Mt. Gox: What Happened

It turned out to be a lousy place to squirrel away your savings. Who knew?

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As long as you never did business with it, the recent collapse of Mt. Gox — the Tokyo-based Bitcoin exchange that seems to have lost close to a half-billion dollars’ worth of the virtual currency to hackers — makes for compelling, mordantly funny reading. Robert McMillian of Wired has an excellent piece on how one of the highest-profile pillars of the Bitcoin economy came crashing down. It apparently boils down to bad software and a distracted CEO, Mark Karpeles:

But Karpeles was obsessed with a new project: The Bitcoin Cafe. Inspired by a French bistro, it would be a stylish hang-out located in the same building as the Mt. Gox offices, a very-new-looking building of metal and glass within walking distance of Tokyo’s largest train station. You could drop by for a beer or some wine, and — using a cash register proudly hacked by Mark Karpeles — you could buy it all with bitcoin. When WIRED tried to meet with Karpeles and Mt. Gox at their offices this past October — and a company representative turned us away, saying that legal reasons prevented Mt. Gox from talking to the press — the placard in the lobby of the building already identified the cafe. This company representative said it would open by the end of the year. It never did.

One insider says that Mt. Gox spent the equivalent of $1 million on the cafe venture, renovating Mt. Gox’s office building to Karepeles’ specifications. At a time when Gox’s business was falling apart, this insider says, the project was a major distraction. “[Karpeles] was super-proud of being able to use his hacked cash register with the code he wrote,” this insider says.

I still think there’s a very high chance that Bitcoin, or something like Bitcoin, will eventually have a huge, positive impact on how finance is done. For now, though, I’m happy to sit on the sidelines and gawk.

The Inside Story of Mt. Gox, Bitcoin’s $460 Million Disaster [Wired]