Mt. Gox Files Bankruptcy; Customer Files Lawsuit - The UpStream

Mt. Gox Files Bankruptcy; Customer Files Lawsuit

posted Friday Feb 28, 2014 by Scott Ertz

Mt. Gox Files Bankruptcy; Customer Files Lawsuit

It has been a weird year for Bitcoin, the crypto currency that seems to have everyone a little confused. First, several new online retailers started accepting Bitcoin as an official payment type. Then, the first Bitcoin ATMs were installed and began operation. On the other hand, there have been several bank heists, accounting for hundeds of millions of dollars worth of Bitcoin thefts.

The largest of these heists comes at the expense of Mt. Gox, the world's largest repository of Bitcoin. The theft cost the company 750,000 customers and 100,000 internal Bitcoin, which at the exchange rate at the time of this writing is just shy of $492 million. The heist has also cost the company the company itself.

This week, the Japan-based Mt. Gox filed for bankruptcy protection with an outstanding debt of $63.3 million. Shortly before the official filing, Mt. Gox's website was shut down and its Twitter history was cleared, causing most customers to fear they had lost their investments. The website now features only a logo and the text:

As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.

Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.

In light of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

That is not where this drama ends, however. After days of protesting outside of the company's headquarters, customers who have lost money in this disaster are getting restless. One of which, Gregory Greene of Chicago, has filed a class-action lawsuit against the company. Greene, who claims to have lost $25,000 in the shutdown, said,

This catastrophic loss has not only revealed the instability of a burgeoning new industry, it has also uncovered a massive scheme to defraud millions of consumers into providing a private company with real, paper money in exchange for virtual currency.

This monumental failure will raise a couple of questions regarding Bitcoin. First, can Bitcoin ever be secured? With as many massive thefts as we have seen over the last 12 months, the answer so far appears to be no. The other question is, will Bitcoin be able to survive this constant onslaught of bad press? Even if the first problem is not the result of a flaw in Bitcoin itself, it certainly affects the faith in the currency, which is all they have for success.

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