BITCOINS - The Sucker's Bet Lost Big

Remember the oft quoted phrase, "There's a sucker born every minute."  Like something with nothing substantial to underpin it is a good bet.  Mt. Gox would make P.T. Barnum proud.

"Major Bitcoin exchange files for bankruptcy, loses $425 million in virtual currency" (Part-1) PBS Newshour 2/28/2014

JUDY WOODRUFF (Newshour):  A week ago, most people never heard of an online currency exchange known as Mt. Gox.  But it’s suddenly become the subject of international interest and its recent turn of fortune is prompting many questions about the future of the virtual currency Bitcoin.

Hari Sreenivasan has the story.

HARI SREENIVASAN (Newshour):  Mt. Gox CEO Mark Karpeles issued his mea culpa before news cameras in Tokyo today.

MARK KARPELES, CEO of Mt. Gox:  There was a weak area in the system, and, as a result, we lost Bitcoins.  I am deeply sorry that I have caused trouble to everyone.

HARI SREENIVASAN:  His website had been one of the largest online exchanges for the digital cryptocurrency known as Bitcoins.   Bitcoins are generated, or mined, by computers, solving math problems that become ever more complex and time-consuming.

The site went offline Tuesday amid allegations of major theft, and Karpeles acknowledged today he can’t account for 850,000 Bitcoins.  That is almost 4 percent of all the Bitcoins that will ever be mined, and they’re valued at about $425 million.

The catastrophic losses prompted picketing this week outside the company’s Tokyo offices

KOLIN BURGESS, Mt. Gox User:  I had 311 Bitcoins in there, which at the time before this started was worth around $300,000.  So it looks like that has disappeared.

HARI SREENIVASAN:  Bitcoins were created in 2009 to enable anonymous cross-border transactions without third-party oversight or expensive transaction fees.  And their value soared in recent months.

Some entrepreneurs even set up ATM-like vending machines to distribute a hard version of the currency.  But security concerns and Bitcoin’s use in money laundering caught the eye of world regulators.  In October, U.S. officials shut down the Silk Road, a major online marketplace for drugs and other illegal products based purely on Bitcoin transactions.

Today, Japan’s finance minister said the Mt. Gox collapse wasn’t unexpected.

TARO ASO, Finance Minister, Japan (through interpreter):  I really wondered whether this would continue.  I thought it would indeed go bankrupt at one point.  But it has indeed happened quickly.

HARI SREENIVASAN:  Supporters of Bitcoin say Mt. Gox is an isolated case, and that virtual currencies still have great potential.

"Will Mt. Gox’s missing money prompt regulation on Bitcoin?" (Part-2) PBS Newshour 2/28/2014

Excerpt

SUMMARY:  Mt. Gox, an early player in the virtual currency Bitcoins, became a major online exchange until the disappearance of a significant sum and the subsequent bankruptcy of the company.  Kashmir Hill of Forbes joins Hari Sreenivasan to discuss the potential for tracking the missing money and the repercussions of collapse for its users and other rising cryptocurrencies.