They only discovered this recently a few weeks ago. They didn't have enough Bitcoins or USD to pay the people with accounts on their website. Mt.Gox's assets are only like $30 million, when their liability was around $80million.
Mt.Gox caused a crash last april from $266 down to $60, when its servers couldn't handle the trading load, and the site crashed, causing a massive panic sell. A month later much of Mt.Gox's assets were seized by the US Justice department since Gox didn't have money laundering prevention protocols in place. Mt.Gox then slightly-suspended USD withdrawals.... half the time the withdrawal would go through but only after a month, the other half of the time the withdrawal would fail and get "lost."
Mt.Gox at the same time froze many of its users accounts funds deeming them "high risk" basically trapping their funds on the site.
From this time onward, Mt.Gox's exchange rate would be about 20% higher than other exchanges.... due to the difficulty of withdrawing USD from the website.... which makes no sense to me.
Human Greed comes into play here. They see the exchange rate on Mt.Gox is 20% higher, so they buy on other exchanges, and plan to sell on Mt.Gox. But then their USD is trapped or takes a month or two to complete the withdrawal.
Human laziness also came in to play.... makes no sense... people who bought Bitcoins when they were only $2~ (at this time Mt.Gox was the largest and safest exchange), trusted Mt.Gox at that time. Most people keep bitcoins on a secure computer or a piece of paper with the keys printed on it. But these people just left their coins on Mt.Gox.... because it was easier. Many stories of people who had hundreds of thousands of dollars of bitcoins on Mt.Gox, now unable to get them.
When you deposit coins onto Mt.Gox, they all go into a big slush fund that is grouped together with everyone else's Bitcoins. Your account is then credited with the number of bitcoins you deposited, but its more of an "I owe you" from Mt.Gox. "You deposited x number of bitcoins, so we owe your account x number when you decide to withdraw"
And then there were people betting that an established entity like Mt.Gox could not fail, they have wire transferred over hundreds of thousands of dollars into Mt.Gox to try and buy up "cheap coins"
So many victims.... but here's the latest announcement from Mt.Gox CEO (and why I think their incompetence is so similar to Sage Sundi): "We should have an official announcement ready soon-ish."Statistics: Posted by kuponut — Tue Feb 25, 2014 11:05 pm
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