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Another Bitcoin Horror Story

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It looks like the Mt Gox Bitcoin currency exchange in Tokyo has collapsed after $375 in Bitcoins went missing.

This does not mean there is a fault in Bitcoin, this means there were big problems at Mt Gox who started of as a place to trade collectable cards. Either their security was hacked or one of the owners is sitting on a luxury island somewhere.

The money stolen was Bitcoins left in trust with Mt Gox to sell when the sellers requirements had been met i.e. when the Bitcoin to $ or £ rate hit a certain level. If they had kept them in their wallets on their home systems they would have been a lot safer.
 
You could buy bitcoins at $90 from Gox at the weekend because you could not withdraw anything.

Now you can't trade at all. They have serious problems but their problems started weeks ago. Looks like someone will be rich from all of this.
 
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Yep with $375 in untraceable money, someone is having a really good day today.

Some people apparently had millions in there. Who would trust a company that was dealing in kids trading cards ten years ago with that sort of money? I know by its very nature there are not many "long in the tooth" exchanges, but why expose yourself to such a risk. They could have spread their money across a number of exchanges or just kept their money on a usb stick in a banks safety deposit box.
 
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I don't believe many people kept it there for the sake of it.

Mostly likely they were using the feature that sells the coins when the price hits a certain point.
 
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No doubt that is what they were doing but there are practices that will keep these people safer. They could keep the money and only transfer it when the price was nearing their target price - at the time the market wasn't really doing anything and had a fair way to climb to prices of just a few months ago. All it would have taken them to do this was to press a few keys as their keyboard at the time. They didn't even have to monitor the price themselves, there are plenty of systems that would text or email them when things were getting close to their required price.

They could have also spread it about between exchanges so only a percentage of their money was at risk at a time (a lot of people on the news seem to claim they used the company exclusively).

Whenever we see these reports come out there always be some element of people not protecting themselves or just plain going full out and gambling everything.
 
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It is worth noting that none of the reports for this and the previous theft suggest it is a flaw with Bitcoin its self. They are straight thefts where these sites holding Bitcoins for others are being hacked and the Bitcoins removed from there. If they were not able to hack in to their systems there is no way they could steal the coins.

These automated exchanges where people dump their Bitcoins and wait for the right price hold incredible amounts of money. In this case Gox was holding over a billion dollars worth at the time of the robbery.

Gox, up until the introduction of BitCoins was a platform for swapping trading cards (Pekemon etc). 5 Years later it is holding a billion dollars of other peoples money. How secure do people think a site with that lack of financial trading had?

This is one of the many reasons governments need to recognise and deal with Bitcoin rather than faff about on the side lines. If Gox had been regulated the authorities could have protection built in to their systems or greatly limit the amount they held.

With out regulation these BitCoin heists will continue to happen
 
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Excel Dragon said:
It is worth noting that none of the reports for this and the previous theft suggest it is a flaw with Bitcoin its self.
Click to expand...

Except that theft is comparatively easy compared to regular money.

Its not the fault as such, but its a flaw in the whole economy of it. And people being more worried about putting the money somewhere they can make a quick sale, rather than looking after it.
 
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Just because it is a Bitcoin and not a pound or dollar on a computer does not make it easier to steal. No matter what the currency is it is just files and data being transferred around computer systems.

The lack of security at hastily put together businesses like Gox makes it easier to steal than stealing funds from a bank. There is no way Gox could build a secure service capable of holding billions in just 5 years to a level we are used to from our banks. Especially as they were doing if from a standing start.

If banks dealt in Bitcoins using their existing security etc the hackers would not be able to reach them. If banks used Gox style servers and services we would see bank robberies on a daily basis.

When it comes theft Bitcoins are no less secure than pounds or dollars, storing them on unsecure servers and computers makes it vastly riskier business.
 
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Totally agree, if I was planning a robbery I would go for a company holding Bitcoins rather than a bank holding pounds or dollars.

If I had a million in Bitcoins it wouldnt be sitting in a place like Gox. I would split them and store them in safety deposit boxes. Dumping a million in an untested, unregulated business like Gox in order to make a lazy profit was pure suicide by those that did it.

My point was to try and clear up the confusion of why people think the currency its self is unsafe compared to pounds and dollars (in terms of theft). Putting money into your bank is like putting in to Fort Knox, putting it in to a place like Gox is like putting it in to your local savings club. Its not the money that is different it is the security holding it.
 
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What got me was as a BTC outsider, I made the decision not to commit to a risky medium I knew nothing about.
However, just for fun, I noted down the day and rate at which I would've bought in had I been feeling reckless or had funds to risk. At the time, Mt Gox seemed like the obvious exchange to go to as they were the ones being mentioned repeatedly in the press. I definitely think I would've conducted all my transactions through them. It was only this week, after their self-impolosion, that I came across comments about them being badly run - and after they've collapsed, it seems everyone is saying it. One another message board, I saw detailed stories from people who saw first hand how they were a shoddy organisation. None of this was mentioned before and it definitely didn't filter through the same news organisations that gave them free publicity during the rise of mid 2013.
 
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I think most of us would have seen it the same way if we were using disposable amounts. If I was risking just a couple of hundred I would have no doubt used them myself.

If I was looking to pump in 5, 6 or 7 figure sums I would be doing a lot more research before hand.

Dont forget that the people were not using Mt Gox as a bank, i.e. somewhere to store their money. They let Mt Gox hold in trust with the instructions to sell it for them when it hit a certain price.
 
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I would've assumed the people with 5-7 figures were early miners/speculators who had small amounts which appreciated during the boom times?
But whoever they were, it seems only prudent to keep them in cold storage and transfer only at the time of cashing out (if you've got a million bucks in bit coins and aren't monitoring the price multiple times daily, then what are you doing??).
I think everyone except James Howells (google him as can't link) will now think that's a wise idea......
 
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Exactly, if you want safety keep it on a USB key in a safety deposit box. For ultra security break it up and put them in multiple security boxes. Can you back them up? If so put copies in different safe places.

I had forgotten all about poor James Howells. Mind you I wouldnt keep a million on a home PC or laptop either. Thats the first thing most burglars pinch.

I suspect those that were effected the most were not miners, but investors who have taken up buying and selling bitcoins for profit. Hence them using a service like that.
 
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Not much of a surprise there, I think that has been on the cards since it started. Hopefully those left with money stuck in there will get their Bitcoins back.

It will be interesting to see how they handle the bankruptcy as it is not officially recognised currency.
 
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Mt Gox has just announced all of the money is gone, not just the previously reported theft. My guess is this would take the total theft to over $1 billion.
 
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Not sure what they are going to recover. Sure they can strip the MD/CEO of all his personal wealth and assets but that is not going to scratch the surface of what is missing.

One of the points of Bitcoin is that it is untraceable. If he has stolen the money and stashed it away somewhere, the only way the authorities will know where it is, is if he is daft enough to have left a paper/digital trail. The fact is he could have shoved it all on to a USB stick and shoved it anywhere.

I suspect if he was involved it was as a part of a much larger gang which will make the money even harder to find as it will be distributed all around the globe.
 
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In the end the location of the bitcoin is a problem for investors. If someone can nick a hard drive and end up with the cash and it is untraceable. It doesn't give me a feeling of secure.
 
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You could say the same about any currency. Keep it in your house and someone steals then it is also untraceable. Most sensible users use "cold storage" where they store their bitcoins off line. This can be on a USB stick, on a hard drive or even printed out. These can be stored at home, in a deposit box or any other safe place.

They even take the extra step of splitting up their storing amounts in different places in case one fails - something people do with large amounts of cash anyway.
 
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Another robbery, this time under half a million quids worth.

Note that this one makes a distinction between those online wallets and those with offline wallets (cold storage). Those with cold storage wallets have kept all their money because the hackers could not reach them.

http://www.businessinsider.com/flexcoin-2014-3
 
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In the end the great thing about bitcoins is that they are untraceable and uncontrolled. but the worst thing is they are untraceable and uncontrolled. Somewhat like gold.It can be stolen. but with bitcoins you don't get your money back
 
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I like the idea that Bitcoin now has some legitimacy since criminals think its worth stealing!

As for the banks, they wern't robbed, they simply managed to lose most of the money through their own unsafe business practices.
 
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Moneyman - I'm not sure how you would get your money back if your gold was stolen.

Banksbroo - There are a few things that could have happened to the bitcoins (1) Someone hacked them and removed them (2) It was an inside job and the owner of the sites stole them (3) There systems were so rubbish they managed to delete the bitcoins and cant retrieve them (effectively destroying them). My guess is it was 1 or 2
 
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In all three cases it wasnt down to the actual bitcoin currency, it was down to poor security and coding at the three exchanges.

The bitcoin currency its self does not allow its self to be stolen any easier than any other currency being stored electronically on computers. The systems used by these three exchanges had massive security flaws in them and even bigger flaws in the business procedures.

The process used to steal them is (a) well known in the bitcoin community (b) easy to monitor for in realtime (c) easy to fix and (d) easy to pick up in audits.

All three companies failed on those points, especially MyGox who had already been robbed in the same way twice before.
 
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