MtGox Announcement Conspiracy Theory - Please Explain?

picobit

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Quote

Misunderstandings and neglect create more confusion in this world than trickery and malice. At any rate, the last two are certainly much less frequent.

—Johann Wolfgang von Goethe

In particular in the case of MtGox, who have repeatedly demonstrated technical incompetence.

EDIT:
Grey's Law: "Any sufficiently advanced incompetence is indistinguishable from malice"

sase007

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More like MtGox Bitcoin bug Cheesy

Basicly - they had bug in their custom Bitcoin wallet program, which allowed to send BTC to one person multiple times if he contacted support...

lorix

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Quote from: stancarrott on February 11, 2014, 09:01:44 AM

How about this:

Say Gox had liquidity issues. Gox suspends BTC withdrawals for period and creates unease in the market. Since they now don't have to hold BTC to cover withdrawal requests, they are free to sell them for $.

When people start worrying, Gox releases a statement pointing the finger the Bitcoin protocol, but is not very informative (they could have said that the issue is known since 2011, their wallets are not coded to handle it correctly and pointed to independent the resources/articles that would have calmed sellers). Gox expects a flash crash with a swift recovery as people realize their statement is misleading and that the problem is far from catastrophic.

So when investors panic sell, thinking the BTC protocol compromised, the price drops & Gox buys. They now have much more BTC - enough to cover all withdrawal requests (and any losses incurred due to the "transaction malleability" issue).

If one were to examine Gox's own BTC movements on the blockchain, I wonder if could you see them taking advantage of the flash crash...

Thanks for the clear explanation, it certainly sounds plausible if the company was having liquidity problems. It also reeks of blatant market manipulation and you are right about the blockchain being possibly revealing of this. I've no doubt that external trading is going on at some point here, any company would as part of it's risk mitigation strategy but the question would be what was the timing of their actions in all this. Is anyone aware of suspicious activity on the blockchain to suggest this may have happened?

stancarrott

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How about this:

Say Gox had liquidity issues. Gox suspends BTC withdrawals for period and creates unease in the market. Since they now don't have to hold BTC to cover withdrawal requests, they are free to sell them for $.

When people start worrying, Gox releases a statement pointing the finger the Bitcoin protocol, but is not very informative (they could have said that the issue is known since 2011, their wallets are not coded to handle it correctly and pointed to independent the resources/articles that would have calmed sellers). Gox expects a flash crash with a swift recovery as people realize their statement is misleading and that the problem is far from catastrophic.

So when investors panic sell, thinking the BTC protocol compromised, the price drops & Gox buys. They now have much more BTC - enough to cover all withdrawal requests (and any losses incurred due to the "transaction malleability" issue).

If one were to examine Gox's own BTC movements on the blockchain, I wonder if could you see them taking advantage of the flash crash...

hilariousandco

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One theory here: https://bitcointalksearch.org/topic/mtgox-story-456740

picobit

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It is far more likely to be incompetence than malice. After all, they probably have more to lose than to gain by crashing the bitcoin price. And the problem they suffer appears to be a likely problem to run into if you are not careful. MtGox does not exactly have a history of technical competence!

lorix

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I've read several posts on here suggesting that the recent MtGox "Bitcoin Bug" announcement was deliberately planned to crash the BTC price.

I'm just trying to wrap my head around how they might profit from such a move - after all wouldn't any price drop mean that the percentage of any fees they collect will be less, thus hurting their own business? I can understand how a company might be citing a known bug in an effort to divert attention away from their own software issues, but the other theories have suggested a profit motive rather than market confidence is the motive here.

Can someone here please provide a clear explanation as to how the situation would allow them to profit, I don't understand how a lower BTC price help anyone here.

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