Captains of Imbecility: Mt. Gox Finds 200,000 Missing Bitcoins

Last month, the implosion of Mt. Gox—formerly one of the biggest bitcoin exchanges—made headlines. The company filed for bankruptcy protection shortly after it had announced that it lost 750,000 customer bitcoins, with another 100,000 bitcoins of its own having gone missing as well. Many wondered what had happened, and whether or not there could be something nefarious at work. But an announcement today seems to cast lots of doubt on that last theory.

Turns out that the folks running Mt. Gox might just be kind of dumb.

Yesterday, a letter written by CEO Mark Karpeles announced that Mt. Gox had discovered 200,000—or about $120 million worth—of the missing bitcoins:

“Mt. Gox Co., Ltd. Had certain old-format wallets which were used in the past and which, MtGox thought, no longer held any bitcoins […] These wallets were rescanned and their balance researched. On March 7, [we] confirmed that an old-format wallet which was used prior to June 2011 held a balance of approximately 200,000 BTC.”

This sounds a lot like a banker announcing that he had found a stack of someone’s cash under the cushion of one of the lobby couches.

And, just so we all remember, Mt. Gox started out as a Magic the Gathering card exchange site. Entrusting your money to Mt. Gox is sort of the equivalent of handing a bag full of money over to the dude who used to run your local comic book store after he says, “don’t worry, I’m a bank now.”

Anyhow, this leaves another 650,000 bitcoins still unaccounted for, but the fact that such a significant portion of the digital currency could just turn up like this is troubling to say the least. Moreover, this can’t help but raise questions about digital currency in general—not the idea of the digital currency, but the people in whom investors entrust their assets.

Let me be clear: bitcoin, as a concept, remains as sound as ever. But the people who maintain the exchanges might be as careless as the people running Mt. Gox. And, yes, while this can be said of any financial institution, the difference is that banks are insured by the FDIC and are subject to close scrutiny and government regulation. Bitcoin exchanges are not. If nothing else, this incident will further prompt the bitcoin community to make sure that the exchanges they trust can withstand the rigors of handling people’s money.

[Image via Daily Mail]