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March 1, 2014

Tokyo bitcoin exchange files for bankruptcy

TOKYO (AP) — The Mt. Gox bitcoin exchange in Tokyo filed for bankruptcy protection yesterday and its chief executive said 850,000 bitcoins, worth several hundred million dollars, are unaccounted for.

The exchange’s CEO Mark Karpeles appeared before Japanese TV news cameras, bowing deeply. He said a weakness in the exchange’s systems was behind a massive loss of the virtual currency involving 750,000 bitcoins from users and 100,000 of the company’s own bitcoins. That would amount to about $425 million at recent prices.

The online exchange’s unplugging earlier this week and accusations it had suffered a catastrophic theft have drawn renewed regulatory attention to a currency created in 2009 as a way to make transactions across borders without third parties such as banks.

It remains unclear if the missing bitcoins were stolen, voided by technological flaws or both.

“I am sorry for the troubles I have caused all the people,” Karpeles, a Frenchman, said in Japanese at a Tokyo court.

Karpeles had not made a public appearance since rumors of the exchange’s insolvency surfaced last month. He said in a web post Wednesday that he was working to resolve Mt. Gox’s problems.

The loss is a giant setback to the currency’s image because its boosters have promoted bitcoin’s cryptography as protecting it from counterfeiting and theft.

Bitcoin proponents have insisted that Mt. Gox is an isolated case, caused by the company’s technological failures, and the potential of virtual currencies remains great.

Debts at Mt. Gox totaled more than 6.5 billion yen ($65 million), surpassing its assets, according to Teikoku Databank, which monitors bankruptcies.

Just hours before the bankruptcy filing, Japanese Finance Minister Taro Aso had scoffed that a collapse was only inevitable.

“No one recognizes them as a real currency,” he told reporters. “I expected such a thing to collapse.”

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