Topic: only $5 million seized from MtGOX - making fears of insolvency ATM SMALL (Read 7136 times)

If gox is in fact in serious trouble, the wiser move for bitstamp would be to put a nail in that coffin rather than skim the transaction fees. All the fees will be theirs if gox is gone.

Recall that June was only a little bit after timely withdrawls began to be a problem, and at the time, Gox issued a statement implying that things would be back to normal on the 4th of July. It's possible that some folks with deep pockets, speculating that everything was about to return to normal, decided to conduct arbitrage prior to actually being able to withdraw their money.

If such a scheme is going on, a consistent tight spread over months would give it away. Sooner or later speculative arbitrage will run out of money, which means the only way to keep the prices equal is a back-channel. Keeping it at 10% or so, in this hypothetical, better matches people's assumptions and gives them less reason to reevaluate.Why would any exchange in their right mind do that? If Gox wants to set up arbitrage to Bitstamp, for example, it's no skin off their nose. On the contrary - it would line Bitstamp's pockets with trade commissions and increase their volume. If Gox is doing this sort of trick, it's in the destination exchange's interest to let it continue. I'm not even convinced that it's unethical - Bitfinex does a similar thing, by "routing" trades to Bitstamp when they're better than the local ones.

I am sorta Bullish about the short term[~2 months] prospects of a price rise due to what's been going on.Irregardless of what people may think concerning Mtgox it is still seen as one of the main price points for BTC and with that fact limiting fiat withdrawal and the only way to get out is to buy BTC leaves me to believe that this price rally will only end when Mtgox is not considered the main exchange anymore.

I believe there's two likely scenarios.

Costs of business:
Employees: at least 20, ~$150,000/month (low estimate)
Office: tokyo (from past photos/videos, seems like pretty nice place) I know their address should be public somewhere, with which can be used to estimate monthly rental costs.
Server costs: ? no clue
Legal fees: ? no clue
Seized funds: at least $4.5 mil

Earnings:
Since March: MagicalTux was quoted in irc claiming a $8 mil earnings since March or April.
Before March: Let's assume $2mil

1. MtGox is becoming insolvent. In my own convo with him earlier this year, he claimed that before the bubble, they were barely breaking even. Writing off the $5mil that that were seized, it would surprise me that the company is overall profitable for the past 3 years. Before you read #2, estimate for yourself a numerical likelihood of this being true (say 70%).


2. Very likely as a last ditch effort, mtgox suspended withdraws. Either premeditated or not, they took advantage of the spread between themselves and other major exchanges and decided to arbitrage the discrepancy.
Supporting observations:
- Gox/bitstamp spread has been *almost* consistently at ~10% since May 15 (day of dwolla seizure)
- Two exceptions are: 1. June, the spread closes. 2. Around 2 weeks ago, the spread went as high as ~20%
So the questions that are hard to answer are:
- Why would the spread be so consistent at 10%, even though it seems more and more likely that gox is in some serious financial trouble? It's been over 2 months, and I'd expect the spread would grow in percentage.
- Why would the spread close in June, even though there were no verification of Gox processing withdraws again?

Added the fact that gox is clearly losing market share and the withdraw suspensions are likely delaying that process.
Liquidity has dropped significantly and general confidence is probably lower, yet rate on bitstamp has actually be following mtgox going up.

Holes in this hypothesis:
Why wouldn't the spread be closer to 1% if gox was arbitraging?
- There's probably a limited amount they are willing or able to trade at any given time. Any other exchange can freeze gox's accounts, ban them, or whatnot if suspected they were doing this. That would put a nail in the coffin. So to avoid getting caught/raising suspicion, gox is limited in its arbitraging opportunities.

Now, if #1 is true, I'd say #2 would almost certainly be true. If Gox is going down:
1. it can go down in flames and with nothing to show,
2. Take everyone's money and run, or
3. it can gracefully go down (relatively) without losing money and without blatantly stealing money.

There is also the problem that having 5M frozen/seized by the government is going to be really harmful to their banking relationships, which could end up hurting them a lot more than the initial seizure.

mt.gox has not been processing withdrawals (usd) for months.

It is not critical to loose 5M for gox - if it were hidden looses. But since they are public it may activate chain panic withdrawals,  which is almost always death for money transmitter business.

Which, in the big scheme of things for company isn't really so bad. It sucks for sure, but if it takes only 1 business quarter to right your ship, then you just suck it up and move on. Not to mention they might get that money back at some point.

I'll admit that I was wrong about some stuff in that post. But as far as Mt. Gox's profit margins, you've got to remember that Mt. Gox makes their money in commissions per volume, and volume has dropped dramatically since April (when most of the bubble activity was going on).

Assuming everyone's paying full fees, and going by the volume from April as seen on bitcoincharts, 8 million sounds about right - they're grossing about 5.5 million from USD, 1.8 million from EUR, and some more change from less popular trading pairs. But, again, that's April. Current volume is like 15-20% of what it was at that time ($75M worth of exchanges in mtgoxUSD), which means that, yes, my $200-800k estimate was wrong. It's more like $1.5M this month.

That still means 3-4 months where all your money is going towards recuperating the cash that was seized.

This is full of a factual inaccuracies.

The 200-800k was calculates very roughly and is likey incorrect. Tux said they made 8mil in April I can't imagein them only making 10% of that last month....

Aso, dwolla account contained approximately 2.9mil, not 5.  The WF account had an additional 2.1 mil. Mark also had a personal account at WF that he was also likely using for customer funds, which we don't know the seized value of.

Yea but that dwolla account did contain trader funds that were on their way to the japanese bank, right? Those funds didn't make it to the bank. So, did Gox credit the traders, at its own expense?

This is not about the money in Japan that is supposedly backing user accounts.

This is about the money in the Dwolla account owned by "Mutum Sigillum LLC" which was being used to process Dwolla withdrawls and deposits. It was seized because Mutum Sigillum LLC is a US company not registered as a money transmitter, but which was acting as a money transmitter by being the middleman between Gox and its customers.

Turns out - apparently - that that Dwolla account only contained $5 million, which means that (putting aside for the moment whatever else might be questionable about Gox's situation) most of the funds are still in their Japanese bank accounts. Of course, at currently reported volumes, Gox is only making like $200k-800k a month, so that's still a troubling loss.

It's a pretty profitable business from what we can tell.  If I was MagicalTux, you would have to pry my cold dead hands off of the helm.  I'm sure they have investors that are pretty tenacious in the face of risk too, given their decision to invest in a currency that is still wading through regulatory muck worldwide.

they are a japanese company. what's so hard to understand? does every company in the world have to abide by USA's arbitrary decisions. please explain your "logic"

am confused. so after gox's money was seized, they still credited trader accounts? that sound's stupid and possibly illegal.

Income of gox is in btc.

I have big respect for gox to continue business under these circumstances.

but gox prolly cant withdraw its own money (not)

however I am beginning to think that gox is fractional reserve USD and BTC....

I struggle to buy this can't withdraw usd any more"....its not plausible for some claiming xx million profit.

updated

No they wouldn't. What company does that, ever? Owners/boards prefer not to operate like an open book. And Gox obviously doesn't want to invite the world to watch them bleed their business from the inside out any more easily than it already can by watching trade volume.

Bullseye.


The thing is, their 'clients' didn't enter their Business relationship voluntarily. In principle you are right and it even sounds much to ask from a common business perspective (even for gox)
However I think we can and should set a higher standard. After all this is supposed the future of finance, isn't it?