Mt Gox: Still a Scam

Yesterday, I moved my old refrigerator to my garage. When I woke up today, there was an icebox in my kitchen and nothing in the garage.

Mt Gox released a report stating that they had “found” 200,000 of the ~850,000 “lost” bitcoins. (The English version is on the second page.)

“But I thought the hackers proved that Mt Gox was a scam from the start?” (me to myself a few days back)

No. That was another scam. This stuff is getting problematic.

Disregarding that. This playout of events is unusually similar (see “Copycat Scam”) to MyBitcoin. After shutting down and claiming hax, they “recovered” 49% of their bitcoins and gave them back to the customers.

Mt Gox has not yet offered the 200,000 bitcoins they found back– likely, more bitcoins will be magically discovered, and then they will allow customers to retrieve a percentage of what was lost.

This only convinces me further of foul play. Think about it. What kind of atrocious accounting does it take to allow 200,000 bitcoins to sit around and not be verified when switching systems?

That’s like moving into a new house and taking a month to realize that you forgot to bring your family.

Or, as a more accurate analogy, depositing $1000 into a bank and taking a month to realize that your account only has $800.

You don’t even need to keep a record. Ignoring that a TRADING MARKETPLACE needs to have everything on record, how can you not bother to notice that A FOURTH OF YOUR MONEY ISN’T THERE?

For Mt Gox to have “thought” that these old wallets contained no bitcoins, they must have failed to check how many bitcoins they actually had in the new wallets. Which means, either Karpeles is such a retard that he doesn’t know how to count, or he purposely left those 200,000 bitcoins behind… to reproduce MyBitcoin’s scam.

I, personally, would be more likely to believe the “haxors” story were Karpeles not to have released this preposterous report. I suggest you do similarly. I am eager to see how this will progress.

Karpeles: Why we won’t see another criminal

Mark Karpeles, CEO of Mt Gox, didn’t only have 850,000 bitcoins “disappear” from a cold storage vault, in what he claims was theft.

It turns out he’s been involved in fraud previously– which makes any claim of his that 850,000 bitcoins were pilfered from his accounting books (which, as Falkvinge points out, is completely unreasonable) seem even more full of bullshit.

For those of you who want to read about the other time he defrauded someone, here’s the link. (I’m completely convinced that Empty Gox is a fraud orchestrated by Karpeles at this point.)

But besides the breaking news: Bitcoin has no regulation. That’s both a problem and a solution.

It’s a solution in that it can become the anonymous P2P currency of the internet.

It’s a problem in that criminals like Karpeles are supposedly freely able to engage in their criminal activities.

While the US economy is crippled by corporate welfare, unregulated companies, corrupt banks, and Wall Street, Bitcoin seeks to solve that.

But in lacking regulation, does it not forecast its own doom by allowing corruption to burgeon?

I was ruminating on this, but I don’t think it will become a major problem in the future.

Note that Karpeles snuck into the Bitcoin business at its inception. Nobody had the time nor the reason to check his credentials.

Getting away with illegal acts is far easier in the earlier stages of an institution.

Remember Benjamin Franklin? Founding Father, one of the greatest womanizers in American history? Back when the printing press still existed? Nobody ever questioned his promiscuity.

Remember Bill Clinton? I don’t think I need to explain what happened to him for one small scandal. The media went “ham” on him.

Once America and American media had developed past its infant stages, it was possible to spend more time on things not related to life or death.

Ten years down the line, the same thing will happen to Bitcoin. If a man like Karpeles shows his face, he will be laughed off the internet before anyone gets the chance to fall for his scam.

A rocket’s hardest obstacle is getting out of the Earth’s gravity… similarly, Bitcoin’s toughest obstacle will be escaping the corruption of the dollar.

I hate Karpeles, but someone was going to do something similar anyway.

Bitcoin: The First Shots, Fired

\Mt Gox seems to have gone dark, with supposedly 744,000 lost Bitcoins. Once the biggest Bitcoin exchange, now dirt on Bitcoin’s name and future.

Of course, something like this was destined to happen. Bitcoin is revolutionary. Bitcoin is new. Bitcoin is valuable.

“All that glitters, someone will try to take.”

That’s what we see here– the first major speed bump for Bitcoin. When even the largest middleman might filch your investments, why invest?

If you had to live in constant fear of the bank divesting you of your money, wouldn’t you stash it all under your mattress?

But even though to the Bitcoin world this is the equivalent of JP Morgan Chase closing its doors, saying “We have a bug”, I don’t think it’ll severely impede Bitcoin’s progress.

After all, the people investing in Bitcoin aren’t the common people. They’re the trailblazers. The WSJ recently reported that 75% of the US aren’t familiar with Bitcoin, and 80% wouldn’t bother using it.

For those 20% who will bother, and the even smaller percentage who actually are pushing the cause forward, Bitcoin isn’t just an investment they think will give high ROI. It’s a revolution they believe will overthrow paper currency. The death of the dollar. A few annoyances won’t stop them. They’re effecting a dream– and nothing can stop someone realizing his dream.

Because of this, while news on Mt Gox has only served to further alienate the populace from Bitcoin, the currency and community in itself is rebounding pretty quickly. Hitting a $400/btc low last night, trading is already back to about 545.

While Mt Gox has been spasming for several weeks now, dragging down prices from what was $800 at the beginning of February, perhaps weeding out this parasite may allow for a stronger push.

Bitcoin is still in its young days. Speculation will shift. Usage will alter. And news like this will only prolong the time before Bitcoin becomes a viable currency. But as Coinbase put it, “As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today.”

But it doesn’t matter, because in the end, decentralized currency will win. No loss can suppress the thirst for freedom. And that’s exactly what Bitcoin provides: freedom of money, the future of Internet payment.

Let’s think of Mt Gox as we think of a flowerbed, blooming. Hidden amongst these flowers are weeds– few in number, but large in effect. While watching someone yank out weeds from a beautiful garden may be estranging, it’s a necessity to save and support the institution as a whole.