Rolling Out

Bitcoin hack lets thieves steal $500 million globally

Mark Karpeles
Mt. Gox CEO Mark Karpeles bows at bankruptcy hearing in Japan

Further illustrating the dangers of doing business online, the creator of the digital currency “Bitcoin” announced the largest theft in hacking history. Mt. Gox located in Japan announced that it lost the account holdings of 750,000 customers, which are worth almost $500 million. Bitcoin allowed customers to purchase with real currency an alternative digital currency. Customers could then use these bitcoins to purchase products online or to actually cash out their holdings in real currency at bitcoin exchanges. Each bitcoin had a set rate based on the number of the account holder’s investments. The price of a bitcoin soared from $13 to $1,100 in 2013 making a tidy profit for investors. The bitcoin then lost almost half its value in December when many people cashed out to take their profits.

Bitcoin is unregulated currency, so there is no protection for those who purchased the digital currency.  The hack not only cost individual investors but also large groups such as Fortress Investment Group, which lost $3.7 million from its purchase of bitcoins in 2013.  The company that runs Bitcoin stated that code was manipulated that allowed cyber thieves to alter customer IDs. Following, Mt. Gox CEO Mark Karpeles, bowed in apology at the Japan’s Ministry Of Justice in front of an investigative panel. “There was some weakness in the system, and the bitcoins have disappeared. I apologize for causing trouble,” stated Karples as the company has filed for bankruptcy protection and shutdown operations.

One Chicago man, Gregory Greene, claims to have lost $25,000 in bitcoins and seeks a class action suit against Mt. Gox. In his court filings, Greene states that Mt. Gox defrauded customers by engaging in  “unlawful, deceptive, and unfair conduct that is immoral, unscrupulous, and causes substantial injury to consumers” and it failed to “protect their bitcoins and fiat currency and safely and quickly allow them to buy, sell, trade, or withdraw the same at any time.”

The company is now under investigation by the U.S. attorney’s office for the Southern District of New York. Details of the nature and depth of the investigation have not been released and the company was ordered to turn over and preserve records.

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