shut down.
The Tokyo-based exchange posted a brief statement to its website Tuesday that said it has stopped all transactions "for the time being in order to protect the site and our users." Investors have been unable to withdraw funds from Mt. Gox since the beginning of this month.
The wider bitcoin industry is seeking to both distance itself from Mt. Gox and offer reassurance about the virtual currency's future. The chief executives of six major bitcoin exchanges and other businesses pledged in a joint statement to coordinate efforts to assure customers of the security of their funds.
Mt. Gox has said that a flaw in the bitcoin software allowed transaction records to be altered, potentially making possible fraudulent withdrawals. No allegations have been made of wrongdoing by the exchange, but the potential for theft has raised concern that the exchange wouldn't be able to meet its obligations.
A report widely circulated online since Monday in the U.S. said Mt. Gox had lost almost 750,000 bitcoin to long-running theft. Though the value of the alleged loss is difficult to quantify because of bitcoin price fluctuations, that amount would represent about 6% of bitcoin in existence and a value of roughly $365 million at Monday's prices.
The report was published by San Francisco-based bitcoin entrepreneur Ryan Selkis, who blogs about bitcoin under the handle "The Two-Bit Idiot." Mr. Selkis said in an email he had authenticated his information with sources independent of one another. The report, which also said Mt. Gox was about to be acquired, couldn't be independently confirmed.
By midday Tuesday in Tokyo, Mt. Gox's website appeared to have been deleted. Attempts to reach the Mt. Gox home page yielded a response from the server handling the page but no data were displayed, indicating the server was functioning properly but the site had no content.
Later Tuesday, there were signs of activity on the site. The Web page still appeared empty, but its coding contained the phrase "put announce for mtgox acq here." It wasn't clear what the phrase referred to; it was only visible by using a command to view the coding of the Web page.
Late at night in Tokyo, the Web page was updated with a statement from "MtGox team" indicating that transactions had been halted "in the event of recent news reports and potential repercussions on MtGox's operations and the market."
Attempts to reach Mt. Gox for comment by visiting its offices, by email and phone were unsuccessful on Tuesday. Reina Matsushita, who had been handling public relations for Mt. Gox, said in an email to The Wall Street Journal, "I am not in charge of MtGox Press since yesterday." Ms. Matsushita couldn't be reached to elaborate on the email.
Outside the exchange's offices in Tokyo's Shibuya neighborhood, journalists and investors gathered Tuesday afternoon, including one London-based bitcoin trader who had held a protest there since Valentine's Day. The light was on in the Mt. Gox offices, but no employees were in sight. A few hours later, the offices were dark, according to one of the people watching outside.
Among those gathered was Karl-Friedrich Lenz, a professor of law at Aoyama Gakuin University in Tokyo, who attributed some of the Mt. Gox investors' plight to the lack of guidelines on how bitcoin trading should be regulated in Japan.
"This shows that it is necessary if you take deposits to have a license," he said. Japan's central bank, finance ministry and banking watchdog, the Financial Services Authority, have all declined to take responsibility for regulating bitcoin.
Bitcoin exchanges "aren't a subject to our regulatory oversight" an FSA spokesman told the The Wall Street Journal this week.
A Bank of Japan spokesman said Friday that the central bank "isn't in a position" to regulate bitcoin and its exchanges, while the Ministry of Finance said Monday that it isn't its job to supervise bitcoin and related services.
Tuesday's events came a day after Mt. Gox deleted all its Twitter posts, and Chief Executive Mark Karpeles resigned from the board of the Bitcoin Foundation, a trade group advocating for the virtual currency.
Amid the turmoil, some investors had started to attempt to make profits on the gap between the value of bitcoins on other exchanges and those stuck somewhere in the inner workings of Mt. Gox.
Until Tuesday, the Mt. Gox website continued to update the price of bitcoin, a sign that trading was going on there, but data from Bitcoin Charts, a provider of bitcoin-trading data, indicated that trading halted at 11 a.m. on Tuesday in Tokyo.
The price of bitcoin on two other major bitcoin exchanges, Bitstamp and BTC-e, also fell sharply Tuesday, according to CoinDesk, which publishes an index of the two exchanges' bitcoin prices. Tuesday afternoon in New York, the index showed bitcoin trading at about $515, compared with a high for the index at $979.45 in November.
In a joint statement, the executives of six bitcoin businesses—exchanges Bitstamp, BTC China and Kraken, as well as broker and payment processor Coinbase; payment firm Circle Internet Financial; and Blockchain.info, a provider of storage accounts, or wallets, for the currency—sought to differentiate Mt. Gox from the broader bitcoin community.
"This tragic violation of the trust of users of Mt. Gox was the result of one company's actions and doesn't reflect the resilience or value of bitcoin and the digital currency industry," the statement said. "As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today."
The firms' statement didn't offer specific details on what they would do to reassure bitcoin investors.
Reached by phone later Tuesday, BTC China CEO Bobby Lee said the latest signs of trouble at Mt. Gox were no surprise. "This has been in the making for a good six to nine months," he said.
He said he doesn't see Mt. Gox's difficulties as opening up more business for any particular exchange, given the way the bitcoin business is spread around the globe. He said BTC China trades about 10,000 bitcoin a day, which is up since January but down since December, when Chinese regulators restricted banks and payment platforms from engaging in bitcoin-related activities in China.
—Chao Deng in Shanghai contributed to this article.
Write to Eleanor Warnock at eleanor.warnock@wsj.com, Takashi Mochizuki at takashi.mochizuki@wsj.com and Michael J. Casey at michael.j.casey@wsj.com
