Until 2014, Mt. Gox used to be the largest bitcoin exchange operator in the history of virtual digital currency and its poster boy bitcoin. The Japanese-based company arose in July of 2010. By the year 2013, it had grown to dominate the bitcoin exchange market by handling an astonishing 70 percent of all bitcoin transaction in the world.
In less than a year later in February of 2014, the company was forced to suspend stock trading, close down its exchange service and website, and to file for bankruptcy protection known as civil rehabilitation. The courts began looking for a buyer of the stricken exchange at this point. By April of 2014, the firm had started official liquidation procedures under the auspices of a court-appointed bankruptcy trustee.
This is when the news, which was only unconfirmed rumors before, emerged that nearly 850,000 bitcoins which belonged to company customers had been missing and probably stolen. The value of said bitcoins at this point proved to be $450 million. The good news for account holders is that fully 200,000 of the supposedly stolen coins were found. In the beginning it was unclear whether the coins had been fraudulently mishandled, stolen, mismanaged, or some combination of all of them. By April of 2015, WizSec produced evidence which showed that the majority of the missing digital currency units were actually stolen right out of the Mt. Gox hot wallet gradually and over several years. This theft began consistently in 2011.
The company initially grew out of a fantasy gaming community project. Its humble origins dated back to late 2006. Programmer Jed McCaleb famous for his games and apps Stellar, Ripple, Overnet 1, and eDonkey2000, came up with the idea to develop a website for the players of Magic: The Gathering Online. This would enable them to trade various cards like stocks, which already traded online. He bought the domain name mtgox.com as an acronym for Magic: The Gathering Online eXchange. When the developer lost interest in what he assumed would never be a profitable project, he later sold it off to investor-developers who had visions for its platform as a bitcoin exchange.
By 2013, the site was by far and away the largest bitcoin exchange operator in all the world, dealing in 70 percent of the global bitcoin trade. By May in 2013, Mt. Gox was trading an impressive 150,000 of the digital currency units each day, as demonstrated by the Bitcoin volume charts.
It was only one month later that suddenly Mt. Gox suspended all client withdrawals in U.S. dollars. Tokyo’s Mizuho Bank which handled their U.S. transfers began pressuring them to close out the account from this moment. Transactions were restored on July 4, but there were consistent problems through the rest of the summer and fall.
Wired Magazine broke the story in November of 2013 that Mt. Gox clients suffered from several weeks to even months of delays when they attempted to cash out their bitcoins for other currencies or take out bitcoins in the forms of withdrawals. The article claimed the company was “effectively frozen out of the U.S. banking system because of its regulatory problems.” By February of 2014, client complaints had mounted regarding the long delays in withdrawal processing. February 7 saw the final halting of all bitcoin withdrawals by the company.
The news just continued to grow worse from this point. February 23 witnessed the resignation of CEO Mark Karpeles from the Bitcoin Foundation. The next day, Mt. Gox had suspended all trades. Its website went dark a few hours later and never came back online. A leaked document on the company’s crisis management insisted that the company had become insolvent after the loss of 744,408 bitcoins in a theft that had been ongoing and undetected for literally years.
At this point, six of the other major bitcoin exchange operators issued a joint press release asserting that they had no connection with the fallen former giant of the industry. The last communication from the company came out on February 25 when they reported that all of their transactions had been closed out until further notice thanks to recent reports and their impacts on the operations of the firm.