Largest Bitcoin exchange MtGox shut down, earthquake in the Bitcoin industry

Pierluigi Paganini February 25, 2014

Largest Bitcoin exchange MtGox shut down after it had announced to have suffered technical issues that forced the exchange to suspend withdrawals for a week.

The world’s largest Bitcoin exchange MtGox has shut down its website, suspending any activities, the news is that to be frightening, a real earthquake that raises a series of reflections on the popular virtual currency scheme.
The situation appears critical, the official Twitter account stopped working and MtGox has deleted its entire Twitter feed, all the trading systems were shut down after MtGox detected “unusual activity.”
MtGox website was founded by Jed McCaleb as an online exchange for buying and selling Magic: The Gathering cards, a popular trading card game. Its name was an acronym of Magic: The Gathering Online eXchange. McCaleb converted its website to a Bitcoin exchange and sold it to Mark Karpeles that brought the site to be the first of its kind in the world.
Tibanne CEO Mark Karpeles At Mt.Gox Bitcoin Exchange And Bitcoin Images
The Bitcoin advocacy group known as The Bitcoin Foundation has confirmed that Mark Karpeles has resigned from the board of the Bitcoin Foundation has confirmed in the official statement:

Jon Matonis    Feb 23 2014 – Effective immediately, Mt. Gox has submitted their resignation from the board of directors. We are grateful for their early and valuable contributions as a founding member in launching the Bitcoin Foundation. MtGox Co. Ltd. (Japan) held one of the three elected industry member seats. Further details, including election procedures, will be forthcoming.

What really happened?
Last week, MtGox announced to have suffered technical issues, a problem forcing the exchange to suspend Bitcoin withdrawals for a week and immediately security community began to think to action of law enforcement who have always opposed the popular virtual currency.

“Update – Announcement Affecting Bitcoin Transfers – February 20th, 2014 – Dear MtGox Customers, Thank you for your patience this week while we are working on re-initiating bitcoin withdrawals. In addition to the technical issue, this week we have experienced some security problems, and as a result we had to relocate MtGox to our previous office building in Shibuya (details can be found here: The move, combined with some other security and technical challenges, pushed back our progress. As much as we didn’t want to only provide an “update on an update”, this is the current status. We are committed to solving this issue and will provide more information as soon as possible to keep everyone in the loop. We are very sorry for the delays and deeply appreciate your kind understanding and continuous support.

An internal document leaked to media reveal that nearly 750,000 bitcoins worth $350 million have been stolen from the exchange, immediately other Bitcoin exchanges released an official statement distancing themselves from MtGox.
The companies Coinbase,, Circle, Kraken, Bitstamp, and BTC China’ have issued a joint statement regarding the insolvency of MtGox.

This tragic violation of the trust of users of Mt.Gox was the result of one company’s abhorrent 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.” “We strongly believe in transparent, thoughtful, and comprehensive consumer protection measures. We pledge to lead the way.”

Rumors confirm that it wasn’t a cyber attack to cause the MtGox shutdown, but is probably a ‘slow-leak‘ hack that went on for years. 
Mt. Gox discovered a technical issue that may have been abused for falsification, probably the same glitch alleged to have been exploited to steal about $2.7 million from Silk Road 2.0.

Who conducted the attack?

The impressive growth in the Bitcoin prices attracted cybercrime, new malware was designed with the intent to steal the precious coins, but many experts believe that the MtGox shutdown is the result of a successful operation conducted by the intelligence and law enforcement that always feared the diffusion of the virtual currency, considered by many specialists the official currency in the criminal underground and a privileged instrument for money laundering.

The MtGox shutdown is a blow to the Bitcoin Industry, in the following image the Bitcoin price after the events.

Bitcoin Price after MtGox shutdown

The source code on the MtGox home page reads “put announce for mtgox acq here” leading many experts to speculate on the motives behind the document leak. An internal document suggests that Bitcoin was closed as part of a four-step rebranding plan.

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Pierluigi Paganini

(Security Affairs –  Bitcoin, MtGox)

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