Mt. Gox

» see mtgox.com as it lived, on the wayback machine

~ the goodbye ~

the first time i heard the name mt. gox was when it stopped working. that is also true for most people who never had an account there. in early february 2014 the bitcoin press went from rumor to bankruptcy filing in about three weeks, and the rest of us learned what a hot wallet was on the way down.

the site started in 2007 as something else entirely. jed mccaleb registered mtgox.com to host a magic the gathering online card-trading exchange, which is what the initials originally stood for. when bitcoin showed up in 2009 mccaleb pivoted the domain into a btc-for-dollars exchange, then sold the whole thing to a french expat in tokyo named mark karpelès in march 2011. by early 2014 karpelès was running an operation that handled around seventy percent of all bitcoin trading on earth out of an office in shibuya.

then withdrawals froze on february 7. trading was suspended two and a half weeks later, and four days after that the company filed for bankruptcy in tokyo with around 850,000 coins missing from its books, worth about 473 million dollars at the time. an old wallet later coughed up 200,000 of those coins. the rest are still part of an active rehabilitation case in the tokyo district court more than a decade later.

~ the chronicle ~

~ how it landed ~

mccaleb built the original site in about five days as a side project for trading magic cards. when he flipped it to bitcoin and then to karpelès, the underlying code was famously fragile and the engineering culture on top of it was reportedly not much better. there was no source control for years, and the founder-ceo personally approved code pushes from his own laptop. running the world's biggest bitcoin exchange on that stack was, the obvious tail risk.

the warning signs were not exactly hidden. transaction malleability had been a known bitcoin protocol quirk since 2011, and mt. gox had been silently bleeding coins through it for years. by the time karpelès went public with the issue in mid-february 2014 there was nothing left to defend.

~ the day it died ~

the bankruptcy filing read like a postmortem of an entire industry. roughly 750,000 customer coins were gone, with another 100,000 belonging to the company itself. mccaleb sued separately for an unpaid balance from his original sale of the domain, while creditors held paper receipts for crypto that was now worth nothing on a frozen platform.

by 2019 a tokyo court convicted karpelès of falsifying the company's records and gave him a thirty-month suspended sentence. the actual fraud charge was dismissed.

~ what got buried with it ~

mt. gox is the reason bitcoin's first mainstream news cycle was a failure cycle. for normal people who only saw the headlines, "you put money in and the site disappeared with it" was the cleanest sentence anyone could write about cryptocurrency. that headline shape did real damage to the trust curve for years.

it also set the template for every later crypto-exchange collapse, all the way through ftx in 2022. the lesson was always the same and somehow nobody seemed to learn it.

@}-->--

              )
             (_)
            .-'-.
            |   |
            |   |
            |   |
            |   |
          __|   |__   .-.
       .-'  |   |  `-:   :
      :     `---'     :-'
       `-._       _.-'
           '""""""

« previous  ·  random  ·  next »