Mount Gox Redemption: Heading Tow to Happy Ending?


The history of the infamous exchange of crypto-currencies Gox seems to take a turn that could lead to a relatively happy resolution of one of the most dramatic episodes of the short history of digital money. Now that the gates of the Japan-based bank have opened their doors for reorganization demands, most of the 24,000 private patrons are likely to recover their funds and also see returns on their involuntary four-year investment [19659002] The development has arrived thanks to a group of Mt. Gox creditors have successfully made an effort to extort the exchange from bankruptcy procedures and put it in an alternative legal process, known as civil rehabilitation. While some of the scammed customers continue to press for criminal charges against former CEO Mark Karpeles, real estate funds are now managed by an independent trustee – the Japanese lawyer Nobuaki Kobayashi – who oversees the civil reimbursement process.

Rehabilitation [19659004] The logic of the move is that this last modality, according to the Japanese law, would allow to distribute the assets in circulation (for a value of over 1.3 billion dollars at the time of the press) among those who had lost their funds to Mt. The collapse of Gox in 2014. If he had remained in the process of bankruptcy, at its conclusion, most of the money would have accrued to stock market shareholders, in particular ex-CEO Mark Karpeles, who owned 88 percent of Mount Gox at the time of the collapse.

Not only would this be a disgrace to creditors – who had cumulatively lost 650,000 BTC due to the mountain. The failure of Gox – but also something that Karpeles himself would prefer to avoid.

In his 2017 Reuters interview, deposed King Bitcoin admitted that he would do his best to help creditors move the case from bankruptcy to rehab rather than face a flood of civil cases and death threats that will inevitably fall about him if he should end up with a billion dollars he never earned.

Yet, before all the polemics, lawsuits and universal ignominy, there was a fascinating history of the Mount. The success and the downfall of Gox that, in many points, have touched many titans of the cryptocurrency pantheon, and that like no other illustrates the spirit of the early years of the sector.

How it all began

Sometimes the newcomers read the Mount. Gox as "Mount Gox", which is not entirely correct – there is no topographic connotation to "Mt." The domain name is the abbreviation of "Magic: The Gathering Online eXchange" and reflects the initial idea with which the service is the founder, Jed McCaleb, had registered the website. McCaleb – right , who later continued to create the Ripple protocol – conceived a platform where fans of the popular fantasy game "Magic: The Gathering" could exchange card games as stocks. He soon got bored with the idea and moved on to other projects – it was not until July 2010 that McCaleb, now fascinated by the newly discovered concept of cryptocurrency, reused the domain to create one of the first Bitcoin exchanges.

Still looking for something bigger and newer, McCaleb lasted for less than a year driving Mount Gox before selling it to Karpeles, a French developer who was looking for a place to start his big journey around the world cryptic. [19659003] The first hacks

According to an e-mail that would later arrive in court, Karpeles learned shortly after the purchase that the exchange has already been violated at least once, leaving a gap of 80,000 BTC on the budget. It was worth about $ 60,000 at that time, the loss did not seem appalling for the new majority shareholder and CEO – yet, over time, Bitcoin prices have taken over, the void has become increasingly difficult to fill.

Mt. Gox suffered another major attack in June 2011 when the criminals broke into the system via a compromised computer that supposedly belonged to an auditor. For a short period of time, hackers managed to artificially set the price of Bitcoin on the mountain. Gox trading platform at one cent, which runs away with around 2000 very & cheap coins. These events made Karpeles a bit paranoid about the threat of hacking and also contributed to his decision to move most of Bitcoin in possession of the exchange to the cold room.

These were serious problems, but at least they were known to Mark Karpeles. What most probably did not realize – until a certain point in 2013 – was the fact that Monte. The Gox online deposit addresses had been compromised as early as September 2011, when someone had stolen – probably with the help of an insider – the private keys associated with them. After hooking up to the platform's hot wallets, hackers would continue to gradually clear the exchange deposit, remaining undetected for nearly two years.

In the meantime, Bitcoin has begun to gain traction. Mt. Gox, fueled by changes in the back-end software implemented by Karpeles, has won the sympathy of the exponentially growing community, which has helped to add thousands of new customers every day. The number of active accounts grew from 3,000 at the start of the Karpeles period to almost 1.1 million at the start of 2013, pushing the Monte. Gox becomes the world's largest cryptocurrency exchange, responsible for its peak for nearly 90% of Bitcoin's global trade.


A profile put together by Wired in the wake of the Mount. The great dissolution of Gox of 2014 depicts Karpeles as someone far from the stereotypical image of a financial crafty. At a time when the share of institutional money in the crypto industry and the attention of the mass media were quite modest, it seems that it was still possible for Karpeles to manage the world's biggest Bitcoin exchange in an almost improvised way , remaining more than one brilliant developer of an organized CEO.

Many accounts of former employees highlighted inefficiencies and loopholes in company organization processes, such as the lack of any control software version, as well as the fact that any change in the source code required Karpeles' personal approval. – which was seriously hampering the work of the development team.

An incident indicative of the CEO's attitude occurred in the wake of the hack of June 2011, when major Entrepreneurs of Encryption Jesse Powell, who would later become a co-founder of crypto exchange Kraken, and the bitcoin evangelist Roger Ver were summoned to Tokyo to help the Mount. Gox returns online.

After several hectic days of troubleshooting, the platform was still inactive; yet, over the weekend, both Powell and Ver were anxious to continue digging into the problem. Both were perplexed when Karpeles did not come to the office on Saturday morning, telling them that he wanted to take a break.

"Cripto robbery of the century"

In this light, it does not sound so Incredible that Karpeles and his team were able to remain unaware of the money that was slowly being dumped from their accounts for two years. By mid-2013, the mountain. Gox has been deprived of almost all its Bitcoin reserves. The Frenchman had probably realized that there was a hole in the fund at some point in 2013, but it was not until the end of February 2014 that the company admitted having lost 850,000 Bitcoins – worth about $ 460 million at the time and having recovered around seven percent of all outstanding Bitcoins.

For a while, the main enigma surrounding the "crypt robbery of the century" remained the problem of where the money actually went.

A Swedish software engineer named Kim Nilsson, along with a handful of security experts – with whom he collaborated to form the WizSec company – were subsequently credited with monitoring most of the stolen coins until the BTC cryptocurrency exchange -IS. Presumably, Alexander Vinnik, a Russian citizen who owned and operated BTC-E, was directly involved in the recycling of billions of dollars in Bitcoin – second not only to WizSec, but also to an investigation by the US Department of Justice. However, some observers were not completely convinced by the evidence presented in both reports, which suggests that some things do not seem to come back. Vinnik was arrested in Greece in 2017 and is currently awaiting extradition to France (and then, perhaps, to the United States) or to Russia.

Full circle

In March 2014, Mt. Gox reported that 200,000 bitcoins lost were "discovered" in the old-fashioned digital memory used prior to the June 2011 hack. Goods have grown steadily in value of the income statement – in addition to the increasing increase in the Bitcoin valuation since 2014, the future owners of these currencies will be entitled to an equal amount of the fork deriving from Bitcoin Cash. (BCH) – which has far exceeded the value of the possible claims of the victims.

But here's the point: according to the rules of Japanese bankruptcy, requests must be valued at the Bitcoin market price of April 2014, something about $ 400 million total. For Mount Creditors and Gox debtors benefit from the rest, it was essential to begin civil rehabilitation – which was approved at the start of the summer.

Although certainly great news for thousands of creditors of the exchange, development could leave some critics worried about its potential effects on the Bitcoin market in general. Like the Gox bankruptcy trustee has already sold large chunks of cryptocurrency in recent months, speculations have emerged that the move could have driven down Bitcoin prices.

Mark Karpeles has spent most of his time since 2014 dealing with the fallout from Mt. Gox's disappearance – including the need to move from time to time due to death threats, serving time in a Tokyo prison before bailing out (he can not leave Japan yet) and face numerous lawsuits in multiple jurisdictions, the latest allegations of fraud brought before a US federal judge in Illinois, whom the defendants of Karpeles have moved to dismiss.

As for the mountain. Gox, the final payments to the victims of its collapse could mark the end of its thorny path. It will certainly remain in the history textbooks as a synonym for "dangers of cryptocurrency trading", etched into the collective memory of the whole generation of the first adoptive crypts. Although Mark Karpeles once said he was considering the possibility of reintegrating the Mount. Gox under new management, perhaps a better way to reincarnate was expressed by a Twitter user:

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