Jed McCaleb posted on the Bitcoin forum: “Hello everyone, I have just set up a brand new Bitcoin exchange.” Please let me know what your thoughts are.

This was 2010. This was in 2010. Gox.

Mt. On the first day that Mt. Each bitcoin sold for five cents.

It’s almost like a fairy tale. Even dwarves and elves are credited with the origins of bitcoin. McCaleb created the site, as bitcoin historians know, years ago as a way to geek out on fantasy card games like “Magic: The Gathering”. He wanted to sell and buy cards. He launched the “Magic: The Gathering Online Exchange” or Mt. Gox is a short form of Mt.

This article is part of the “CoinDesk Turns 10 Series” which looks back at key stories in crypto history.

Back then, buying bitcoin was not easy. Early enthusiasts bartered the “coins,” as they were then called, for items such as Tshirts and Visa gift certificates. Kolin Burges, a software developer at the time, recalls that he used a cumbersome workaround to buy bitcoin. He would purchase “Linden Dollars,” i.e. Second Life’s digital currency. Burges now says, “It was an absolute disaster.” Burges lost 40% on a $5,000 purchase due to a lack in liquidity.

A Canadian named Greg was so confused when he first tried to purchase bitcoin that he went into a local TD Bank, because he knew they converted currencies. The tellers had no idea what he meant; they’d never heard of Bitcoin.

Gox. Gox. You could now buy and sell bitcoins (or “bitcoins” as they called them back then) with no major hassles. Was it really that risky to have the digital currency on a centralized exchange? It’s easier to let the experts handle the security details.

Mt. Gox grew. It grew, and grew, and grew. Despite an initial hack in 2011, when it lost 25,000 Bitcoin – temporarily driving the price down to zero – Mt. Gox accounted 70% of all bitcoin transaction. Mt. It appeared that Mt.

The loot stolen from Mt. The stolen loot from Mt.

Mt. Gox has changed hands. McCaleb sold Mt. Gox to a French coder named Mark Karpeles, a “chubby twenty-four-year-old” who “had tremendous difficulty with human interaction, while the logic of the computer had spoken to him naturally,” as Nathaniel Popper described him in the book “Digital Gold.”

Burges, Greg, and the other 24 000 users of Mt. Gox did not really care if the exchange was owned by Burges, Greg or anyone else. They liked the fact that it worked. Burges’ life changed when he attempted to cash out bitcoins in Paris in January 2014. He was celebrating his 40th Birthday with his girlfriend. The withdrawal failed. Huh?

Former Mt. Former Mt.

Other people noticed the same problem. Daniel Kelman, an attorney in his 20s who started buying bitcoin at $100 per unit, was also unable to make any withdrawals. Mt. Gox said the withdrawal could not be processed due to KYC (know-your-customer) requirements, but this explanation seemed suspicious. Kelman had 44.5 bitcoin in Mt. Each bitcoin was worth about $1,000. This money changed Kelman’s life. Kelman couldn’t sleep because he was so worried. He was angry and confused.

Mt. Gox customers were not satisfied with Karpeles’ vague and unsatisfying answers. Mt. In a Reddit posting, Mt. Gox said that it was necessary to temporarily stop all withdrawal traffic in order to get a better technical understanding of the current processes. (“Haha! The first bitcoin bank run,” a Redditor commented. “Awwww! It’s growing so fast!”

Burges held 250 bitcoins in Mt. Gox, which was then worth about a quarter million dollars. He wanted them returned. He booked a flight to Tokyo from London and staged a small protest outside Karpeles’s office.

Burges, jet-lagged and cold, slapped a sign together that read “MT. Burges did not ask, “WHERE IS THE MONEY?” Burges deliberately avoided asking, “WHERE IS THE BTC?” at the time because no one knew what he was talking about.

Read more: Michael J. Casey, CoinDesk turns 10: What we learned from reporting a decade of crypto history

Burges met with a reporter for The Wall Street Journal, and another reporter from CoinDesk, a newly launched website covering the crypto space. Burges protest gained attention quickly and was one of the first bitcoin stories to be covered by mainstream media.

The Japanese observers were confused by Burges’ protest, as 1) he didn’t know Japanese, and 2) nobody had ever heard of Bitcoin. Burges was not deterred. He waited patiently for Karpeles’ arrival at work, and then confronted him.

Burges, in the snow with an umbrella and iced tea in hand, asked Karpeles: “Do you have everyone’s Bitcoins?”

Karpeles did not have a satisfactory answer for Burges and neither for the 24,000 other Gox customers. The hard truth finally emerged: Mt. Gox was hacked. Bitcoin was gone. Nothing was left. Karpeles stated at a Tokyo Press Conference in February 2014 that “we had weaknesses in the system and our bitcoins disappeared.” Gox’s bankruptcy. “We have caused a lot of trouble and inconvenience for many people and I am deeply sorry.”

It was about 7% of the total bitcoins that were in existence at the time. This crime totals over $22 billion at the current market value of about $30,000 per Bitcoin. Mt. Mt. The stolen loot of Mt. The loot from Mt.

What is the wildest part on Mt. Gox? The story is still relevant today, in 2023, as it was then. The hack helped to shape the crypto-industry. And now, almost a decade after the original publication, the final twist has been revealed.

You can’t find your keys

After the hack, the other heavyweights – not dummies – quickly distanced themselves. Gox, stating that the exchange was a mistake made by one bad actor rather than a failure for bitcoin. Sounds familiar?

This tragic breach of trust by Mt. Gox is the result of a single company’s actions, not the value or resilience of bitcoin, said Brian Armstrong, Jesse Powell, Kraken and other exchange heads in a statement. As with any new industry there are bad actors who need to be weeded-out, and this is what we’re witnessing today.

You can substitute Mt. You can swap out Mt.

Mt. To many, Gox represents the original sin in the crypto world: placing too much faith in centralized exchanges. For them, this is a lesson they should have learned in 2014. But it’s still a mistake we are haunted by in 2023. Caitlin Lon, founder of Custodia Bank and a bitcoin advocate for many years, says that the legacy of Mt Gox will be “not your keys, but not your coins.” Long was a Mt. Gox customer regrets having trusted a central institution, and says now that “it was a cheap tuition to learn an important life lesson.”

Roger Ver, a former volunteer who helped Mt. Gox in 2011 during the hack. Ver, when asked about Mt. Gox’s core lesson. Peter McCormack of “What Bitcoin Did”, a podcast that focuses on Bitcoin, has a similar takeaway. Gox: “Not Your Keys, Not Your Bitcoin.”

McCormack then offers a second point of view. He points out that the destruction of Mt. The price of BTC fell and many thought that bitcoin had been ruined. Kevin Roose , a tech reporter , wrote after the hack that “the Bitcoin dream is dead.”

Roose, to his credit has since retracted the statement. retorted, “Hoo boy did I blow it,” in 2017. Bitcoin, of course did not die. One could say that bitcoin grew stronger. Less fragile. If you take a look at the last 13 years, which includes Mt. McCormack says that the fact that FTX and Silk Road are still around is a testament to its strength. McCormack says it’s difficult to destroy a blockchain, even in the worst case scenario, where bitcoin is hacked or banned in the United States. I guarantee that people will move it around the next day and it will have price.

Hacking Mt. The hack of Mt. Mt. Japanese authorities have strengthened regulations for crypto exchanges . JP Koning claims that this Mt. According to JP Koning, Japan was the safest country for FTX customers because of this Mt.

Satoshi’s identity is one of the most intriguing unsolved mysteries in the crypto-space, but who hacked Gox comes a close second

Hackers’ success at Mt. Gox resulted in a tightening of security. Jed McCaleb designed the original exchange with orcs, goblins, and magic missiles – and not with billions of dollars worth of assets. The security was poor. Steve Walbroehl teaches Web3 security classes and includes Mt. Gox. Walbroehl says that the failures of Karpeles’ exchange led to improvements in “technical controls” (such as two-factor authentication and extra password security) and in “administration controls,” such as KYC requirements and a minimum amount of collateral an exchange must hold in reserve.

The exact details of the hack are still a mystery. While the U.S. Department of Justice subsequently blamed a Russian crypto-exchange runner named Alexander Vinnik, for laundering Mt. Walbroehl says that the cause of the hack and the culprit are “still a mystery.” Many in the crypto-space believe that Karpeles’s handling of the Mt. He was not the mastermind, and he did not act maliciously. Karpeles, however, was found guilty of manipulating data in court but not for hacking or embezzling funds. Who’s really the villain? Satoshi’s identity is still the biggest crypto-mystery, but who actually hacked Mt. Gox comes in second place.

There’s still one more mystery surrounding Mt. The shadow of Mt. Weeks after Mt. Karpeles, weeks after Mt. He found an old wallet containing bitcoins. He thought 200,000 bitcoins were in the wallet. This tiny wallet held nearly 1% of the total bitcoins that will ever be created. Imagine the Goonies finding One-Eyed Willie’s treasure. Now imagine an entire fleet of pirate ships.

Kelman, a young lawyer who lost 44.5 Bitcoin in the hack had obsessively followed the Mt. Gox bankruptcy. Kelman says that “everything” changed when Karpeles found the 200,000 bitcoins.


The end of the rainbow

It took almost a decade for the events that followed to be sorted out. The crazy thing about Mt. Kelman says that although the event took place in Japan and almost no creditors were in Japan, it was a bizarre situation. The court documents for Celsius Network, Voyager Digital and FTX can be accessed in the United States. Kelman, a lawyer who wasn’t involved in the case, says that “that didn’t exist” in Japan. There’s only one set of documents. The documents are in a specific room. You must go to the Tokyo District Court room and speak Japanese.

Imagine yourself in the shoes Mt. Put yourself in the shoes of Mt. They were furious and wanted answers. Django Bits, a bitcoiner and Swiss photo editor who went by the name “Django” at the time bought bitcoin for 30 cents in 2011. He held 20 bitcoins at Mt. He had 20 bitcoins in Mt. He created a Telegram Group for other creditors to share stories, commiserate, and track any developments in Mt. Gox bankruptcy case.

It was difficult to keep track. We’re looking over these strange documents that are coming from Japan. Django says that things continued to drag on. Karpeles was booted out of the exchange and a Japanese lawyer named Nobuaki Kobiashi was appointed as Mt. Gox’s trustee. He was tasked with distributing the remaining assets to creditors.

What exactly was the value of these assets? Before the hack in 2014, bitcoins were worth about $1,000. After the hack, the price dropped to under $500. The trustee had planned to sell 200,000 bitcoins and distribute the cash among the creditors, with the price set at $483.

Kelman, along with the other creditors, had a completely different idea. What if the creditors could receive their bitcoins instead of a cash payment? Kelman says that it would send a clear message to the world about bitcoin’s value. He visited Tokyo courts to see the documents, and later leaked them to the public. Kelman believed bitcoin. He attended weekly meetups at Tokyo’s Roppongi District where they convinced some bars to accept Bitcoin for beer. Kelman regarded bitcoin as money. If the Gox payment to creditors was made in bitcoin, this would validate their thesis.

The Gox bankruptcy case, which was later changed into a “civil rehab” case, continued to drag on. A lawsuit filed by an early bitcoin exchange named CoinLab was also complicating matters. The founder Peter Vessenes claimed he had a contract to buy Gox in the early days. Over the years, the Mt. The Mt. Brock Pierce attempted to launch “Gox Rising,” as an alternative resolution path for creditors. Craig Wright claimed that he owned the wallet containing over 79,000 stolen bitcoins.

Karpeles has appeared from time to time and at one time even waded into Django’s creditor group Telegram in order to answer questions. Django credits Karpeles with warning the group of the danger of their bitcoins – which at the time were worth over $1,000 – being liquidated for $488. The creditors sent letters of concern to the trustee, and prevented this outcome.

Even Django who runs the Creditors Telegram group struggles to keep up with every turn and twist. He says that the “Civil Rehabilitation Plan” is a 102 page document written in Japanese. Django laughs and says, “There is a 17-page English translation but it states that the translation was only for reference purposes.” It always states that the Japanese version of the document is the one which is binding.

The 102-page Japanese report does seem to contain one important message: the creditors will get their bitcoin back, or at least some of it, soon. Creditors will receive approximately 21% of their bitcoins that they lost at Mt. Gox plus an equal amount of Bitcoin Cash (BCH), created during the 2017 “fork wars”.

A paltry 21% payment in a normal settlement would be a huge disappointment. No one is happy about a 79% reduction. Bitcoin is not normal. Although the current crypto environment is often described as a “bear” market with “low” price, today’s prices ($30,000) are about 30 times higher than the $1,000 they were at the time of the Gox hack.

Mt. The Mt. They may not be on the exchange anymore, but they still HODL, still believe.

Greg had 14.7 Bitcoin in Mt. He’ll receive roughly 2.2 bitcoins, 2.2 bitcoins cash, and some cash. At current prices, that’ll give him about $60,000 which is far more than the value of his 14.7 Bitcoin (around $15,000.) He is suddenly better off after a decade of frustration. His assets have quadrupled. He can use his windfall to renovate the home he recently purchased. He says it is also nice to have the mentality of “f**k it. It’s done.”

Theoretically, if Greg’s bitcoins had never been chained at Mt. If he had timed the market perfectly and sold all 14.7 Bitcoins in November 2021 at $69,000 per bitcoin, he would have made $1 million. This seems unlikely. What are the chances he held on to all 14.7 shares for many bumpy and rocky years, then sold them at the top price?

Greg, Kelman Burges Django, and other creditors were “forced to HODle” and are now much better off. Kelman says that “the forced HODL made a lot people money” as they were forced to ignore market gyrations in order to play the long-term game. Kelman says that “there is gold at the end the rainbow” for many creditors.

As it stands, creditors have a choice. They can either receive an early lump-sum that Mt. The trustee of Mt. Early payouts are roughly 90% more than what they would get if they waited for CoinLab’s resolution, which may take years. Django says that a poll conducted by the Telegram group showed that 46% of respondents opted for an early lump-sum payment, while 20% opted for a final settlement, and 30% were undecided.

Django gently pushes back against the “forced HODL’ narrative. He acknowledges that some creditors may be better off, but they still lost 80% of their Bitcoin. Fair.

When will the creditors receive their long-lost Bitcoin? Django conducted another poll within the Telegram group of creditors. Django reports that, amazingly, only 14% of respondents would sell bitcoins immediately. 25% would sell a part of their total and a staggering 50% would continue to HODL.

This is either crazy or inspiring, depending on how you look at it. These creditors spent a decade in limbo. They thought that their money had disappeared. They thought that they would only receive crumbs. It turns out that they could receive four times as much (in comparable U.S. dollar amounts) than they did in 2014. They believe so strongly in bitcoin that thousands of people are not even cashing out a penny.

Mt. The Mt. They may not be on the exchange anymore, but they still HODL, still believe.

Ben Schiller is the editor.