Topic: [ANN] Bitcoinica Consultancy abandons customers. Bitcoinica to enter Liquidation (Read 12960 times)

Well, that was fast:

To All Investors
 
We have received a number of requests for updates on the liquidation of Bitcoinica LP (In Liquidation).
As noted in my email of 20th December 2012, we have requested details of the account records held by Mt Gox.  To date, Mt Gox has refused to release these details on account of confidentiality and has requested that the Liquidators provide various details of the accounts before it releases this information.  As reported in the Liquidators first report, we do not have any company records whatsoever and are reliant upon the assistance of the limited partners and Mt Gox to take control of the bitcoins and cash assets.  We cannot make any progress in the liquidation unless Mt Gox provides us with access to Bitcoinica’s accounts.  We are currently awaiting information from the limited partners so that we can progress the account access issues with Mt Gox.
We apologise for the slow progress in the liquidation, but hopefully the investors will appreciate that we are making every effort to recover the bitcoins and funds in order to make a distribution to creditors as soon as possible.  We will continue to provide updates periodically to keep all investors abreast of the liquidation progress.
 
Kind Regards
Taslim Bhamji
Senior Insolvency Administrator

I too hoped things would be further along by now. The lawyers are looking at skipping receivership and proceeding directly to liquidation. This is intended to save time but nothing in the legal world is fast by bitcoin standards. With luck, the Court will approve a liquidator in September.

Take this with a grain of salt, because it's unsubstantiated rumour at this point, but if it's true it would be enormously helpful to the liquidation process.


https://privatepaste.com/5241fafb45

Hi all and sorry for the wait.

I can confirm that as of last night all the funds Zhou promised to retrieve (approx. $100,000 USD and 20,000 BTC) have been returned to Bitcoinica, LP's MtGox account. The receivership and liquidation process is underway and I'll post updates here as things move forward.

Best,
Patrick

You are correct that Zhou stated $140,000. My understanding is that the additional $40,000 includes funds frozen (rightly so) at ArumXchange. I would hope that Zhou would cooperate with authorities in apprehending and prosecuting the hacker.

A Public Letter about Bitcoinica

Why?

You are receiving this email because I, Zhou Tong, want to update you about Bitcoinica's recent events, and clarify some frequently asked questions by Bitcoinica customers.

I still have your email address because Bitcoinica shared the available account information with me so that I can help them process the claims. I won't use your email address for purposes other than communicating Bitcoinica-related matters.

Apology

First all, I would like to apologize to all affected users. As many of you know, I'm reaching 18 years old this year, and even though the Bitcoinica venture was extremely exciting and eye-opening for a teenager, I have to admit that I could have displayed a higher level of maturity and professionalism in some matters.

Also, I also have to admit that a lot of the business circumstances were well beyond my scope of understanding. I assure you that I have learned the relevant lessons and I will do a much better job in my next project — NameTerrific.

The "Mt. Gox Hack"

Bitcoinica experienced the third major hack on July 12, 2012. According to Bitcoinica's announcement, 40,000 BTC and $40,000 were stolen.

It's regrettable that the master password of Bitcoinica's LastPass account, which includes the crentials required to access its main Mt. Gox account with all unpaid funds, was found to be the same as one API key in the source code leaked on July 7, 2012.

On July 26, AurumXchange has posted a statement publicly stating some information found in the recent Bitcoinica hack. I was pointed to be an important suspect due to a link of this hack to one of my "sockpuppet" email addresses used for anonymously testing websites. After a short period, I have replied to emphasize this fact and also a possible email hack.

It's important to note that I have never used this email for any official purpose, and it should not be used to identify me personally. The email password was a heavily re-used one because nothing inside was intended to be private.

On the same day, I have posted another statement about my findings of the evidence left in the email account. Chen Jianhai has used a credit card of Chris Heaslip (which was also present in the LastPass account) to place an order on Amazon.com. He was using a freight forwarder address with his real name. Later this order was canceled by Amazon due to fraud.

Chen Jianhai has agreed to return at least $140,000 and 20,000 BTC under the condition that Bitcoinica LP will not start a police investigation about the hack. I have made it clear to him that I will have zero tolerance on this wrong-doing and if the promised amount is not paid back, I will make his identifiable information available to the police, and possibly public.

Fund Recovery

Patrick Murck is an experienced lawyer who is also very familiar with Bitcoin. He was asked by some creditors and stakeholders of Bitcoinica to broker the transactions. I was supposed to be act as an intermediary between the hacker and Patrick Murck to faciliate the recovery of stolen funds.

A great progress has been achieved in fund recovery and we can expect the funds to be returned to Bitcoinica LP, or its creditors as soon as the end of next week.

Liquidation

Tihan Seale, who represents Wendon Group (the limited partner of Bitcoinica LP), released a statement on August 2, 2012 detailing the abandonment of legal duty by Bitcoinica Consultancy, the general partner of Bitcoinica LP.

Mr Seale has confirmed that his investment firm will appoint a legal receiver in New Zealand to return all remaining assets owned by Bitcoinica to creditors, which include all customers with an account balance and/or a position and a verifiable claim. He has also mentioned that all assets subject to Wendon Group's ownership will be contributed to Bitcoinica customers proportionally.

To my best knowledge, Patrick, Donald or Amir has not responded to the above-mentioned statement publicly.

My Personal Appeal

Here, I would like to appeal to the community and all Bitcoinica customers for acting rationally about recent events.

With the accusations from some active parties in Bitcoin community, I have lost a lot of confidence in myself and my life has been significantly and negatively impacted. I'm an Agnostic and a Libertarian who believes in living one's life for others' good, and the accusations are clearly against my value judgement.

Furthermore, there are repeated threats of violence and informal investigations that can put my family, friends and myself into dangerous situations.

Regardless of your stand in the debates, I appreciate your respect. Whether I'm guilty or not, I have closely experienced the power of justice and I can assure you I will hate living a life of a criminal. I deeply believe that I can make good use of my web development skills and business experience into valuable innovations for the society, rather than illegally obtaining properties from other hardworking people.

My Bitcoinica Experience

In my previous post about leaving Bitcoin, I mentioned that I didn't really enjoy the outcome of Bitcoinica:

"I failed at one thing though, that is generating value for the society. Bitcoinica did create a place for people to trade more efficiently and provide liquidity to the market. However, speculation is a zero-sum game (or negative-sum, strictly saying). I know there can be many justifications for Bitcoinica's value, but all of them are against my intuition and values."

I want to make it clear (again) that I stand in line with the interest of Bitcoinica customers because you have made me proud of my creation. Without your support, I wouldn't have moved to Melbourne, and I wouldn't have been so confident about my potential. To me, like it or not, Bitcoinica was a life-changer, and very possibly an opportunity that I would never encounter again in my whole life.

My first major aim in life is to become a millionaire (in US Dollar) by the age of 21. I set this aim when I was 15. Here, I also want to thank Tihan for his wonderful acquisition offer, which contributed to the achievement of this aim (though I still have a lot to go).

Moreover, I have interacted to many Bitcoinica customers personally and I have to say that there's no better way of accumulating business experience. I'm lucky to have known so many high-net-worth individuals in this community and I believe that many of the Bitcoinica customers will be helpful in some ways in my future adventures.

Last Words

So, I have:

lost my job
seen my own baby fail
been stuck in a situation beyond my control
been accused of stealing customer funds
contributed most of my Bitcoin savings into personally compensating customers
thought about committing suicide
never had a satisfied sleep since 3 months ago
lost some confidence
felt insecure and nervous for prolonged periods
affected some friendships
delayed the development of my new project significantly
spent a large amount of time in the 200-page debates
skipped a few classes
ruined my professional reputation in some ways
I'm still surviving after all. There's always hope in life, right?

In these three months, I have learned a lot, and experienced all kinds of human emotions, thoughts and value judgements. In one occasion, I cried over the phone, and my best friend (a 18-year-old student) told me (translated):

"You're already very successful. Not many people can have your experience as a youth entrepreneur, and be such a mature expatriate and global citizen. The reputation damage will at worst make your future successes arrive later, but they will still come to you, because you deserve the successes."

I won't give up. I'm not running away. I'm still here to help you get your precious savings back. I know how important the money stuck in Bitcoinica is to you. It truly means a lot to me.

Meanwhile, I appreciate your support towards my new startup NameTerrific.

Thank you very much for your support. I hope we can all survive this difficult period together. You are welcome to contact me anytime at [email protected].

Best Regards,
Zhou Tong
Founder of Bitcoinica (Yeah, I hate to be the founder.)

There will be legal action against Consultancy members for applicable acts of civil and criminal wrongdoing.

This should remove roadblocks to recovering additional funds.

When the hacker was ready to return 15,000 BTC, that transaction was delayed for days because the Consultancy would not provide a receiving address.

Thankfully, Mr. Murck stepped in as a licensed attorney to broker their receipt. He was subjected to a lot of hazing and invasion of privacy here for doing so. Without him, the coins might never have been recovered.

Those funds and any additional recovered funds will be placed under control of a receiver. This is a formal legal process that will allow Mt Gox et al to release funds to the receiver for distribution.

Quick update. The returned Bitcoins are being moved to an account where the receiver can consolidate funds. Transaction details here: http://blockchain.info/address/1LH6Q1ZXvdQepz8hfQd7kx6XHrggz1VkzD.

More updates to come.

Thanks,
Patrick

MtGox officially confirms currently having on deposit those 15,006.00000000 BTC. As you may know, our system uses a pooled Bitcoin online reserve, which means that activity beyond that point is no longer from Bitcoinica, LP.

We also have disabled the ability to withdraw Bitcoins from the account where those Bitcoins are held to ensure the security of those coins until we receive validated information from an appointed receiver for Bitcoinica, LP.

It is August 2012 and 80 days have passed since Bitcoinica was taken offline following the Rackspace hack. Many of you have followed developments since that time with interest and frustration. The company's investors and I have also been extremely disappointed.

Donald Norman, Patrick Strateman and Amir Taaki accepted responsibility for Bitcoinica on April 24 as Bitcoinica Consultancy and have retained the -only- legal authority to act on behalf of the company. At this time it appears they have abandoned their legal duty.

They now refuse to reply to communication, refuse to acknowledge their responsibility, refuse to resign voluntarily, and refuse to act. In particular they have refused to do anything to recover stolen funds, even where the required action is as simple as providing a payment address. This is now hindering the efforts of others to minimize loss to Bitcoinica's customers.

Clearly, this must end.

Acting in its capacity as creditor to Bitcoinica LP, the Wendon Group investment fund will appoint a receiver under New Zealand law. This has been an option of last resort which is now unavoidable. Under receivership, a licensed and insured specialist will replace the Consultancy as the designated authority. Upon satisfaction of secured creditor interests, the company will proceed to liquidation in which remaining funds are distributed. Without Consultancy cooperation, this is the only ready way forward.

Wendon Group intends to donate any funds it obtains via receivership in favor of Bitcoinica customers. Complete liquidation will likely take place over a matter of months.

While this is not the outcome any hoped for, it is certainly an improvement over the deadlock resulting from Donald, Patrick and Amir's untimely abandonment.

Many have suffered because of the Bitcoinica disaster. Everyone is right to be upset. Since no one in charge has seen fit to offer an apology, let it be me instead. To all those affected, I'm very sorry.


Tihan Seale