Bitcoin Company Mt. Gox Files for Bankruptcy Protection

BitcoinBitcoin’s credibility as a virtual currency has dropped further after leading exchange company Mt. Gox filed for bankruptcy protection. The CEO, Mark Karpeles, has gone into hiding as hundreds of affected people protest outside the headquarters looking for their money.

Around 850,000 units of the virtual currency is missing from the company, including 100,000 of its own. The only explanation Karpeles had was that the money had been hacked and stolen. It has renewed the fears that the currency is not quite safe and needs further regulation. The units amount to around $425 million based on the most recently provided prices, according to USA Today.

Mt. Gox was one of the largest exchanges for Bitcoin, and ceased allowing withdrawals at the start of the month. The company reported some strange happenings with the wallets, and found that preventing withdrawals was the best way to protect the money left and hoped to retrieve any money taken illegally. However, the company suddenly shut down on Tuesday evening without explanation.

USA Today reports that the total debts of Mt. Gox are now at around $65 million, which is much more than the total assets available. This does have to take the value of the currency into account, which has seen a sharp decrease since the closure of the company. It was worth around $1,000 at the end of 2013, but has now dropped to around $430 according to Bloomberg Businessweek.

Bitcoin company Mt. Gox filing for bankruptcy protection has put the life of the currency into some serious doubt. However, it is doubt that some people already had. Taro Aso, Japan’s finance minister, states that he saw the collapse coming. The currency was not viewed as a real one for enough people for its life to be sustainable. He stated this as recently as last Friday, before the news of the company struggling broke. Vietnam has also banned the virtual currency in an attempt to protect its citizens.

Mt. Gox was never originally a Bitcoin exchange site. Before the currency’s debut in 2009, it was a site for trading Magic: The Gathering playing cards. The name of the company is the acronym of Magic: The Gathering Online Exchange. Originally owned by Jed McCaleb, he decided to change the site to one for exchanging the new and upcoming virtual currency, but quickly sold it off to Karpeles to protect himself.

Dave Carlson is one man who has been affected by the closure of the site. He had 1,100 units within an e-wallet there, which had reached a value of $1 million. He kept the money there, even when he saw the collapse coming. He believed that taking the money out would just lead to a quicker collapse. Bloomberg Businessweek now believes that his currency units are worth nothing.

The only way to stabilize the currency is to ensure all exchanges are subject to international regulations, according to vice finance minister for Japan, Jiro Aichi. However, the money would also need to be viewed as a currency, which he does not believe that it is. The filing for bankruptcy protection by Bitcoin company Mt. Gox is just one of the first warning signs that it may not have the life many would have liked.

By Alexandria Ingham

Sources:

USA Today

Reuters

Bloomberg Businessweek

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