Imagine if your bank wouldn't let you withdraw money, ignored your complaints, and then moved offices when you showed up at their door? If you put real dollars into Mt.Gox, the erstwhile top dog in Bitcoin trading, you've probably completely screwed.
Japan-based Mt.Gox is said to have begun as a "Magic: The Gathering" trading card website, and hasn't picked up in the way of business cachet since then. The exchange—basically a place where you can trade real "fiat" currency for speculative crypto-currency—was for years the largest of its kind, moving millions of dollars around the world, anonymously. Trouble began for Mt.Gox when the feds started noticing its financial paperwork was a mess, and it was acting as a middleman for the internet drug trade. Bitcoin prices on the exchange plunged accordingly. That was only the start of the bad news.
Today, people with thousands (or even millions) of dollars or yen in real money tied up in Bitcoins can't touch it—there have been huge delays and blackout periods when customers try to remove their funds. Earlier this month, Mt.Gox stopped all withdrawals completely, and this month has seen the value of a single Bitcoin plunge from around $700 to a low of $75.
Mt.Gox's CEO, Mark Karpeles (above) recently quit the Bitcoin Foundation's board of directors, and hasn't tweeted any explanation for anything since January—he's been busy literally trying to avoid his customers on the streets of Tokyo. The company's official Twitter account just deleted its entire history, a sort of social media paper-shredding that can't bode well for anyone.
The 21st century moneychangers now find themselves in a very old fashioned problem: there's a run on the joint, with panicked Mt.Gox customers trying to get whatever they can out of the place before it goes entirely belly up—which, for now, is nothing. There are literally no signs that would give anyone involved in Mt.Gox the slightest bit of comfort—just-take a look at Reddit, where Bitcoin hustlers congregate huddle together like shellshocked Bear Stearns traders, and death is in the air:
should I buy from Mtgox or is it finished ?
Just how many BTCs could Gox have lost? Surely not half.
Will there be another announcements in a few hours?
Can I have a friend in Europe deposit into my MtGox account?
sell your MTGOX bitcoins quick for cash!
Without a trace of irony, others are wondering if a "bailout" (From where? Narnia?) could save Mt.Gox, or if everyone should switch to another decentralized, unregulated, virtual currency. For now, no one knows whether Mt.Gox is technically incompetent, completely insolvent, or just a bunch of thieves who made off with the money of cyberspeculators and giddy idiots. But in the end, there will only be so much sympathy for people who dumped money into an unregulated, untraceable, unaccountable vault run by strangers.