Bitcoin Exchangec Mt.Gox Halts All Transactions in New Virtual Currency Setback

Tokyo-based bitcoin exchange Mt.Gox went dark causing huge losses for investors, and sending ripples of alarm throughout the global community of digital currency adopters.

A report widely circulated online since Monday in the US said Mt. Gox had lost almost 750,000 bitcoin to long-running theft. Photo: vnupdate.net/ Flickr

On Tuesday, one of the world’s largest bitcoin trading platforms, Mt. Gox, was shut down, as its CEO Mark Karpeles said the business faced “a turning point,” sparking concerns about the future of the unregulated virtual currency.

The website of the Japan-based company was closed with no explanation, after on Sunday Karpeles resigned from the Bitcoin Foundation’s board of directors and deleted all company’s tweets.

Mt. Gox CEO Mark Karpeles in an email to Reuters said: “We should have an official announcement ready soon-ish. We are currently at a turning point for the business. I can’t tell much more for now as this also involves other parties.” He did not elaborate on the details or give his location.

The announcement came after the exchange had been experiencing technical issues for months, including a hacking attempt two weeks ago.

According to unverified document called “Crisis Strategy Draft” that is being circulated online claims because of a “transaction malleability” glitch, some 744,408 bitcoins — the equivalent of about $350 million — had gone missing. It also claims Mt.Gox is planning to rebrand itself as Gox.

As Mt. Gox had previously explained, “a bug in the bitcoin software makes it possible for someone to use the bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur.”

Bitcoin prices briefly plunged more than 23% on Tuesday, based on the CoinDesk price index of two other virtual-currency exchanges. Late in the day, one bitcoin fetched about $538, down 1.2% from Monday.

Late on Monday, several other Bitcoin exchanges, like Coinbase, Kraken, Bitstamp.net, BTC China, Blockchain.info and Circle, sought to reassure investors and took a harder line with Mt. Gox.

“This tragic violation of the trust of users of Mt.Gox was the result of one company’s actions and does not reflect the resilience or value of bitcoin and the digital currency industry. There are hundreds of trustworthy and responsible companies involved in bitcoin.

“These companies will continue to build the future of money by making bitcoin more secure and easy to use for consumers and merchants. As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. Mtgox has confirmed its issues in private discussions with other members of the bitcoin community.”

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, said the person familiar with the matter. Attempts to reach Mt. Gox representatives in Tokyo about the subpoena were unsuccessful on Wednesday morning, reports the Wall Street Journal.

According to Reuters, critics of the exchange, from rivals to burned investors, said the digital marketplace operator had long been lax over its security. Investors in bitcoin, who have endured a volatile ride in the value of the unregulated cyber-tender, said they still had faith in the currency despite the problems at Mt. Gox.

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