After nearly a year of investigations, Japanese police are saying that the missing Mt. Gox Bitcoin vanished due to someone with inside knowledge of the system.
When Mt. Gox, then the largest bitcoin exchange, went dark in February 2014, the price of Bitcoin dropped a staggering 23%, and soon reports began to trickle in that estimated losses were nearly US$370 million. When the news first broke, officers of the company claimed that the losses were due to a bug in the Bitcoin protocol that had been exploited by hackers.
Nathalie-Kyoko Stucky is a Tokyo-based reporter for Jiji Press in Geneva. Nathalie-Kyoko Stucky reports that the Tokyo Police Cyber Crimes Unit, White Collar Division, believes that the money was not taken because of “transaction malleability,” which was the original claim made by officers at Mt. Gox. Instead, police believe that someone inside the company, someone who had inside knowledge of how the exchange system worked and how it could be exploited, was responsible.
Mark Karpeles, then CEO of Mt. Gox, originally blamed the losses on outside hackers. This claim has been questioned from the beginning, however. While transaction malleability is definitely a weakness in Bitcoin, it is one that has been known since 2011, and one that can be easily corrected by installing software that accurately reports balances and transactions.
When Mt. Gox filed for bankruptcy on February 28, 2014, they issued a statement that said in part:
We believe that there is a high probability that these bitcoins were stolen as a result of an abuse of this bug. We are looking [at a] variety of causes including hacking by third parties.
Karpeles, who is still CEO of the Mt. Gox parent company Tibanne, a small Tokyo-based IT company, never indicated during this period, at least publicly, that he suspected inside involvement. In November of 2014, he said inan interview with Reuters that security at Mt. Gox was not as good as it should have been.
Karpeles did tell the Daily Beast in November that:
I suspect that some of the missing bit coins were taken by a company insider but when I tried to talk to the police about it, they seemed disinterested. I’ve been as helpful as I can with the investigation but I hope that they’re not targeting me. I didn’t steal anything.
The Tokyo police are not alone in their investigation into the crimes. In November, the District Court approved the involvement of Kraken in the investigation, at the recommendation of bankruptcy trustee Nobuaki Kobayashi.Kobayashi said about the appointment:
The bankruptcy trustee believes that it is very helpful for conducting the bankruptcy proceedings smoothly and for protecting the interests of the bankruptcy creditors to obtain support from a company with expertise in operating a bitcoin exchange business and managing bitcoin transactions.
While the police have yet to identify the culprit, the investigation seems to be closing in and hopefully the haze surrounding the Mt. Gox matter will finally be cleared. The harm caused by this event is still being felt by the Bitcoin community, and opponents of virtual currency use it to point to what they see as a lack of security and accountability.