Bitcoin Exchange Mt. Gox Files for Bankruptcy Protection
TOKYO—Bitcoin exchange Mt. Gox said it was filing for bankruptcy protection and that 750,000 of its customers' bitcoins and 100,000 of its own had been lost.
At market prices charted by the CoinDesk bitcoin index, that would represent a loss of $473 million.
The company's lawyer also said at a news conference at the Tokyo District Court that Mt. Gox had outstanding debt of about ¥6.5 billion ($63.6 million) with assets worth ¥3.84 billion.
A covered Bitcoin sign is hung outside a Bitcoin cafe which was scheduled to open in March at the building housing the company operating the Mt. Gox Bitcoin exchange in Tokyo, Japan. Bloomberg News
The exchange has been under fire from investors since it stopped bitcoin withdrawals in early February, citing a technical issue that potentially made fraudulent withdrawals possible.
On Tuesday, Mt. Gox, which at one point handled more than 80% of trades in the virtual currency, stopped all transactions, dealing the severest blow to the bitcoin industry yet and raising concerns about a lack of protection for users. Several Mt. Gox investors say they have little hope of recovering their funds, with some individual investors saying they had bitcoins valued at hundreds of thousands of dollars in Mt. Gox.
Customers from as far away as the U.K. and Australia have come to air their complaints outside the company's Tokyo offices this month.
Mt. Gox has made two announcements on its otherwise empty website this week. On Tuesday, it said it had decided to close all transactions for the time being "to protect the site and our users." On Wednesday, Mr. Karpeles said on the site that he was still in Japan and "working very hard" to find a solution to "our recent issues."
Meanwhile, several people close to Mt. Gox say other factors than technical issues contributed the company's difficulty in meeting customers' withdrawal requests. They also blamed banks taking time to transfer money and some cited government requests.
Mt. Gox had said on its website that it had accounts for customer settlement at Mizuho Bank and Japan Net Bank. A spokesman for Mizuho Bank confirmed Friday that Mt. Gox had an account for settlement for its customers at the bank but declined to comment further, saying it doesn't comment on individual customers' business. Japan Net Bank declined to comment on any individual customer.
One Japanese small-business owner that accepts bitcoin as payment said Japanese banks had expressed skepticism toward the payment method, and that the business's lenders this week asked that the company wouldn't use bitcoin in the wake of Mt. Gox's stopping all transactions on Tuesday. "They're approaching bitcoin very conservatively," the owner said.
An Australian investor, who protested outside Mt. Gox's offices earlier in the month, said that when he confronted a Mt. Gox executive, Gonzague Gay-Bouchery, on Feb. 5, he was told "an investigation" was ongoing. When reached by phone this week, Mr. Gay-Bouchery declined to answer any questions and hung up. The Australian investor declined to give his name.
"It is disappointing they hid so much for so long," said Jonathan Waller, a 30-year-old game developer who said he had had 211 bitcoin in Mt. Gox. "I hope they manage to become a fully-functioning exchange again, but their reputation is so damaged it may not be possible," he said.
The only known regulatory action involving Mt. Gox has come from U.S. authorities. Mt. Gox registered as a money-services business in the U.S. in June last year after authorities said it wasn't properly registered in the country.
This month, federal prosecutors in Manhattan subpoenaed Mt. Gox, asking it to preserve certain documents, among other things, according to a person familiar with the matter.
If Mt. Gox or its employees sent emails or financial transfers through Manhattan, federal prosecutors there could claim jurisdiction as they have in past financial cases. This month's federal subpoena was sent from the U.S. attorney's office in the Southern District of New York, the person said.
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