THE STRONGEST ONES ALSO FALL
Mt. Gox: from hero to zero
Coo! It’s me, Crypto Owl! This time I’m returning with another legendary story written in crypto history pages.
On Today’s Menu:
👨🍳 CHEF’S SPECIAL DISH: From Hero To Zero. Mt. Gox Edition.
🍨 DESSERT: Crypto News Around the Web
🍷 GLASS OF WINE → Problem with Tether (USDT) | Is It Next to Fail?
FROM HERO TO ZERO. MT. GOX EDITION.
If you haven’t heard this name (doubtful, but just in case) - Mt. Gox - was the largest and most influential Bitcoin trading exchange platform in the world from 2010 ‘till its collapse in early 2014.
But why did Mt. Gox end up in bankruptcy court? Let’s rewind time and see. If you think, why - the answer is that Mt. Gox is returning to the light.
From 2007 to 2010, Mt. Gox was an online card trading game. It was launched by American software engineer Jed McCaleb. In late 2010, Jed McCaleb decided to change the purpose of Mt.Gox and made it a Bitcoin exchange;
2011. McCaleb gives Mt. Gox (along with 3k customers) into French software engineer Mark Kerpeles's hands for free. Or rather, with a few conditions: (1) Kerpeles shares Mt. Gox’s revenue with McCaleb for 6 months, (2) gives a 12 percent stake, and (3) does not make McCaleb responsible for any problems related to the company. So, this “agreement” made Kerpeles own 88% shares of Mt. Gox (under the parent company Tibanne). Well, that’s a deal, isn’t it?
In June 2011, Mt. Gox was a victim of the first hacker attack, in which nearly $9 million was stolen. After the incident, some people said that Kerpeles acted strangely indifferent. But as time went by, Kerpeles started to build up a good reputation (at least it looked like it), and the company became more and more influential in the crypto community.
In 2012, Kerpeles signed a contract with a Seattle-based bitcoin project incubator called CoinLab to build a more extensive community and advance with the exchange in both the U.S. and Canada;
It didn’t take long for this partnership to break. CoinLab argued that Mt. Gox served North American customers directly without sending their accounts to CoinLab. Coinlab demanded at least $75 million for this damage to the company from Mt. Gox.
Later, Mt. Gox counter-argued and said that the company did this because CoinLab “wasn’t properly registered to do business”. Another accusation was that CoinLab hadn’t returned more than $5 million in customer deposits for Mt. Gox. So, as you can probably understand, this friendship ended in court for good;
Back to the Mt.Gox growth. By 2013, the company had 1.1 million active users from more than 230 countries, Mt. Gox handled more than 90% of global bitcoin trading. Fascinating for sure!
By 2014, Mt. Gox generated around $40 million from fees alone.
In the same year, Mt. Gox faced a second, really massive hacker attack. They managed to steal more than $460 million. Another $27 million were missing from the bank accounts. More than 24k customers around the globe lost access to hundreds of millions of dollars worth of crypto and cash. It changed the whole game for the company and its future.
A few days later, Mt. Gox filed for bankruptcy, declaring an outstanding debt of $63.6 million.
The part of the community suspected that Mt. Gox had fallen because of suspicious activity within the exchange - not because of the hack.
Some people from the inside said that Mt. Gox was the most successful and glorious company from the outside, but things on the inside were so much different. There was a combination of bad management, inexperience, and neglect. Insiders also said that their CEO Mark Kerpeles was a computer coder rather than a leader and that his duties “really bothered him”.
Months after the hack, former Mt. Gox employees alleged the company of using clients’ deposits to cover extravagances and operations.
In August 2015, Japanese police arrested Mt.Gox CEO Mark Kerpeles. That time he pled not guilty, but four years later, on March 14, 2019, the Tokyo District Court found Mt. Gox CEO guilty of falsifying data to inflate Mt. Gox’s holdings by $33.5 million. Kerpeles was sentenced to 30 months behind bars and suspended for 4 years; so, in the end, he avoided the actual prison unless, during those four years, he would commit additional offenses.
…2022.
The company recently provided a new update to its Rehabilitation Plan for repayment procedures.
There will be a specific form (full of various important choices, registrations, etc.), that affected users might be willing to fill in. Repayments should start in August 2022, and as they do, no more new applications will be accepted, so hurry up if you’re one of the victims of major Mt. Gox failure.
However, it is essential to notice that no exact dates, figures, or amount of funds planned to be returned are specified in the document.
After such news, bitcoin’s price could drop more; at least that’s what happened in November 2021, after the announcement of “returning stolen bitcoin” - Bitcoin’s price fell by 10% in less than a week. We’re already in a deep market; it doesn’t even sound scary anymore.
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Disclaimer: This newsletter is strictly educational. None of this information is intended to be financial advice. Always do your research and act responsibly with your profits.