Topic: Poll: Cause of MtGox missing funds? (Read 1293 times)

I think the truth will be a combination of factors including mismanagement, theft (malleability), price manipulation and government intervention.

I know many people here scream Occam's razor. But from my experience with Bitcoinica the rabbit hole goes deeper than you think and things only collapse when the situation has become an unrecoverable entangled mess. Government seizure would explain the majority of the 'temporarily unavailable' coins best imho.

We know the US and Japan governments work very closely when it comes to regulation. Also there are vested interests in MtGox failing:

1) Creating the need for government regulation - more power to DFS in NY. more power to lobby institutions like the BF.
2) Depressing the price so large (Wallstreet) investors can get in at ground 0.
3) Opening up new space for competing U.S. regulated exchanges to fill the void.
4) Creating FUD around Bitcoin to turn the public opinion against a technology that poses a threat to the existing power base.

The SR investigation is ongoing and already led to the seizure of customer BTC accounts in the past. It also led to the arrest of Charlie from BitInstant. And subpoena's to virtually every US business that so much a touches BTC (including Gox). Surely the FEDs had their eyes on Gox for a long time but has largely remained out of reach by virtue of them being based in Tokyo.

However, in May 2013 they were able to seize 3 US based accounts (1 Dwolla, 2 Wells Fargo) from Gox:


I would not be surprised if the FEDs have turned MtGox into a giant honeypot since then so they could actively monitor money flows. (And putting Mark under a gag order possibly issued by FISA in collaboration with the Japanese government). There is a precedent for this in SR where the FEDs also monitored transactions for some time before swooping in and seizing all funds:


Mark also mentioned he stores the cold storage funds as paper wallets in multiple physical locations. I would not be surprised if one of those location would have been in the US. (e.g. a Wells Fargo safety deposit box associated with their seized bank accounts). Mark also mentioned he uses RAID technology to store the private keys, so perhaps he was using split keys. That would mean that Mark has only the first half of his keys, and the FEDs have the 2nd. I.e. neither party can move the coins at the moment. This situation might have existed since May but only escalated recently due to the malleability bug that drained the hot wallet forcing Gox to fall back on cold storage that is frozen.

I could be wrong (and most likely am).

A hypothesis along these lines strikes me as being as strong as any.  I, however, think it most likely that the Coinlab deal was supposed to result in the historic customer activity data landing in the Fed's laps and the retribution for this not happening took place immediately afterwards and was highly effective.  Thus, Mt. Gox has been acting as a honey-pot since the beginning of 2013 rather than the end.  And the Feds have all the data that Mt. Gox kept which is probably a lot.

It seems very unlikely to me that the cold funds were stolen in an ordinary manner since there is no way Karpeles is that stupid and careless, and pretty much inconceivable that they were drained in anything but trivial amounts by the malleability issues.

I'de put the hypothesis tree as so:

 - Mark has lost control of the BTC through extortion
   - by criminals
   - by state actors

 - Mark has lost control through very sophisticated zero-day means (e.g., hardware backdoors.)  This would imply state level action.

 - Mark has control of the coins but is floating a story of some vague theft story to avoid giving up control.

 - Mark has ceded control to a friendly entity do stage a theft for similar reasons.

 - Mark thinks he can get away with simply stealing the BTC and the theft is staged or bogus.

An interesting (and bothersome) thing about having law enforcement work in a covert and secret manner is that it short-circuites all of the traditional justice systems of the U.S.  If information or actions (e.g., stealing/appropriating the BTC) is carried out in a covert manner than it becomes very cumbersome to act on it in public without giving away the methods.

I would not rule out that Mark and the U.S. authorities are working hand-in-glove to invent a story of theft as a means of diverting attention and analysis of the methods that the authorities are employing as they relate to Bitcoin.  For the whole year Marks assertion that he simply cannot talk about certain fairly basic things has been highly awkward.  It literally screams 'gag order.'

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Edit:  One more perfectly viable hypothesis which I forgot to mention:

  - Mark did in fact simply lose access to some cold wallet keys.

I say this because it is actually damn difficult to come up with a scheme which limits loss due to extortion.  I've put many hours into figuring out how to mitigate this threat, and I control nowhere near the BTC that Mark does so his threat surface here is much larger.  Not only that, but a scheme which is subject to loss of keys has the utility of providing a level of plausible deniability which can go a long way towards helping solve certain kinds of problems.