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Demise of Mt. Gox bitcoin exchange threatens virtual currency

Feb. 25, 2014 at 11:57 PM   |   Comments

NEW YORK, Feb. 25 (UPI) -- Mt. Gox, a major bitcoin exchange in Japan, is close to bankruptcy after a recently disclosed theft, various bitcoin-connected companies said.

The exchange's arrival at the precipice of bankruptcy is largely the result of months of technological problems, the New York Times reported Tuesday. But the theft of 744,000 bitcoins that went unnoticed for several years has been a major blow to the bitcoin community, given it represents about 6 percent of bitcoins in circulation, the Times said.

Federal prosecutors in New York sent Mt. Gox a subpoena this month asking the company to preserve certain documents and other things, the Wall Street Journal reported.

Faith in the virtual currency is critical due to the high volatility of its value, which has fallen from more than $1,200 per bitcoin in November to less than $500, the Times said.

Mt. Gox Chief Executive Officer Mark Karpeles has resigned from the board of the Bitcoin Foundation, a non-profit attempting to advance the bitcoin's legitimacy, which most major banks avoid due to its volatility.

The joint statement on Mt. Gox's precarious financial position was issued by executives at leading bitcoin companies Coinbase, Circle, Blockchain.info and Payward.

The "tragic violation of the trust of users of Mt. Gox was the result of one company's abhorrent actions and does not reflect the resilience or value of Bitcoin and the digital currency industry," the executives said.

Bitcoin Foundation officials said they were anticipating Mt. Gox's closure.

"This incident just demonstrates the need for initiatives by responsible individuals and responsible members of the Bitcoin community," said Patrick Murck, the foundation's general counsel.

© 2014 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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