Topic: Do you really believe gox has lost 740,000 BTC and has only 2,000 left? - page 2. (Read 8247 times)

Very interesting.

I think you've come up with just about the only way that 740,000BTC number could in any way be connected to reality.  In other words, they've been fractional reserving and 740,000 is their reserve ratio times their actual on-chain loss.  If they were levered 10:1 the numbers start to get believable.

It would also provide a believable explanation for why they knowingly and intentionally drew down their cold wallet to a 0 balance (the bullion banks are doing the same thing right now).

So it's more Madoff than Corzine.

Until the cold wallet was nearly empty?

And nobody noticed this?  Remember, extracting coins from a cold wallet is, by definition, a manual operation that is not automated.  A human being would have to have done this, repeatedly, and not noticed.

Simply does not add up.



That is, by definition, not a cold wallet.  It's just another hot wallet.

By the way, what do you think of the proposed Gox brand for a bitcoin wallet, Bitpocket?

That name may be the single most ridiculous plan listed in the document being circulated. Perhaps it doesn't suggest pickpocket in Japanese.

No, c_r is saying they might have intentionally sold fictitious coins to customers -- in other words, a fractional bitcoin depository. Many users (such as traders) left a lot of real coins on the exchange for long periods, so there was always a sizeable reserve gox could draw against to fill withdrawal requests.

Gox could have injected their own trades into the order book (violating their written promise to never take either side of any trade). They would then pocket the real fiat that had been deposited, and update the "coin" buyers' accounts to show bitcoins which were not actually on deposit. An extensive review of the blockchain (with access to company records) could probably tell whether they actually received all coins that were "held" by accounts.


A simple way would be to create regular trading accounts, held by them, that were credited at some point with fake bitcoin balances ... then using those accounts to trade fake coins for customers' fiat, perhaps via Tor or a VPN. With over a million customers in the database, this might be easy to hide even from any forthcoming auditors. Especially if the software & accounting was as disorganized as it seems.

At least one employee/contractor would realize many "coins" in the system were never in the wallets. That person would have been motivated to hide the imbalance by adjusting the internal bookkeeping software. That takes one line of code (or a handful to obfuscate it well). People later taking over the company could find the discrepancy, though.


So far we have no evidence this happened, and the claim instead is that many coins that were in wallets no longer are.

It does seem an easy theft for any current exchange to do -- except the decentralized ones which are just getting started. Future exchanges can be designed (using multisignature transactions) to give customers full control over their coins and the ability to track them at all times.

Yes but still... how can you not notice that amount?

If you've ever run any kind of website you know there's just no way...

I don't think they lost 740,000BTC in the sense of "they had it" versus maybe they were selling Bitcoins they never really had in the first place. :-/

If you wanted to steal some bitcoins, getting a job at MtGox was definitely the way to go.

I think the rampant obvious insider trading we've seen, along with the leaked documents, and a complete lack of communication point to one very obvious conclusion:  Inside job.  Either Mark himself, or someone on his senior staff was complicit with stealing the 700K coins, and covering it up for so long.

If you can automate it, it is not cold since it is available.
If it is available and automated you could in theory hack it.

The only safe method for a cold wallet is an off-site safe where you go with an encrypted paper wallet. Preferably a bank or other secure location.
The guy transporting doesn't have the password and the dude with the password doesn't have the offline wallet. Password gets saved somewhere else offsite.

My 2 cents

Just viewed the source of mtgox again and I have just seen about 20 lines of code with the phrases "mark" ,"my account id: ,and my correct ip address showing in one of the lines, when i refreshed the page to make a screenshot it was gone and now back to this again:


   
     
   
   
     
   

Oopsie. $10M could actually be believable.

That would not be a cold wallet - but with MtGox anything goes.

This is what SilkRoad2 claimed isn't it??

Thats easy: Suppose they have

• automated withdrawals from cold wallet to hot wallet in case hot has less than X BTC
• automated deposits to cold wallet from hot wallet in case hot has more than X BTC
• due to the malleability problem hot wallet constantly shrinks
• they only check the BTC transactions in their database, and do not double check whether the real BTC holdings are equivalent

Done. With a system like this money from the cold wallet could automatically trickly down into the hot wallet, and nobody noticed anything until it was too late.

We know that they are not a very professional operation.  There are substantive claims that until recently they had very limited development and testing infrastructure and were making a number of patches directly to the production system.  In this environment is it hard to believe that a staff member tasked with continually having to go and retrieve bitcoins from cold storage, instead transferred in large amounts in one go to save himself a few trips?  I doubt it was Mark himself, but someone who was focused on a quick fix and not the cause.

^^ well it said other virtual currency's not litecoin but thats what i translated it as!

Who the hell wrote that?

Part 2: switch off exchange temporarely (1month) --???

What? It's been 12 hours and people are freaking out already.

So they are going to change their name to Gox and get a new CEO and add litecoin and re-openup .. with captial controls? haha My god, what kind of shinanigans st hooplah am i reading..

http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft

When you say $1.3m, do you mean the number in first row, first column? That was the year 2012. 2013-2014 is on the second column, totalling $10m.

Ture, they don't know how to avoid the leaks, technically.


They have, but solving this requires the level of core bitcoin devs, any of these may disclose the current financial status. You can have a trusted guy and a proficient one, but not both. The trusted guys talked with the proficient ones many times to try to solve it without revealing too much details. I am too bad at remembering western names to give you google keywords, but this fact was discussed here before.