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Mt. Gox Knew It Was Selling Phantom Bitcoin 2 Weeks Before Collapse

timothy posted about 8 months ago | from the but-y'know-what-the-heck dept.

The Almighty Buck 263

An anonymous reader writes "Mt. Gox CEO Mark Karpeles wrote in a sworn declaration in the company's U.S. bankruptcy filing he suspected hundreds of thousands of bitcoins were missing on Feb. 7, more than two weeks before it finally halted trading. That means Mt. Gox allowed its customers to continue trading, knowing that its bitcoin stash was wiped out and collecting as much as US$900,000 in trading fees. Since Mt. Gox said it was also missing $27.3 million in cash from customer deposits, it raises the possibility that customers — despite seeing a cash balance displayed in their account — might have actually been buying bitcoins that did not exist, with cash that was already long gone."

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dark matters render onto series continues.. (0)

Anonymous Coward | about 8 months ago | (#46476001)

give us your money & your life? http://rt.com/usa/trader-suicide-nyc-financial-community-618/

Phantom? (0, Offtopic)

Anonymous Coward | about 8 months ago | (#46476003)

I think you misuse. BC IS PHANTOM!

Bitcoin (5, Insightful)

roninmagus (721889) | about 8 months ago | (#46476033)

I'm all for what bitcoin is trying to achieve. But this is just a news story about an exchange which didn't know what it was doing, trading in a currency that hasn't been fully proven, operating in an unknown capacity from somewhere in Japan, and without any oversight at all. That's like millions of people asking my buddy Joe who lives in a trailer to hang onto their money for them. Oh no, bad decisions were made?

Re:Bitcoin (5, Interesting)

interkin3tic (1469267) | about 8 months ago | (#46476135)

Yeah, those fools should have definitely given their money to the pros. [wikipedia.org]

You know what, that's too much sarcasm for me to fart out at once. This sounds essentially like the subprime mortgage crisis. And a lot of other banking crises. It doesn't seem totally insane to me to trust your friend Joe in a trailer over the banking industry: when he runs off with my money, at least he might go to jail rather than getting millions in rewards.

Re:Bitcoin (2, Interesting)

DarkOx (621550) | about 8 months ago | (#46476319)

^^ This what all the "see you do need regulations, I told you so" crowd does not get.

A cheat is a cheat is a cheat and they will cheat you using unregulated BitCoins, just the same way they will cheat you using regulated dollars.

It isn't as if regulations create some magical inviolate barrier. Madoff ran a ponsi scheme masquerading as a hedge fund with SEC reporting requirements and everything. Much of the monies were never recovered. The subprime crisis is another example the brokers just faked all the paperwork and wrote the liar loans.

The only differences in the end is possibly if someone goes to jail or not. FRAUD however is still a crime even if there are no specific securities statues that apply to BitCoin. So these guys certainly could be charged as criminals too. This has NOTHING to do with regulations.

Re:Bitcoin (4, Insightful)

evilbessie (873633) | about 8 months ago | (#46476515)

Is fraud not specifically doing things against regulations? Without any form of regulation at all it wouldn't be fraud. The SEC are the police but they are paid by the people they police, if not actually being the same people. Bad policing of regulation isn't a problem with the regulations and to draw such comparisons hides the nature of the problem.

Re:Bitcoin (4, Insightful)

Ralph Wiggam (22354) | about 8 months ago | (#46476629)

Madoff ran a ponsi scheme masquerading as a hedge fund with SEC reporting requirements and everything.

Hedge funds are a notoriously unregulated part of the finance industry. The reporting requirements are minimal.

Re:Bitcoin (2)

Frosty Piss (770223) | about 8 months ago | (#46476661)

Hedge funds are a notoriously unregulated part of the finance industry. The reporting requirements are minimal.

Bitcoin is a notoriously unregulated part of the finance industry. The reporting requirements are minimal.

Re:Bitcoin (0, Troll)

Dagger2 (1177377) | about 8 months ago | (#46476889)

Case in point, Mt Gox also lost a significant amount of USD balances. Apparently the regulation surrounding the dollar didn't actually help much.

Re:Bitcoin (1)

Anonymous Coward | about 8 months ago | (#46476997)

Whatever. Fraudulent securities are a tiny portion of all investments. You or I could not have invested with Madoff even if we wanted to.

Meanwhile the majority of Bitcoin exchanges and online wallets have turned out to be scams (or were "hacked"). Matter of proportion.

Re:Bitcoin (1)

Darinbob (1142669) | about 8 months ago | (#46476357)

The banking crises hurt many more people moderately, but overall their stupidity wasn't as deep as some startup exchanges. There's a difference between an industry that's regulated but which tries every possible way to avoid regulations, and a group that doesn't even know if regulations apply to it or not. Even in the very bad banks, they will know if a customer fails to pay their fees, and if they sell items that they do not own then they are doing it on purpose rather than through ignorance.

Re:Bitcoin (5, Insightful)

rudy_wayne (414635) | about 8 months ago | (#46476375)

Yeah, those fools should have definitely given their money to the pros. [wikipedia.org]
You know what, that's too much sarcasm for me to fart out at once. This sounds essentially like the subprime mortgage crisis. And a lot of other banking crises. It doesn't seem totally insane to me to trust your friend Joe in a trailer over the banking industry: when he runs off with my money, at least he might go to jail rather than getting millions in rewards.

As much as people (including me) like to hate on banks, when was the last time you actually lost money? When was the last time you put money in a bank and they "lost" all or part of it? When was the last time you put money in a bank and lost all or part of it because the bank was robbed?

Re:Bitcoin (1)

Anonymous Coward | about 8 months ago | (#46476681)

As much as people (including me) like to hate on banks, when was the last time you actually lost money? When was the last time you put money in a bank and they "lost" all or part of it?

Iceland would be one example,

http://en.wikipedia.org/wiki/2... [wikipedia.org]

Re:Bitcoin (0)

Anonymous Coward | about 8 months ago | (#46476743)

If you deposit money in a bank, you are guaranteed to lose purchasing power. The interest never covers inflation.

Re:Bitcoin (0)

Anonymous Coward | about 8 months ago | (#46476747)

My parents lost upwards of 40 grand when the market died. I've been steadily robbed by banks changing their own rules to grab overdraft fees by turning in huge checks first then using the out of order smaller checks to jack up the total overdrafts.

Just 'cause it's legal, doesn't mean it's moral.

Re:Bitcoin (1)

Anonymous Coward | about 8 months ago | (#46476873)

In 80 years, nobody in the US has lost money that was in a bank. 'The market' is not a bank.

You write bad checks, then complain that the BANK is immoral? Good one!

Re:Bitcoin (2)

BasilBrush (643681) | about 8 months ago | (#46476781)

Thanks so much for the very interesting chart. It's most interesting feature is the remission from banking crises during the time of the Bretton Woods system.

Turns out that the way to avoid banking crises is to have fixed exchange rates, and more regulation.

The recent banking crisis was caused by a long standing trend towards less regulation. And worse the stupidity of the belief that they could regulate themselves.

The Falsification of Evolution (-1)

Anonymous Coward | about 8 months ago | (#46476215)

Any theory that does not provide a method to falsify and validate its claims is a useless theory.

Example; if someone said a watermelon is blue on the inside, but turns red when you cut it open, how could you prove them wrong? How could they prove they're right?

You couldn't and they can't. There is no method available to confirm or disprove what was said about the watermelon. Therefore we can dismiss the theory of the blue interior of watermelons as being pure speculation and guess work, not science. You can not say something is true without demonstrating how it is not false, and you can not say something is not true without demonstrating how it is false. Any theory that can not explain how to both validate and falsify its claims in this manner can not be taken seriously. If one could demonstrate clearly that the watermelon appears to indeed be blue inside, without being able to demonstrate what colors it is not, we still have no absolute confirmation of its color. That is to say asserting something is the way it is, without being able to assert what it is not, is a useless claim. Therefore, in order for any theory to be confirmed to be true, it must be shown how to both validate and falsify its claims. It is circular reasoning to be able to validate something, without saying how to falsify it, or vice versa. This is the nature of verification and falsification. Both must be clearly demonstrated in order for a theory to be confirmed to be true or false. Something can not be proven to be true without showing that it is not false, and something can not be proven to be not true, unless it can be proven to be false.

Unfortunately, Darwin never properly demonstrated how to falsify his theory, which means evolution has not properly been proven, since it has never been demonstrated what the evidence does not suggest. In the event that evolution is not true, there should be a clear and defined method of reasoning to prove such by demonstrating through evidence that one could not possibly make any alternative conclussions based on said evidence. It is for this reason we must be extremely skeptical of how the evidence has been used to support evolution for lack of proper method of falsification, especially when the actual evidence directly contradicts the theory. If it can be demonstrated how to properly falsify evolution, regardless if evolution is true or not, only then can evolution ever be proven or disproved.

It will now be demonstrated that Darwin never told us how to properly falsify evolution, which will also show why no one can claim to have disproved or proven the theory, until now. It must be able to be demonstrated that if evolution were false, how to go about proving that, and while Darwin indeed made a few statements on this issue, his statements were not adequate or honest. In order to show Darwin's own falsification ideas are inadequate, rather than discussing them and disproving them individually, all that needs to be done is demonstrate a proper falsification argument for evolution theory. That is to say if the following falsification is valid, and can not show evolution to be false, then evolution theory would be proven true by way of deductive reasoning. That is the essence of falsification; if it can be shown that something is not false, it must therefore be true.

So the following falsification method must be the perfect counter to Darwin's validation method, and would therefore prove evolution to be true in the event this falsification method can not show evolution to be false. As said before; if something is not false, it must therefore be true. This would confirm the accuracy of this falsification method, which all theories must have, and show that Darwin did not properly show how evolution could be falsified, in the event that evolution was not true. In order to show evolution is not false (thereby proving it to be true), we must be able to show how it would be false, if it were. Without being able to falsify evolution in this manner, you can not validate it either. If something can not be shown to be false, yet it is said to be true, this is circular reasoning, since you have no way of confirming this conclusion. Example; If we told a blind person our car is red, and they agreed we were telling the truth, the blind person could not tell another blind person accurate information regarding the true color of the car. While he has evidence that the car is red by way of personal testimony, he has no way of confirming if this is true or false, since he might have been lied to, regardless if he was or not.

So one must demonstrate a method to prove beyond any doubt that in the event that evolution is not true, it can be shown to be such. To say evolution is true, without a way to show it is false, means evolution has never been proven to be true. If evolution be true, and this method of falsification be valid, then by demonstrating the falsification method to be unable to disprove evolution, we would confirm evolution to be right. Alternatively, if the falsification method is valid and demonstrates that Darwin's validation method does not prove evolution, then evolution is false indeed.

Firstly, the hypothesis. If evolution is incorrect, then it can be demonstrated to be so by using both living and dead plants and animals. The following is the way to do so and the logical alternative to the theory. The fossil record can be used as well, but not as evolution theory would have us believe. In order to properly falsify something, all biases must be removed, since assuming something is correct without knowing how to prove its false is akin to the blind person who can not confirm the color of someones car. Since evolution has not correctly been shown how to be falsified, as will be demonstrated, we must be open to other possibilities by way of logic, and ultimately reject evolution by way of evidence, should the evidence lead us in such a direction.

If evolution be not true, the only explanation for the appearance of varied life on the planet is intelligent design. This would predict that all life since the initial creation has been in a state of entropy since their initial creation, which is the opposite of evolution. If this be true, then animals and plants are not increasing in genetic complexity or new traits as evolution theory would have us believe, but are in fact losing information. This would explain why humans no longer have room for their wisdom teeth and why the human appendix is decreasing in functionality. The only objection to this claim that evolution theory would propose is that evolution does not always increase the genetic complexity and traits of an organism, but rather, sometimes decreases them as well. This objection is only made because we have only ever actually observed entropy in living creatures, which suits the creation model far better than evolution, which shall be demonstrated.

If the creation model is true, we can make verifiable predictions that disprove evolution. For example; the creation model states that life was created diversified to begin with, with distinct "kinds" of animals, by a supernatural Creator that did not evolve Himself, but rather always existed. Without going into the debate on how such a being is possible to exist, it must be said that either everything came from nothing, or something always existed. To those who say the universe always existed; the claim of this hypothesis is that the Creator always existed, which is equally as viable for the previous logic.

In order to demonstrate that the Creator is responsible for life and created life diversified to begin with, the word "kind" must be defined. A kind is the original prototype of any ancestral line; that is to say if God created two lions, and two cheetahs, these are distinct kinds. In this scenario, these two cats do not share a common ancestor, as they were created separately, and therefore are not the same kind despite similar appearance and design. If this is the case, evolution theory is guilty of using homogeneous structures as evidence of common ancestry, and then using homogeneous structures to prove common ancestry; this is circular reasoning!

The idea of kinds is in direct contrast to evolution theory which says all cats share a common ancestor, which the creation model does not hold to be true. If evolution theory is true, the word kind is a superficial label that does not exist, because beyond our classifications, there would be no clear identifiable division among animals or plants, since all plants and animals would therefore share a common ancestor. The word kind can only be applied in the context of the creation model, but can not be dismissed as impossible due to the evolutionary bias, simply because evolution has not been properly validated nor can it be held to be true until it can correctly be shown to be impossible to falsify.

One must look at the evidence without bias and conclude based on contemporary evidence (not speculation) if indeed evolution is the cause of the diversity of species, or not. It must also been demonstrated if the clear and distinct species do or do not share a common ancestor with each other, regardless that they may appear to be of the same family or design. In order to verify this, all that needs to be done is to demonstrate that a lion and cheetah do or do not have a common ancestor; if it can be demonstrated that any animal or plant within a family (cats in this case) do not share a common ancestor with each other, this would disprove evolution immediately and prove supernatural creation of kinds.

However, since lions and cheetahs are both clearly of the same family or design, and can potentially interbreed, we must be careful not to overlook the possibility of a very recent common ancestor If such is the case, this does not exclude the possibility that the two are originally from two separate kinds that do not share a common ancestor previous to them having one. It is therefore necessary to build an ancestral history based on verifiable evidence (not homogeneous structures in the fossil record) that can clearly demonstrate where exactly the cheetah and the lion had a common ancestor. If no such common ancestor can be found and confirmed without bias, and this test is performed between two or more of any plant or animal life without ever finding anything to the contrary, we can confirm with certainty evolution did not happen, and that kinds do exist.

In the event that fossils are too elusive (compounded with the fact that they can not be used as evidence of common descent due to circular reasoning e.g. homogeneous structures), then there is a superior and far more effective way to falsify evolution. Evolution states by addition of new traits (new organs, new anatomy) that the first lifeforms increased in complexity and size by introduction of new traits, slowly increasing step by step to more complex life forms. Notice that the addition of such traits can not be attributed to the alteration of old ones, for obvious reasons, since detrimental or beneficial mutations are only alterations of already existing traits, and can not account for an increase in the number of traits any given life form possesses.

That means a bacteria becoming able to digest nylon is a mere mutation of already existing digestive capabilities, and can not be classified as an increase in traits. Evolution theory would predict that the process of gradual change and increase in traits is an ongoing process, and therefore should be observable in todays living animals and plants through new emerging traits that any given plant or animal did not possess in its ancestry. Those who say such changes take millions of years and can not be observed today only say so because no such trait has ever been observed to emerge or be in the process of emerging in contemporary history, which is what the creation model predicts. If evolution theory be true, we would expect that at least one animal or plant would contain a new trait or be in the process of growing such a triat over its known common ancestors (that is not simply a multiplication or alteration of a trait it already had).

At this point, the fossil record can not be used as evidence to prove that evolution can produce new traits due to the fact that two animals that appear to be of the same family (T-rex and Brontosaurus, dinosaurs), while they do indeed exhibit distinct trait differences, may not have a common ancestor, but rather were created differently with all their different traits. It is therefore of paramount importance to show a single instance of such an increase of traits exists within a provable ancestry (stress provable) in contemporary times, and not assume anything concerning where the traits in the fossil record owe their origin. If it can not be shown that any animal or plant living today (or very recently deceased) exhibits any trait variance that can clearly and thoroughly be proven to be a new addition over its (stress) provable ancestors, compounded with the reasoning that two similar animals (such as a penguin and a woodpecker) do not necessarily or provably share a common ancestor, then evolution is clearly absent entirely, and supernatural intelligent design and creation is thereby proven beyond all reasonable doubt.

In conclusion, should any two animals or plants within a family (a palm tree and a coconut tree) be proven to not share a common ancestor, or if no provable increase of traits can be demonstrated to be in its beginnings or actively present in the animals and plants living today over their provable ancestry, then The Bible is correct when it says God created all the animals and plants as distinct kinds with their traits to begin with. This is the only way to falsify evolution, and it is amazing (and convenient) that Darwin never encouraged people to attempt to falsify his theory in this manner.

Re:The Falsification of Evolution (1)

khallow (566160) | about 8 months ago | (#46476593)

Ok, I get that you don't like Beta.

Re:Bitcoin (2, Insightful)

jhol13 (1087781) | about 8 months ago | (#46476233)

I'm all for what bitcoin is trying to achieve.

I'm not. Actually I do not know what it is trying to achieve, but "unregulated" and "not backed up by anything" are certainly not what I am after.

But this is just a news story about an exchange which didn't know what it was doing, trading in a currency that hasn't been fully proven, operating in an unknown capacity from somewhere in Japan, and without any oversight at all.

I think they knew what they were doing. I think the currency is proven - to be faulty. I think the "achieve" part means "no oversight at all" so you are already contradicting yourself.

That's like millions of people asking my buddy Joe who lives in a trailer to hang onto their money for them. Oh no, bad decisions were made?

What you "bitcoin people" seem to want is anymous (i.e. can buy drugs without getting caught) which can be easily transferred (i.e. no exchange can steal or stop you) backed up (i.e. you cannot lose your money - just win with it) non-government (i.e. not backed up ...), non-fiat (i.e. er, I have no clue) money.

Then someone makes "cryptographic mathematically proven" - and you expect that to mean it holds all above. You fail to understand that money has just one necessary condition: majority of people trust it - mostly because the country they live in would collapse without it, and the persons backing it up knows this and you know they know.

Re:Bitcoin (1)

Anonymous Coward | about 8 months ago | (#46476365)

Regulations and backing have worked so well in the past... Nothing like this has EVER happened to any world currencies..

Re:Bitcoin (1)

Darinbob (1142669) | about 8 months ago | (#46476261)

Bitcoin has its own share of bad flaws. The exchanges just compound the problems. Overall it's about a community not really knowing what they're doing, sort of like your buddy Joe in a trailer hording his stash of State of Jefferson dollars that he uses to invest in hog bung futures.

Re:Bitcoin (1)

JaredOfEuropa (526365) | about 8 months ago | (#46476513)

The community seemed to be on to them; rumours about that exchange have been floating around for ages, and they apparently already had a bad payment history. The market was doing its work just fine, factoring in risk and the trustworthiness of the exchange, with BTC trading for $100 at MtGox and $500 everywhere else.

Re:Bitcoin (0)

Anonymous Coward | about 8 months ago | (#46476921)

*Some* of the community was onto them. However there was a ton of other people telling everyone things were fine, because they were in IRC with Karpeles or whatever, and GoxCoins were actually an "investment" opportunity. The problems were not that apparent until it was too late and few people could get their money out.

Currencies aren't sentient (1)

sjbe (173966) | about 8 months ago | (#46476421)

I'm all for what bitcoin is trying to achieve.

Bitcoin is a currency. It cannot try to achieve anything. As for the people behind bitcoin, it's extremely unclear what they are trying to achieve and not all of the possibilities are harmless. I can very easily make an argument that bitcoin looks like merely the latest version of a pump-and-dump scheme. The exchanges look a lot like pyramid schemes. Most of the arguments supporting bitcoin show a shocking lack of understanding of economics and how and why currencies actually work. I see a lot of credulous arguments in support of bitcoin that make me worry that many of the supporters are FAR too trusting and will be taken advantage of.

Re:Bitcoin (1)

Above (100351) | about 8 months ago | (#46476435)

Perhaps "money" is more than just the coins, paper, or bits that represent some units, and actually only has value when it is in a predictable and stable system. Who knew!

Re:Bitcoin (0)

Anonymous Coward | about 8 months ago | (#46476863)

He puzzled and puzzed till his puzzler was sore. Then Above thought of something he hadn't before. Maybe bitcoin, he thought... doesn't come from a store. Maybe bitcoin, perhaps... means a little bit more!

Re:Bitcoin (1)

Anonymous Coward | about 8 months ago | (#46476539)

I'm all for what bitcoin is trying to achieve. But this is just a news story about an exchange which didn't know what it was doing, trading in a currency that hasn't been fully proven, operating in an unknown capacity from somewhere in Japan, and without any oversight at all. That's like millions of people asking my buddy Joe who lives in a trailer to hang onto their money for them. Oh no, bad decisions were made?

Not a single part of your statement here regarding bitcoin investing is any less risky than investing in the stock market backed with USD, which ironically is where most people put their retirement nest egg.

Bad decisions are made all the time, regardless of denomination. In this sense, it was sheer ignorance that allowed the word "gambling" to be replaced with the word "investing". But, time has shown that this is how suck, er, I mean "investors" are born.

Re:Bitcoin (1)

Comrade Ogilvy (1719488) | about 8 months ago | (#46476913)

Not a single part of your statement here regarding bitcoin investing is any less risky than investing in the stock market backed with USD, which ironically is where most people put their retirement nest egg.

You are employing a double standard in an attempt to create a false equivalence. For the dollar, the general stockmarket, the US GDP, dropping more than 10%-20% is an unusual event. It is not perfectly safe, but it is very safe if you are willing to accept a modest amount of downside risk. In contrast, we see extreme hyperinflaction and hyperdeflation all the time, and the bounds of risk are clear as mud.

Re:Bitcoin (1)

ShanghaiBill (739463) | about 8 months ago | (#46476725)

But this is just a news story ...

... and not a very good news story. It uses "suspected" and "knew" as interchangeable synonyms.

Re:Bitcoin (1)

JoeMerchant (803320) | about 8 months ago | (#46476839)

In other news, CEO of a multi-million dollar crypto-currency bank/trading house decides to gather information for a few days before halting trading based on a suspicion that something might be wrong.

Oh, wait...

Interesting... (4, Insightful)

Agares (1890982) | about 8 months ago | (#46476049)

I do not see why there are still people out there who keep saying Bitcoin is a good investment. We keep seeing these exchanges fold up and run off with all this money. I know they claimed they were hacked, but how do we know for sure. To me the whole Bitcoin thing is just a way for a few to get rich by ripping off so many others. Also no one should be surprised that they were sold phantom Bitcoins. You have no way of knowing what you actually have on a site like that since you can’t directly access the wallet. It seems like common sense to me, but I guess I will never understand this kind of thing.

Re:Interesting... (2, Insightful)

Anonymous Coward | about 8 months ago | (#46476111)

Curious you think this is isolated to BitCoin. Look up MF Global.

Re:Interesting... (1)

Agares (1890982) | about 8 months ago | (#46476195)

I didn't say it was. I don't see why you are making assumptions.

Re:Interesting... (0)

Anonymous Coward | about 8 months ago | (#46476147)

We keep seeing these exchanges fold up and run off with all this money.

Why would you keep your wizard dubloons in an exchange unless you're actively exchanging them for Barry's Imaginary FiatBucks?

Re:Interesting... (2)

Registered Coward v2 (447531) | about 8 months ago | (#46476259)

I do not see why there are still people out there who keep saying Bitcoin is a good investment.

Mencken's Law: "No one in this world, so far as I know — and I have searched the record for years, and employed agents to help me — has ever lost money by underestimating the intelligence of the great masses of the plain people."

Pretty much sums it up.

Re:Interesting... (0)

Anonymous Coward | about 8 months ago | (#46476303)

I'm not sure why people would have their bitcoin or money in an exchange for more time than it takes to do the exchange - and then only the minimal amount.

Bitcoin is not like US Dollars in that it can't just be replaced by a central bank if it goes missing. It is also not safer in a "bank" than it is in your own wallet.

Bitcoin is not like gold in the sense that if you had large amounts of gold in your house, you would be robbed. I'm not sure you would have that problem if you had large amounts of bitcoin in your own wallet. Probably the safest place to store bitcoin is in offline storage.

Pyramid or pump and dump? (2, Insightful)

sjbe (173966) | about 8 months ago | (#46476307)

I do not see why there are still people out there who keep saying Bitcoin is a good investment

For those at the top of the pyramid scheme it probably is. For everyone else? Yeah, not so much. Bitcoin has all the hallmarks of a pump and dump [wikipedia.org] scheme. Thinly traded asset of dubious future value? Check. Marketing campaign to recruit investors? Check. Early large purchases at discounted rate? Check. Absurdly fast rise in "value"? Check. Early investors selling out or disappearing and leaving the new investors holding the bag? Check.

Unregulated bitcoin exchanges are basically pyramid schemes waiting to happen. The bitcoin currency itself looks shockingly like a pump and dump scheme and should be treated as radioactive (i.e. very carefully) until proven otherwise.

Re:Interesting... (0)

Anonymous Coward | about 8 months ago | (#46476391)

Agares,

I wholeheartedly agree. I too think Bitcoin was just a way for a few rich people to get richer.

Re:Interesting... (1)

E++99 (880734) | about 8 months ago | (#46476577)

Exchanges folding up have nothing to do with whether or not bitcoin is a good investment. Bitcoin's value is the same as it was in mid-December. Exchanges folding up, rather, means that it's unwise to trust your bitcoins to be held by exchanges.

Re:Interesting... (2)

BasilBrush (643681) | about 8 months ago | (#46476927)

Trouble is that the only safe place to hold bitcoins is on your own media accessed by a computer which is unconnected to the internet. The number of bitcoin owners and users that do this is anyone's guess, but unlikely to be more than a tiny fraction.

In fact it's pretty hard to do anything in a secure way with bitcoin, unless you have an appreciation for how bitcoin works. And that's an extremely complex thing to understand - far beyond the grasp of most people.

(Of course many here on Slashdot understand, but we're a self selecting group of nerds, most of whom have probably been CS students, and the rest have mostly self-educated to a similar level. We are big outliers on the bell curve of understanding stuff like this)

Re:Interesting... (1)

gutnor (872759) | about 8 months ago | (#46476651)

There are 2 categories (within the people that really care about giving you real advices, i.e. friends and family) - the true believers that really think in 20 year bitcoin will be the only / most popular currency used on Earth. Considering the limited supply of bitcoin, that means its current value is still several order of magnitude cheaper than when it reaches that goal. So buy 10K in bitcoin today, and in 10 year you will have the equivallent of 1M buying power.

The other category, are the guys that made money out of it. It worked for them, it will work for you, right ? (the same guys that were telling you to buy in the middle of the housing bubble because they sold the house they bought in the 80's for a fortune in 2005)

Change in name expected (4, Funny)

Mister Transistor (259842) | about 8 months ago | (#46476053)

It's official. The name is now changed to MtGotchya.

Stick to GOLD (1)

KillerBeeze (756541) | about 8 months ago | (#46476057)

Real hard currency!

Re:Stick to GOLD (4, Funny)

compro01 (777531) | about 8 months ago | (#46476107)

Gold is not hard currency. That term really should really only apply to diamonds.

Re:Stick to GOLD (0)

Anonymous Coward | about 8 months ago | (#46476203)

Meh, diamond is mostly hollow. Neutronium, now that's a hard currency.

Re:Stick to GOLD (1)

Anonymous Coward | about 8 months ago | (#46476361)

In case anyone misses the humor of this:
http://en.wikipedia.org/wiki/M... [wikipedia.org]

Re: Stick to GOLD (1)

AvitarX (172628) | about 8 months ago | (#46476579)

Gold (vs bread, or guns, or cars, or gas, or pretty much anything ) is not particularly stable.

Re:Stick to GOLD (1)

Ralph Wiggam (22354) | about 8 months ago | (#46476675)

It may lose a third of its value on occasion, but at least it's pretty to look at.

The nature of the Ponzi (3, Insightful)

NotDrWho (3543773) | about 8 months ago | (#46476059)

The only people who make money in a pyramid scheme are the people at the very top. Everyone else is a sucker.

Re:The nature of the Ponzi (1)

Anonymous Coward | about 8 months ago | (#46476157)

You know what's hilarious? Not quote-unquote-hilarious, but truly funny? There was a site, Ponzicoin.co, that was openly a ponzi scheme. It didn't bother trying to hide behind it with flowery words or anything. Hell, check it out for yourself, the site's still up.

But the delusional Buttcoiners over at Reddit's Bitcoin sub were ALL OVER IT. Like white on rice, they ate it up. "Yay, more free monies!" I mean, c'mon! THINK, MCFLY!

I've been munching popcorn 24/7, I haven't been this entertained in years. Thanks Bitcoin!

Re:The nature of the Ponzi (0)

Anonymous Coward | about 8 months ago | (#46476607)

I can't find exactly where it is, but there was one person on Reddit who got burned by this very site saying something like:

I know Ponzi schemes burn the bottom 90%. I just thought I was in the top 10.

Which sums up a lot of what I see.

Re:The nature of the Ponzi (1)

friedman101 (618627) | about 8 months ago | (#46476249)

False. The lawyers of the folks at the top also make money.

Re:The nature of the Ponzi (0)

Anonymous Coward | about 8 months ago | (#46476351)

False. The lawyers also make money.

FTFY. Wouldn't want to leave out the not-so-poor lawyers filing the class action suit from the bottom after the collapse.

Re:The nature of the Ponzi (0)

Anonymous Coward | about 8 months ago | (#46476285)

In the case of Bitcoin, it's far more complicated.
Those at the top sold when bitcoin hit $0.10.
Those who bought bitcoins at $0.10 sold when it hit $1.
Those who bought bitcoins at $1 sold when it hit $10.
Those who bought bitcoins at $10 sold when it hit $100.
Those who bought bitcoins at $100 sold when it hit $1000.

It's not clear who made the most money.

Re:The nature of the Ponzi (1)

auric_dude (610172) | about 8 months ago | (#46476349)

Looks like Bernard Madhoff is doing the maximum sentence of 150 years in federal prison due to his part in the almost $65 billion Ponzi scheme. Being found guilty of such a scheme can give you some grief. https://en.wikipedia.org/wiki/... [wikipedia.org]

Re: The nature of the Ponzi (0)

Anonymous Coward | about 8 months ago | (#46476439)

First you say it's a Ponzi scheme, and then a pyramid scheme. Maybe you should stick to a simpler word such as scam?

Buying a Pig in a Poke ... (1)

Anonymous Coward | about 8 months ago | (#46476073)

All these 'with-it' trendy people got to brag about about being ahead of everyone else and 'cool' because they were so smartly investing in this scam. Well they got what they paid for then as its been shown they really didnt do their homework to figure out that there are insufficient checks and balances in this BitCoin game to make sure swindles like this cant happen.

Dont worry, another similar scam will soon turn up for them to put their money into.

Re:Buying a Pig in a Poke ... (2)

TheRealMindChild (743925) | about 8 months ago | (#46476331)

You aren't looking back far enough. The "with-it" trendy people as you call them, mined bitcoins or bought them when they were worth ~$1 or less. If the world comes crashing down and they end up back there, they lost nothing. I believe you are thinking of the people that only cared about bitcoin when it began to have some exchangeable value, where bitcoin was an investment, or a scheme to get rich. These will be the people who suffer. These are the ones who "fell for the scam"

[fuck beta][Why won't beta fill in a default subje (1)

pla (258480) | about 8 months ago | (#46476355)

All these 'with-it' trendy people got to brag about about being ahead of everyone else and 'cool' because they were so smartly investing in this scam.

So do I still get to brag, since the handful of BTC I still have currently trade at USD$650, while my initial investment comes out to less than $50 in electricity?

Boo hoo, people who trusted an unregulated exchange got burned - Color me shocked.

I'm thinking of a word - (5, Funny)

Darth Snowshoe (1434515) | about 8 months ago | (#46476075)

I'm thinking of a word for a kind of system where, I don't know, someone makes rules for how large chunks of assets are managed, traded, stored. This word would mean that some PEOPLE, some kind of official-sounding types of PEOPLE, would "check up" on these places, these places that handle and store and manage other people's money, or assets, stuff. They would be checking up to make sure that the people who run those places, those people, wouldn't be, knowingly or unknowingly, doing things with other people's money that they shouldn't be doing. Maybe there could be a kind of system, say, where those people doing those things, are encouraged or made to do some things, to prove, that they have the money and things that they are supposed to have, and doing the things, those things that they are supposed to do, and not doing those things that they are not supposed to be doing, to those other people's money, and assets and stuff. And that they're honest, about what they say that they're doing, and that they're not doing. Who would be doing all that checking, and what would that process be, and who would be subject to it. If only there were one simple word for all of that.

Re:I'm thinking of a word - (1)

Rick Zeman (15628) | about 8 months ago | (#46476271)

I'm thinking of a word for a kind of system where, I don't know, someone makes rules for how large chunks of assets are managed, traded, stored. This word would mean that some PEOPLE, some kind of official-sounding types of PEOPLE, would "check up" on these places, these places that handle and store and manage other people's money, or assets, stuff. They would be checking up to make sure that the people who run those places, those people, wouldn't be, knowingly or unknowingly, doing things with other people's money that they shouldn't be doing. Maybe there could be a kind of system, say, where those people doing those things, are encouraged or made to do some things, to prove, that they have the money and things that they are supposed to have, and doing the things, those things that they are supposed to do, and not doing those things that they are not supposed to be doing, to those other people's money, and assets and stuff. And that they're honest, about what they say that they're doing, and that they're not doing. Who would be doing all that checking, and what would that process be, and who would be subject to it. If only there were one simple word for all of that.

Does self-policing count as your word since it's a compound word?

I jest. I can't think of one example where self-policing led to a better outcome to society.

Correct units (1)

bob_super (3391281) | about 8 months ago | (#46476095)

As long as the amounts were in Millions of US dollars, they can get away with it, if they can get a trial in the US.

buying nonexisting bitcoins... (3, Insightful)

Anonymous Coward | about 8 months ago | (#46476109)

Isn't the bitcoin protocol expected to prevent exactly this? Assuming that the cryptographic part wasn't broken, the existence of a 6-block chain telling you the coins are there means they *are* there. Something tells me that a lot of people blindly trusted some random guy on the internet with their money instead of simply validating the fckn block chain, which would have told them immediately that they were screwed over.

Reply to Comment - Beta, why no default subject li (2)

pla (258480) | about 8 months ago | (#46476453)

If you hold your own Bitcoins in a local wallet, then yes, a handful of confirmations adequately proves you really do have those coins.

As soon as you entrust them to someone else to store in a pooled account, bam, confirmability lost.

A key philosophy behind the BTC protocol assumes direct person-to-person transactions. If you adhere to that, you don't get screwed by a failed exchange; for that matter, you don't even care about the existence of an exchange... Except insofar as they help define the "worth" of a Bitcoin as a medium of trade. Though, with the likes of Overstock accepting BTC now, the marketplace itself might soon serve that function without needing an external point of reference.

Re:Reply to Comment - Beta, why no default subject (2)

devman (1163205) | about 8 months ago | (#46476665)

Overstock is only accepting bitcoin via an exchange so the items are not truly priced in BTC.

Overstock doesn't hold BTC, they convert it via CoinBase. Coinbase sets Overstock's BTC prices for them by using the current exchange rate. When you go to checkout with BTC you get a quote for the price that is only good short amount of time, if you don't pay the invoice within that window you have to start over and get a new price quote.

Re:buying nonexisting bitcoins... (2, Informative)

Anonymous Coward | about 8 months ago | (#46476603)

It had absolutely nothing to do with the Bitcoin protocol. The attackers abused a flaw in Mt. Gox's code, not Bitcoin's, to cause them to initiate transactions where it should have failed.

Governing body (0)

Anonymous Coward | about 8 months ago | (#46476117)

Gosh, if only there was some governing body to regulate this sort of thing and insure individuals against it.

Re:Governing body (0)

Anonymous Coward | about 8 months ago | (#46476641)

Because that works so well for every other form of currency, right? I mean, it's not like bankers have screwed over people. And certainly there's never been any abuses with credit or debit cards. Or fake checks.

Thank your for your well-informed opinion and suggestion about this fool-proof plan. I'm sure it can be incorporated to make sure nothing bad ever happens.

So what you're saying is (1)

JudgeFurious (455868) | about 8 months ago | (#46476161)

"Mistakes were made"?

Re:So what you're saying is (1)

bobbied (2522392) | about 8 months ago | (#46476569)

"Mistakes were made"?

That much is clear.. At Mt Gox, apparently they didn't all get away with taking/loosing their customers' deposits.

The Free Market (1)

PopeRatzo (965947) | about 8 months ago | (#46476163)

Neoliberals will shrug this off as an anomaly, but the ability of people of privilege to steal is enhanced by unregulated free markets.

It never fails. When there are no rules, it pays to be unruly.

Re:The Free Market (3, Informative)

Jeff Flanagan (2981883) | about 8 months ago | (#46476237)

Neoliberals? I'm under the impression that Libertarians with the minds of teenagers are the ones so in love with Bitcoin, and opposed to regulation that would normally keep their money safe.

Re:The Free Market (1)

sqorbit (3387991) | about 8 months ago | (#46476347)

Just because Libertarians are full of silly ideas doesn't mean they all like Bitcoin. Yes I'm a libertarian,..with the mind of a teenager and I don't own bitcoins.

Re:The Free Market (0)

zifn4b (1040588) | about 8 months ago | (#46476425)

You have Libertarianism wrong. Libertarians are not against regulation, they are against regulation that would restrict people's freedom unjustly. Libertarianism != anarchy. Libertarianism = a balance between fiscally conservative and socially liberal. The ultra-conservative folks are the ones you're looking for. They love Laissez-Faire Capitalism.

Re:The Free Market (2)

akirapill (1137883) | about 8 months ago | (#46476837)

You have anarchy wrong. Anarchists are not against government regulation. They are against power. If a small amount of government regulation results in a large reduction in corporate power, some anarchists (such as this one) would support that.

Re:The Free Market (1)

PopeRatzo (965947) | about 8 months ago | (#46476855)

Neoliberals? I'm under the impression that Libertarians with the minds of teenagers are the ones so in love with Bitcoin

Neoliberals = libertarians. They mean about the same thing for the purposes of this conversation.

Re:The Free Market (3, Insightful)

JoeyRox (2711699) | about 8 months ago | (#46476337)

That all depends on how one prefers to be robbed. The transparent, libertarian way is to have your money stolen in front of you. The opaque, governmental way is to have it stolen in 3% to 5% increments every year via government-mandated inflation.

Re:The Free Market (1)

PopeRatzo (965947) | about 8 months ago | (#46476895)

The transparent, libertarian way is to have your money stolen in front of you.

So, the 700,000 bitcoins that disappeared under Mt Gox were stolen "in front of" the people who owned them?

Maybe we need to define "in front of".

Re:The Free Market (0)

Anonymous Coward | about 8 months ago | (#46476867)

Neoliberals? That hasn't been a thing for fifty years. No one self-identifies as "neoliberal": the term you want is "libertarian". A lot of Bitcoin enthusiasts self-identify as libertarian. See http://www.zerohedge.com/news/2013-03-10/demographics-bitcoin

Some highlights

The average user is a 32.7 year old libertarian male.
Top motivators for new users are curiosity, profit, and politics.
Bitcointalk.org is the dominant community platform.
Far more people have used Bitcoin to make donations than to buy narcotics.
39% of users do not drink, smoke, gamble, or take drugs.

No Sympathy (1)

ACNiel (604673) | about 8 months ago | (#46476167)

The only reason people were into this was to either trade in illegal goods and services or be cutting edge with something that only really served to facilitate illegal activity.

People were told repeatedly that there were no regulations as countries didn't know how to handle it, which emboldened everyone.

Now you see the ramifications. If you like being in a lawless area, don't look for cops when you get raped.

Re: No Symapthy for BETA SUCKING (2)

pla (258480) | about 8 months ago | (#46476519)

The only reason people were into this was to either trade in illegal goods and services or be cutting edge with something that only really served to facilitate illegal activity.

Fuck you very much, sir.

I, and the vast majority of Bitcoin users, engage in entirely legitimate commerce with BTC as the medium of exchange. Heck, I even declared my BTC gains on my taxes last year, fer chrissakes.

Now, when I want to score a quarter of weed - You ever actually try to buy anything with BTC, or just mindlessly parroting the FUD about Silk Road? My dealer takes USD only, thanks.

Fractional Reserve (0)

Anonymous Coward | about 8 months ago | (#46476225)

MtGox did the standard bank thing of trading what they don't have by power of the fractional reserve, not particularly surprising.

Re:Fractional Reserve (1)

scuzzlebutt (517123) | about 8 months ago | (#46476377)

Ahh. Leverage. Good stuff, leverage.

Re:Fractional Reserve (1)

bobbied (2522392) | about 8 months ago | (#46476597)

Ahh. Leverage. Good stuff, leverage.

Only when you have ENOUGH and you use it at the right times and locations. Otherwise, it's destructive in a big way. Just ask the owner of the engine who snapped off a head bolt...

Re:Fractional Reserve (3, Insightful)

Ralph Wiggam (22354) | about 8 months ago | (#46476759)

Except banks have multiple layers of safety nets to cover depositors and investors if things go bad.

Climbing a mountain with and without a rope are identical most of the time, but the difference is very important under certain conditions.

Ponzi lives on! (0)

Rick Zeman (15628) | about 8 months ago | (#46476241)

Or close enough.

Suspected =/= knew (1, Interesting)

DaveV1.0 (203135) | about 8 months ago | (#46476267)

In the first sentence, Karpeles is reported to have said he "suspected hundreds of thousands of bitcoins were missing". In the second sentence, the submitter, and by extension Timothy the editor, turn this suspicion of into "knowing that its bitcoin stash was wiped out". Let me demonstrate the problem with this:

A person suspects Timothy of being a murderer and panning a second murder thus that person knows that Timothy is a murderer and will be killing again and thus can kill Timothy and claim defense of another based solely on that suspicion.

Re:Suspected =/= knew (1)

BronsCon (927697) | about 8 months ago | (#46476437)

I don't see a problem with that. As long as we're talking about /. editorial staff, that is.

Re:Suspected =/= knew (0)

Anonymous Coward | about 8 months ago | (#46476493)

A person suspects Timothy of being a murderer and panning a second murder thus that person knows that Timothy is a murderer and will be killing again and thus can kill Timothy and claim defense of another based solely on that suspicion.

Do you live in Florida? If so I think this line of reasoning should hold up.

Re:Suspected =/= knew (1)

thesandbender (911391) | about 8 months ago | (#46476605)

It doesn't matter if he suspected or knew... in either case transactions should have been suspended. Let me demonstrate the issue for you:

"DaveV1.0 paid me to house sit while he was on vacation. I suspected that a friend had stolen the key, was taking his valuables and defiling his gerbil but I didn't bother to change the locks or even drive by the house to see if anything was amiss."

I suspect you wouldn't care if I suspected or knew at this point, you would still hold me responsible.

Re:Suspected =/= knew (0)

Anonymous Coward | about 8 months ago | (#46476623)

I don't know about the exact situation in Japan, but in many jurisdictions it is considered a criminal offense if you keep accepting people's money while you know for sure you're not able to fulfill their orders, because you're technically bankrupt.

I guess there is a fine line to "suspect" and to "know". The first one would not be punishable by default, but the latter would.

Libertarians... (1)

mlw4428 (1029576) | about 8 months ago | (#46476325)

Seems as if this is a great "real world" example of what happens when you try and run a "free market" without any sort of regulating body. People get scammed and it doesn't matter that the scammer's company collapsed...they cashed out a LONG time before it happened.

Re:Libertarians... (-1)

Anonymous Coward | about 8 months ago | (#46476477)

Where is the problem? People risked their own money instead of dragging the taxpayer into this. People personally responsible for their own faith = perfectly libertarian outcome.
And give me a fucking break with 'any sort of regulating body'. Retards at the SEC somehow couldn't see the Madoff's scam for years, despite the numerous reports that something fishy was going on.

Re:Libertarians... (1)

bobbied (2522392) | about 8 months ago | (#46476775)

Seems as if this is a great "real world" example of what happens when you try and run a "free market" without any sort of regulating body.

Um, not a good example. Everybody knows (or should know) that BitCoin exchanges/Banks are unregulated. If you thought your money was safe on deposit with Mt Gox, you where woefully misinformed and STUPID. However, what happened is still subject to law, civil law. Mt Gox can be sued (for what it's worth anyway) as can the principles who ran it. There may have even been criminal fraud involved which would subject the people who committed fraud to criminal charges. So this is NOT totally a free market, real world example of anything.

But your implied argument is also invalid. "Free Market" does not mean "no rules" it means that you advocate for the minimum regulation possible while keeping opportunity equal for all involved. (Note that I'm saying equal opportunity, and not equal outcome.) Fraud needs to be illegal in a "free market".

mod dowN (-1)

Anonymous Coward | about 8 months ago | (#46476565)

Irony (1)

IonOtter (629215) | about 8 months ago | (#46476589)

"...buying bitcoins that did not exist, with cash that was already long gone."

Sssoooo, it's exactly like the US dollar. Or ANY fiat currency. [wikipedia.org]

Where's the Tokyo Metropolitan Police Department? (1, Insightful)

Animats (122034) | about 8 months ago | (#46476771)

Half a billion dollars has been stolen. Where's the Tokyo Metropolitan Police Department? This is their job. It's embarassing that they haven't made any arrests.

Central casting (0)

Anonymous Coward | about 8 months ago | (#46476971)

I just can't help but think that if you went to Central Casting and asked them to send you a guy who looks like he would run something like a Magic the Gathering web site, you'd get back Mark Karpeles.
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