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In January 2014, Mt. Gox, was the biggest bitcoin exchange in the world.

Based in Japan the exchange handled over 65% of all worldwide bitcoin transactions. One month later, it was bankrupt.

After being hacked the exchange lost more than 700 000 bitcoins, which at the time was roughly 6% of all bitcoins in existence. The total value was more placed at a little over $500 million and over $2.5 billion by late 2017 bitcoin prices. There were about 200 000 recovered bitcoins, but combining that with the 650 000 still missing and the $27 million which was missing from the exchange’s bank accounts, things were looking like rock bottom.

Many investigations revealed that the attacks began way sooner than announced and the company was robbed of its bitcoins by late 2013. Some investigations even point to a large theft of more than 70 000 bitcoins even before the exchange was purchased by Mark Karpeles. Regardless on any ongoing investigations, it’s almost certain that the biggest amounts of bitcoins were stolen from the hot wallets.

Before September 2011, Mt. Gox’s private key was unencrypted and stolen by a copy of the wallet.dat file or through leaked information of a company insider. The shared keypool of the copy file, led to a massive re-use, meaning the company was completely oblivious to the attacks, as the Mt Gox systems were interpreting the transfers as deposits.

Mt. Gox’s lessons to future crypto exchanges

This opens up the question if such an attack can take place today. In 2018 there are far more online exchanges that deal with far more cryptocurrencies. The answer is unfortunately a big resounding yes. Many small exchanges today aren’t transparent on the ways they operate. This does not automatically qualify them as potential hack victims, but when it comes to the security of your own investments when crypto trading is involved, it’s always best to rely on more reputable exchanges. That is of course unless you can without a doubt guarantee for the exchange’s legitimacy.

The hacking of Mt. Gox can be a great lesson in teaching investors not to store their cryptocurrencies on any exchanges, no matter how reputable they are. Karpeles was arrested by the Japanese police and charged with manipulation of data, fraud and embezzlement of company money. He was later released on bail and is currently facing many future legal battles.

Last week a rehabilitation plan was published by several Mt. Gox creditors following their petition in November to move the company out of bankruptcy and into civil rehabilitation.

Last month Nobuaki Kobayashi, who liquidated over 30 000 of the 202 000 bitcoins he was holding in March 2018 said that in July a new system will be available for creditors to claim payments. The system is expected to be released in August.

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About Ian Karamanov

Based in Sofia, Bulgaria. Writing about cryptocurrency, politics, finance and esports. Keen interest in unedited history, spirituality and freedom.

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