Topic: URGENT: What is next and legitimate on MtGox after the security issue? (Read 7839 times)

I have proof that names and bank accounts were compromised. MtGox did not answer my request for clarification on this matter,

What happens with stock exchanges is completely different.  There is a period of time over which the trade is, for lack of a better term [since I don't know what the term is], held proxy.  Depending upon the brokerage, if you buy a stock in the morning and then sell it in the afternoon, there is often a fee or a potential fee associated with that.  Bitcoin doesn't work that way and can't work that way [there is no such thing as a transaction reversal ... just a new transaction that where a trade could be opposite of the original thus leaving a net of 0BTC changing hands].  Even with a brokerage, your stock is available for sale immediately.  Unless an exchange requires you to leave your BTC and USD from trades in their exchange for a period of time to supposedly mitigate something like the crime that occurred, they can't solve that problem.  I for one do NOT trust my funds (BTC or USD) in Mt.Gox or really any exchange for any period of time.  I have been given every reason NOT to trust it to be held safely and every reason to move funds in and out as quickly as possible.


With high volume, we see how fast that can be done.  Volume is only going to increase.  Sorry, case by case is not a solution.


Clearly people did since they have a claims page setup.  Also, private information was lost which is a clear breach of trust, and it was done via a breach of a security auditor's computer?!  Even if true, which I have significant doubt about, that auditor will NEVER have another client again.  The effect on the market is damage to some and benefit to others.  You claim they should know better.  How do you know that bitcoin isn't collapsing when you see something like this happening [say the government steps in and shuts down key network points to stop bitcoin trading and mining].  Nobody knows whether bitcoin will grow to a feasible online currency or go bust like previous virtual currencies.  It is riskier than the stock market BY FAR if you are investing money in it.  Tangible losses?  At least one person lost approximately $1000 worth of BTC it sounds like [at what USD price ... how many coins?].  It looks as if several accounts were used, so it seems several accounts suffered a loss.

I suggest you dont use bold text for your main text, as it makes it difficult to read.

Bitcoin-central wasn't effected, as far as I can see.  But this is not the point.  Any exchange would have done the same if a criminal got illegal access to a brokers funds, and sold them all to manipulate prices and create havoc in the market. The only difference is that most normal stock exchanges would halt trading automatically and investigate the situation as a soon as there was unusual activity with no known reason.  MtGox should behave like any other responsible exchange, and nullify the affected trades.  Other exchanges roll back trades more often than you think.  Even Bitcoin exchanges.  It has happened on Bitcoin-Market and Bitcoin7, at least.  Hopefully MtGox will implement a few safeguards for later as well, and pause trading for a while to investigate when it gets to hot.

Of course there are complications, which would have to be handled on a case to case basis.

Did anyone lose anything?  People who traded at a loss on other exchanges based on a sudden change from 17.5 to 0 on mtgox should know better, IMHO.  I don't think you will many, with the exception of mtgox, who actually lost money on the rollback.  More likely a lot of people suffered a loss due to the unusual buying and withdrawals from stolen accounts during the previous days, but this would be impossible to prove.

veldy, thanks for a competent opinion!

Nah ... MtGox, in the U.S. as Mutum Sigillum LLC, would simply go bankrupt and pay what it could via the few lawsuits that resulted in awards.  There is no crime here [on the part of MtGox, at least not that I am aware of], and thus, it would be difficult to prosecute anyway.  It would almost certainly be a civil case as opposed to a criminal case.  Same probably goes for Japan, but I don't know how similar their legal system is to ours and how many people would sue them in Japan.  So, either MtGox survives and comes back [in some form large or small], or they close up, but as for legal; I think it would cost most people more than they would recover [in most cases probably hundreds of times more].  Of those remaining, the cases could be tied up for years if defended, but I think, legal or not, MtGox would likely just throw in the towel and pay until they fold rather than lawyer up and fight ... it is just two guys and an extremely sloppy and incompetent security analyst [supposedly .. never heard of the analyst until after it was suggested that they should have used one and after they blamed the breach on one ... anybody know who this analyst is?].  As an LLC with no criminal wrong doing [as far as I see it .. rolling back is unethical in my opinion], they are only liable for the assets of their company and not the assets of the share holders [owners] which is likely few or even one person.

@1. If a trade is proven illegitimate it is perfectly fine for the exchange to rollback, to reduce the losses for everyone (including them).
@2. There were a few "halts" at the different exchanges which gave ppl time to cancel their limit orders. So IMO nothing happens.
@3. Mtox should CLEAR the entire orderbook before enabling trading again, otherwise it will screw anyone who had orders before it got halted (fundamentals have changed).

MtGox has made obscene amounts of money by running an insecure primitve exchange website. All losses should be covered by MtGox, not other parties.

I am against and for none of the reasons that you mention.  It is wrong to reverse honest trades (all other exchanges were affected and are not rolling back trades, nor should they.  It is an ethics breach.  I think half of the people that traded will be happy about it (thinking purely about the bottom line) and the other half unhappy.  Further there are significant complications around trades that occurred and bitcoin proceeds immediately withdrawn (which is what I always do).

Mtgox should simply pay the victim(s) back for their losses and be done with it (and take their lumps).  The market properly reacted to an event that occurred.  No different than other toys of exchanges (I was one of those that lost a lot of money when Tyco (the company, not Tycho the man) was busted by the SEC.  Some people received restitution via legal means and similar, but I wasn't one of them.  There was nobody to reverse my trades and if there was, who would the victim be then?

Look, I am not saying that rollbacks good or bad. I do not know this. I am just saying that this all will end in tears, either way, and lawyers will have a "field decade" over this.

I think the rollback is the right way to do things, I think a good portion of the people who are against it got orders in for <1 USD/BTC and are upset they didn't strike it rich like they thought they would

Did they lose anything? No, did people who sold lose anything? No, did people who bought immediately before it crash lose anything? No. No one lost anything, no one gained (well, some people did, whether moral or not I'm not sure, I wouldn't feel right having done it, but that's me) anything (sales/buys alone, not counting withdrawals)

I guess they could try, but if I was on the jury I'd definitely find in favor of the defendant. They bought stolen money. If you bought a stolen credit card, you don't get to sue Visa for shutting the card off.

Rollbacks will cause lots of legal issues down the road. Someone who bought 100 BTC at 3$ and got rolled back might not find it viable to file lawsuit in Japan now, but once BTC hits 100$ these people all of the sudden will find money for lawyers.

Chances are that Mt.Gox will be haunted by lawsuits for years should they decide to continue shifting their liabilities and risks to users and traders.

@bitdragon, note that the normal exchanges to get that kind of flexibility to null and void trades make all market participants to sign hundreds of pages worth of small script in contracts and other paperwork. How many pages in mtgox contracts and terms and conditions? Right, just about 0, isn't it?

From my point of view it looks like they have no qualified legal counsel at all.

I'd like to see each exchange continue to be free to operate in whatever way they see fit, and let the customers decide. If they can catch a crook, and prove he did it - great.

As for me, this whole thing proved my suspicions that mtgox was too big for this stage of the game, and in relation to their competition. They were either going to be a target for TPTB, or they actually were already co-op'd. Either way, I was out.

There are a whole bunch of other exchanges - most of them are better than mtgox. People should do themselves a favor and use them.

And I still don't think even that should be "reversed".  MtGox can choose to pay for the damages to the victims.  It can choose to go after and possible catch the thief/thieves and maybe even get the bitcoins returned [or perhaps a fiat currency equivalent].  These are new trades [although, perhaps unwilling if it is the thief giving back his loot] and remain part of the market.  Even in highly regulated trading environments, things like this occur.  The housing bubble and the trading of exotic derivatives [who the hell wants to buy bad debt ... but they do! ... they gamble that they will sell it at a profit before getting stuck and burned by the hot potato], the Enron collapse, and the list goes on.  All of these are because of dishonest and greedy people.  Many in the market will suffer for it; many may gain as well.  It is the nature of markets and the risks of participating [which in the case of the nation that you live in the fiat currency daily business is done it, you have very little choice ... you still suffer from bubble bursting recessions and benefit from times of growth [reasonable or artificial]. 

If there is no trading exchange .. or people simply don't trade in exchanges, then an already [relatively] small "economy" becomes very many micro economies and will simply stagnate potentially die since nobody would have any reference to bitcoin value.  The bitcoin exchange, which MtGox can be applauded for starting, was a necessary adaption to the needs of the free market of the bitcoin economy and played a big part taking it to the next level.  Additional exchanges [perhaps some that only do small amounts, or only large amounts .. or some niche that needs to be filled] will naturally form and evolve.  TradeHill is certainly different than MtGox and yet performs largely the same central functions with significantly different [or perhaps additional] peripheral functions.

Trading is essential and it won't stop because of or in spite of MtGox.  As is the case with all economic events, good, bad and ugly, they benefit the market in some way and that is to harden it, allow it to adapt and evolve [not so different than Darwinism]; people learn from it, adapt to it and protect it as a natural result of their participation (and thus personal interest) in the market.

I don't think that's necessary for anyone but the person who actually had their bitcoins stolen.

i go even further and say 'don't use any exchanges at all, at present'.

but for people who have, it's important they understand that they're not merely at the whims of mt. gox. they have other options, from public pressure to lawsuits to dwolla/bank chargebacks.

I say don't use them, or at least don't leave too many bitcoins on their site. Use their competitors.

right, the governing law is unclear, but at least contract law would apply. japan is a signatory to the CISG, too, so if bitcoins are treated as 'goods' (an open question under the relevant law) then the contractual relationships between bitcoins and its users will be governed mostly by that body of contract law, which is quite sensitive to trade usage and custom.

mt. gox cannot simply do as it pleases, unless it hopes to escape all regulation and private lawsuits.

the calls like 'mt. gox should be arrested' are obviously too extreme, but i think many people would be a lot more comfortable if mt. gox were investigated or at least if it were able to verify some of its claims. it has proposed taking a course of action unilaterally that, for all anyone knows, merely serves mt. gox's private interests. the people raising hypothetical questions like 'how do we know the hacked account was mt. gox's?' and 'how do we even know the account was hacked?' are asking the right sort of conceptual questions.

i'm not condoning particular conspiracy theories, but it doesn't take an especially cynical mind to avoid giving blind faith to an oligopolistic foreign exchange whose regulatory status is unclear, which allowed accounts to be compromised and sensitive customer data leaked, and which has not put forward a complete and consistent story of the events that justify its proposed unilateral decision to cancel trades.

with each new thing they say, i am less and less impressed with their response to the situation, particularly their unfounded accusations that the 'hacker' and one of the beneficiaries of trades with that hacker were coordinating their efforts. (if that is true, the case for a rollback would be very strong, but mere allegation is obviously not proof.)