Bitcoin skeptics say the silk road bitcoin stolen currency is doomed. Gox shows the agony of an evolving industry without any government oversight and led by tech entrepreneurs with zero financial experience. Gox is blaming a costly computer hack for its current troubles. But in reality, the company was in dire financial straits long before that.
Cash flow issues are to blame, as the exchange balanced a tiny revenue stream with a giant burning hole in its pocket. 380,450 in revenue during most of 2012. But it lost 13 times that the next year, when U. 5 million from its accounts for allegedly lying on bank documents. Such a massive loss would cripple any business, but Mt. It’s still unclear how it could pay its customers — or its bills — after losing so much money.
Ever since, though, customers noticed Mt. Gox was slow to process transactions. That gave it the aura of a Ponzi scheme. Gox and give it your money, but cashing out was near impossible.
The company’s computer programmers hadn’t accounted for a quirk in the way Bitcoin works, allowing cyber attackers to dupe Mt. Gox with a scheme resembling receipt fraud. Share your story: Do you have bitcoins? By the time trading at Mt. Meanwhile it was trading for more than four times that on other exchanges. Gox website was back online Wednesday, but only with a statement saying that the exchange had been closed to “protect the site and our users.
CEO Mark Karpeles also posted a statement saying he was still in Japan and working with “different parties” to resolve the exchange’s issues. Gox’s management potentially lost all of its customers’ deposits to theft is nothing short of gross incompetence. The cyberthieves would have needed to trick Mt. Gox repeatedly — withdrawing money, faking a receipt and demanding yet another withdrawal. Now imagine doing that for a prolonged period — unnoticed — to the tune of millions of dollars and emptying the company’s accounts. The lack of transparency is also astounding. A company with millions of dollars is staying silent about what’s going on.
At most, it offers the occasional cryptic message assuring customers it’s “closely monitoring the situation and will react accordingly. Gox customers are left with more questions than answers: Was Mt. Gox really just an insolvent bank with insufficient reserves? Did it use clients’ incoming funds to pay out exiting ones?
And why the lack of transparency with loyal customers? Gox is based in Tokyo and isn’t subject to the strict controls of Wall Street firms. It also isn’t insured by the Federal Deposit Insurance Corporation, as most standard American bank accounts are. Wednesday on reports that a subpoena had been issued on Mt.