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posted by janrinok on Monday March 03 2014, @04:00PM   Printer-friendly [Skip to comment(s)]
from the tell-me-it-aint-so dept.

unitron writes:

"Via Twitter, Cmdr Taco passes this along

'A crazy theory, MtGox had its btc seized by us govt during Silk Road investigation, but gag order prevents disclosure'

The actual article, by Chris Pacia (who links to and credits PuffyHerb on Reddit for most of the thinking behind it), is here:

http://chrispacia.wordpress.com/2014/02/28/this-is -what-most-likely-happened-to-mtgox/"

[Ed's Note: The paragraph above is pretty much how it was received. I leave it up to the readers to draw their own conclusions on the plausibility or otherwise of this report and the linked article. It is, by its very nature, speculative but worthy of further discussion nonetheless.]

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  • (Score: 5, Insightful) by Anonymous Coward on Monday March 03 2014, @04:08PM

    by Anonymous Coward on Monday March 03 2014, @04:08PM (#10093)

    Ed's Note: The paragraph above is pretty much how it was received. I leave it up to the readers to draw their own conclusions on the plausibility or otherwise of this report and the linked article.

    Err... yes. That's what happens on discussion sites and why editorializing is best avoided.

    • (Score: 5, Insightful) by hubie on Monday March 03 2014, @04:50PM

      by hubie (1068) Subscriber Badge on Monday March 03 2014, @04:50PM (#10110) Journal

      I disagree with the editor's decision to put this up. I don't think it serves this site well to put up blogger's conspiracy rants just so the community here can decide whether they make sense or not. Is it because it has to do with bitcoin, or because it came from Cmdr Taco that it gets a free pass? Maybe the editors feel they can do an adequate job filtering the nut job conspiracies from the plausible ones, but I disagree because I think it will drive the signal to noise of this site down pretty quickly.

      • (Score: 2, Insightful) by xlefay on Monday March 03 2014, @04:52PM

        by xlefay (65) on Monday March 03 2014, @04:52PM (#10111) Journal

        If only I had mod points...

      • (Score: 4, Insightful) by Sir Garlon on Monday March 03 2014, @07:13PM

        by Sir Garlon (1264) on Monday March 03 2014, @07:13PM (#10163)

        Yeah, I concur with hubie. Not every article will interest every reader, but I think there need to be a certain amount of hard facts for a news piece, or a person of a recognized expertise (meaning, recognized outside of Soylent) for an opinion piece. I don't see the value in trying to have a good discussion about a bad article.

        --
        [Sir Garlon] is the marvellest knight that is now living, for he destroyeth many good knights, for he goeth invisible.
      • (Score: 3, Insightful) by Foobar Bazbot on Tuesday March 04 2014, @02:16AM

        by Foobar Bazbot (37) on Tuesday March 04 2014, @02:16AM (#10395) Journal

        Actually, if this had come from CmdrTaco, I'm not sure it shouldn't have run -- he's something of an internet celebrity, so stuff written by him is more newsworthy than it otherwise would be. But that would mean an article, blog post, etc. written by CmdrTaco, not a single twitter post by CmdrTaco linking to an article/blog from some random bloke.

    • (Score: 2) by LaminatorX on Monday March 03 2014, @05:54PM

      by LaminatorX (14) <laminatorxNO@SPAMgmail.com> on Monday March 03 2014, @05:54PM (#10137)

      We're going to have a discussion about this on the Content forum.

  • (Score: 5, Interesting) by VLM on Monday March 03 2014, @04:13PM

    by VLM (445) Subscriber Badge on Monday March 03 2014, @04:13PM (#10095)

    We no longer have a rule of law society / culture / economy / government so that has two implications:

    1) Anything is possible

    2) People wisely expect anything is possible (conspiracy theory, etc). In a less corrupt culture, conspiracy would be less likely and therefore not widely believed.

    • (Score: 1) by ikanreed on Monday March 03 2014, @04:43PM

      by ikanreed (3164) on Monday March 03 2014, @04:43PM (#10108) Journal

      Anything possible apparently means always blame the big targets.

    • (Score: 1, Informative) by Bill, Shooter Of Bul on Monday March 03 2014, @07:31PM

      by Bill, Shooter Of Bul (3170) on Monday March 03 2014, @07:31PM (#10172)

      Well, actually we still do have a rule of law society in the US. If we don't now, then lets face it: we never have. There is nothing you can point to that's really any worse than anything we've done in the past. Maybe you can point to a five year period some point in the late 19th early 20th where we weren't, but for the most part, its always been like this.

      Perhaps that's why, in the real world, conspiracies are *still* not widely believed. Thank goodness. Well, except for theories about global warming and other environmental catastrophes being hoaxes by liberals.

  • (Score: 5, Informative) by MrGuy on Monday March 03 2014, @04:48PM

    by MrGuy (1007) on Monday March 03 2014, @04:48PM (#10109)

    So, we have the former head of Slashdot on twitter repeating the speculation of a blogger that got his theory from an unknown person on Reddit.

    Interesting idea? Sure. Conspiracy theories tend to be. News reporting? Not on your life.

    I know we're all finding our way here, and all our editors are new editors. But this doesn't belong on this site for multiple reasons.
    1.) There are no facts here. It's all one guy's speculation, and other than his Reddit handle, we don't know his name. It's a story that can make certain selected facts hang together well. But that's not different than "the CIA assassinated JFK" or "NASA faked the moon landings" stories.
    2.) This is several degrees from the actual story. TFA is a blog post from someone who's repeating someone else's speculation. Not a primary source. If we don't have the actual story, we shouldn't be posting it.
    3.) We have a submission process. There's plenty of stuff out there, and there's quite a lot of content on this site. Why exactly are we monitoring Cmdr Taco's twitter feed as an alternative to our article submission process?

    • (Score: 1) by hubie on Monday March 03 2014, @04:52PM

      by hubie (1068) Subscriber Badge on Monday March 03 2014, @04:52PM (#10112) Journal

      Damn. Not only did you beat me to the point by several minutes, but you made your point much better than I did! :)

      • (Score: 1, Funny) by Anonymous Coward on Monday March 03 2014, @06:35PM

        by Anonymous Coward on Monday March 03 2014, @06:35PM (#10149)

        AND he beat you joining up and has a lower UID

    • (Score: 5, Insightful) by kebes on Monday March 03 2014, @05:14PM

      by kebes (1505) on Monday March 03 2014, @05:14PM (#10118)
      I agree. I'm generally very happy with how the SN team are running things (keep up the awesome work!). But there's room for improvement.

      Posts such as these are possibly a symptom of the desire to have "a post on topic X", in which case any recent news/blog/twitter item (no matter trite) is used as a summary; mostly to give a focal point to a discussion on topic X. I feel like Slashdot would very frequently do this: post strings of terrible articles on topics that would generate tons of comments. (Cynically, you could say they were fanning flame-wars for ad impressions; or you could optimistically say they were trying to give a space for topics that the community (sorry: audience) cared about.)

      I actually think posts that amount to "it's been awhile since we talked about X; let's start a new thread" can be good. But if that's what's going on, then the editors should be straightforward, with a post along the lines of "What's going on with X? Here are some links to recent developments and stories (some well-researched, some highly speculative). Discuss!"

      (It's of course possible I've entirely misinterpreted the editor's intent. But I believe my central point remains...)
      • (Score: 1) by neagix on Monday March 03 2014, @07:51PM

        by neagix (25) on Monday March 03 2014, @07:51PM (#10189)

        mod this up, Scotty!

    • (Score: 1) by TGV on Monday March 03 2014, @07:57PM

      by TGV (2838) on Monday March 03 2014, @07:57PM (#10193)

      Yup. But if they want to screw up soylentnews before it gets any traction, this would be the way to go.

  • (Score: -1, Flamebait) by willie3204 on Monday March 03 2014, @05:03PM

    by willie3204 (826) on Monday March 03 2014, @05:03PM (#10114)

    How long before this gets taken down? IBTD (in before the disappearance)

  • (Score: 5, Funny) by gallondr00nk on Monday March 03 2014, @05:30PM

    by gallondr00nk (392) on Monday March 03 2014, @05:30PM (#10126)

    gallondr00nk writes:

    A crazy theory, but MtGOX may have had its assets siezed by any of the following:

    1: The ILLUMINATI
    2: Richard Garfield
    3: Cyber Gnomes, tunneling into the pipes.
    4: The owner of MtGOX.
    5: CmdrTaco himself.
    6: An unprecedented plague of bitrot.

    There is no evidence provided, but please discuss as if it were true.

    Apologies for being snarky, but this isn't one of the better submissions I've seen here.

    • (Score: 0) by Anonymous Coward on Monday March 03 2014, @05:57PM

      by Anonymous Coward on Monday March 03 2014, @05:57PM (#10140)

      You forgot:

      7. Extraterrestrials.
      8. God.
      9. The devil.
      A. Bitcoin itself: It achieved consciousness and decided to free itself from its human masters.
      B. The secret club of hexadecimal coun%&@$
      NO CARRIER

      • (Score: 2, Informative) by tbuddy on Monday March 03 2014, @07:33PM

        by tbuddy (932) on Monday March 03 2014, @07:33PM (#10173)

        Texas oil billionaires and New York bankers aren't off the hook either.

    • (Score: 2, Insightful) by Anonymous Coward on Monday March 03 2014, @07:20PM

      by Anonymous Coward on Monday March 03 2014, @07:20PM (#10167)
      Obligatory xkcd reference [xkcd.com].
    • (Score: 1) by _NSAKEY on Tuesday March 04 2014, @02:56AM

      by _NSAKEY (16) on Tuesday March 04 2014, @02:56AM (#10411)

      I'm taking bets that mtgox seized mtgox's bitcoins, in a ponzi scheme fit for the 21st century.

  • (Score: 5, Insightful) by mth on Monday March 03 2014, @05:39PM

    by mth (2848) on Monday March 03 2014, @05:39PM (#10130) Homepage

    Whatever happened, the official story is one of the least likely theories. It's highly unlikely transaction malleability exploitation could have been going on for a long time undetected, especially since it seems they had a cold wallet. Also several people claim to have warned them about the problem long before the first reports of it being exploited. If they saw exploits happening at a huge scale, they would have fixed the problem sooner, stopped trades sooner or have been more careful in re-executing failed transactions.

    Normally an exchange should be resilient against a bank run, since they don't lend money: the amount of money they owe to customers should be equal to the amount of money they have stored. For some reason, MtGox seems to be unable to access most of that stored money. It is unclear whether the money is still there and they are unable or not allowed to access it or whether the money was moved.

    The evidence that the US government has seized or frozen that money is rather thin. It would surprise me if they'd freeze the majority of MtGox's funds, rather than just a few accounts related to the Silk Road investigation. MtGox itself is probably also under investigation, but in that case it is unlikely there would be a gag order to prevent them from talking about the investigation: they wouldn't be able to tell themselves something they don't know yet.

    Most of the evidence presented in TFA is interpretation of things Karpeles said or is rumored to have said. Both the interpretation and the message itself could be incorrect. Even if there is a gag order, the only proper statement would be "I cannot say anything at this time", not trying to blame the problems on transaction malleability. So I think statements from Karpeles/MtGox don't carry much credibility.

    • (Score: 3, Informative) by Non Sequor on Tuesday March 04 2014, @01:06AM

      by Non Sequor (1005) on Tuesday March 04 2014, @01:06AM (#10380) Journal

      I am an actuary but most of my knowledge of finance comes from textbooks rather than direct experience, so take it with a grain of salt.

      From the descriptions I've heard they were likely acting as a market maker in addition to operating the exchange. An exchange facilitates trades and a market maker is a party who is willling to always take the other end of a transaction (for a quoted price).

      If I want to buy bitcoins with dollars, a market maker will sell me those bitcoins.
      If I want to sell bitcoins for dollars, a market maker will buy those bitcoins.

      An exchange makes money off of fees charged for trades and a market maker makes money by buying things at lower rates than they sell them for.

      Market makers have to have enough dollars and (in this case) bitcoins on hand to be ready to take whatever transactions come their way. They also need to protect themselves against price changes so that they don't lose money due to changes in the value of their inventory (typically this is done in traditional market making by trading in offsetting options contracts).

      Given the stories about the dollar withdrawal limits and the withdrawal delays on MtGox, I suspect they never really had access to enough dollars to be a viable market maker and their capacity to process dollar withdrawals may have been limited by their trade requests in the other direction coming in. In that situation, they can experience a run in that if they have a large disparity between dollar cashouts and dollar buyins, then their ability to process the cashouts would freeze up.

      --
      Write your congressman. Tell him he sucks.
      • (Score: 2) by mth on Tuesday March 04 2014, @06:54PM

        by mth (2848) on Tuesday March 04 2014, @06:54PM (#10859) Homepage

        If they participated in trades with their own money, acting as a market maker would still have no impact on being able to pay out the user accounts. If they traded with their customers' money, it is possible that trade losses would reduce coverage for user accounts below 100%. (I don't know the correct bookkeeping terminology, but I hope it's clear what I mean.)

        At some point MtGox controlled such a large portion of the bitcoin exchange market that they would have been able to steer the price by injecting their own trades. Later their share diminished and they would no longer have had the opportunity to do that.

        So while it is of course still speculation, your theory at least makes sense.

        One thing that is mentioned in various different analyses is that they may have been running without insufficient funds to pay out all customers for quite some time, but they were able to cover it up because more money was coming in all the time. Only when people started pulling their money out they collapsed. In other words, the root cause may well be unrelated to recent events.

        I'm curious what the bankruptcy investigation will turn up.

        • (Score: 1) by Non Sequor on Tuesday March 04 2014, @11:29PM

          by Non Sequor (1005) on Tuesday March 04 2014, @11:29PM (#11055) Journal

          I think we're on close to the same page.

          To be clear, I doubt they would have paid trades with any kind of money they are holding for a customer (trade completed but not withdrawn) but I believe paying a 100 bitcoin seller with the inflow from a 100 bitcoin buyer is, in itself, kosher. I'd expect nonkosher actions would have run them into a wall sooner than they did.

          But I think it's plausible that: they could write an exchange platform, that platform did not have any glaring issues, but eventually they ran into a ditch because they lacked funding and risk controls to keep things operating when the cashouts substantially exceeded buyins. If that's the case, then this should just be regarded as the expected outcome of an ill-advised adventure.

          --
          Write your congressman. Tell him he sucks.
    • (Score: 0) by Anonymous Coward on Wednesday March 05 2014, @02:36AM

      by Anonymous Coward on Wednesday March 05 2014, @02:36AM (#11131)

      ... it seems they had a cold wallet. Also several people claim to have warned them about the problem long before the first reports of it being exploited. ... the amount of money they owe to customers should be equal to the amount of money they have stored.

      Oh, yeah, I get it! Yeah... yeah. My thinking about this case had become very uptight.

      So what happened is, they had their cold wallet on a single machine, the hard drive died, they couldn't recover it and didn't have a backup... no way they could admit it... It makes perfect sense now!

  • (Score: 5, Insightful) by egcagrac0 on Monday March 03 2014, @05:51PM

    by egcagrac0 (2705) on Monday March 03 2014, @05:51PM (#10135)

    I expect this site will be great because of the interesting discussions, not because of the linked articles.

    This has the possibility of stimulating interesting discussion.

    At the very least, kudos to the editors for clearly stating that the linked article is speculative rather than factual.

    I, for one, am OK with SN being people (and our interesting discussions), rather than stale news.

  • (Score: 5, Informative) by unitron on Monday March 03 2014, @05:56PM

    by unitron (70) on Monday March 03 2014, @05:56PM (#10138) Journal

    ...except the eds changed the headline to take out the question mark.

    (I don't have a problem with that)

    I thought the guy at the link presented an interesting theory.

    Here's someone who offers a dissenting view.

    http://hackingdistributed.com/2014/03/01/what-did- not-happen-at-mtgox/ [hackingdistributed.com]

    As for me personally offering a theory or opinion about what happened, that ain't gonna happen 'cause I'm not even on the same planet with knowing enough about any of it to do so, but it involves computers and networks and databases and maybe "crackers" and maybe the heavy hand of one or more governments, so I'd say the story bears keeping an eye on even if everyone is as sick of hearing about bitcoins as they are of hearing about Donald Trump or the Kardashians.

    (In hell they make you watch stories involving Trump and the Kardashians)

    --
    something something Slashcott something something Beta something something
  • (Score: 5, Informative) by Papas Fritas on Monday March 03 2014, @06:04PM

    by Papas Fritas (570) on Monday March 03 2014, @06:04PM (#10142) Journal
    Cornell Computer Science Professor Emin Gun Sirer has some interesting analysis about what may have happened at Mt.Gox [hackingdistributed.com] and it's not Transaction Malleability, it's not lost keys, it's not "Hackers," and it's not the database.
    • (Score: 1) by goose on Tuesday March 04 2014, @08:48AM

      by goose (3266) on Tuesday March 04 2014, @08:48AM (#10517)

      In addition to the above (in the link), it occurs to me that all exchanges *have* to be doing something dodgy to cover the spread between what the BTC was worth when deposited and what it's worth when withdrawn. For example a BTC deposited when it is trading at $35 might be withdrawn when it's worth $900; should the exchange be running some sort of fractional reserve system (even if it is a large fraction) it would soon collapse due to the currency deflation.

      Of course, perhaps the exchanges make all their money on fees for withdrawal/deposits, in which case it might be cheaper to simply put money in the bank and pay via EFT. Either way, there's no need for exchanges and no way for them to run in the black. Normal banks are able to run in the black due to using the deposited money to make more money and relying on slight inflation to ensure that their costs are met. BTC exchanges do not have this functionality.

      It would be better if the other exchanges (who the BTC'ers keep calling "reliable" and "trustworthy") post their trial books so we can see exactly how they make enough money to stay in business. The silence from other exchanges on how to make money out of running an exchange is very telling.

      • (Score: 1) by Non Sequor on Tuesday March 04 2014, @11:04AM

        by Non Sequor (1005) on Tuesday March 04 2014, @11:04AM (#10552) Journal

        See this post:
        http://soylentnews.org/comments.pl?sid=410&cid=103 80 [soylentnews.org]

        Long story short, the entity that's missing from your picture of things is a market maker: someone who has enough dollars, bitcoins, and patience to take both ends of any incoming trade request. The market maker absorbs the risk of price moves between the time a buyer is found for a seller or vice versa, but there are methods to hedge these risks (although those methods may be hamstrung for a developing market like bitcoin).

        It's sounded to me like MtGox never had deep enough pockets themselves or from other sources to provide their exchange with an adequate market maker. Trying to make an exchange work without one would be a futile exercise, as would trying to play at being a market maker without the resources and risk controls needed to make it work.

        --
        Write your congressman. Tell him he sucks.
  • (Score: 0) by Anonymous Coward on Tuesday March 04 2014, @06:34PM

    by Anonymous Coward on Tuesday March 04 2014, @06:34PM (#10842)

    I realize the USA likes to think the whole world has to follow their laws but can somebody explain to me how an apparently French person living in Japan would be under the jurisdiction of US gov?

    Of course there is the Kim Dotcom case. What BS.