What happened on February 24th, 2014?

Eight years ago the crypto community saw the greatest exchange hack in Bitcoin history. That Monday users found Mt. Gox had suspended trading, and hours later, the website returned a blank page.

Mt. Gox was founded in July 2010 by the American programmer Jed McCaleb and sold to Mark Karpelès in March 2011. Mark was a French developer living in Tokio, Japan at that time who had the resources to “take to the next level” Mt. Gox, as Jed McCaleb stated.

Crypto community was in need of an exchange and Mt. Gox occupied that empty space. The exchange continued on growing, and with growth the first problems arrived in 2011. During July 25.000 BTC were robbed, the user database was leaked and the hacker made fraudulent trades using the credentials from a Mt. Gox auditor ‘s compromised computer. Some months later, in October, 2.609 BTC were sent to invalid address, without possibility of recovering the funds.

During 2013 and early 2014 Mt. Gox processed over 70% of all bitcoin transactions worldwide, making it the greatest bitcoin exchange. 

In the course of February 2014 bitcoin withdrawals were suspended and a press release claimed that the firmware had security issues which the company would work on to mitigate.

Days went by and users weren’t able to withdraw their coins until Monday 24th February. That day trading got interrupted and the website went offline, but the real surprise was the leaked internal document that claimed the company was insolvent after losing almost 750.000 BTC.

Mark Karpelès stated that “The company believes there is a high possibility that the bitcoins were stolen”, blaming hackers for the lost bitcoins. The total amount of bitcoins lost was almost 7% of the total supply: 750.000 BTC from the clients and 100.000 BTC from the company.

During 2014 and early 2015

  • Mt. Gox filed in Tokio a form of bankruptcy protection from creditors.
  • The company faced lawsuits from their customers.
  • The exchange filed for bankruptcy protection in the US.
  • Mt. Gox reported that it found 200.000 BTC in an old digital wallet.
  • WizSec, a token security company, concluded that missing bitcoins were stolen from a hot wallet, a problem derived from 2011 security breaches.

We talked to Alejandro, an Argentinean crypto early adopter that has been buying and mining bitcoins -when profitable- during those years. He suffered from Mt. Gox hack and one morning found himself without his bitcoins. His loss was around 30 bitcoins acquired between USD 0,75 and USD 11 that accounted for almost USD 17.200 at the moment of the incident. Today those 30 bitcoins would be valued around USD 1 million.

Alejandro, as many other investors, is still not sure about what really happened, but he firmly suspects that Mark Karpelès benefited from the situation. Luckily for him, last year he found some more BTCs in another exchange he used at that time.

The company liquidation started in 2014 to compensate the 127.000 creditors. After years of ongoing investigations the Japanese trustee overseeing the bankruptcy finally confirmed the reimbursement notice in 2021. The distribution of the crypto assets will probably take until 2023 and be executed with settlements over time.

Mark Karpelès was arrested in 2015 charged with manipulating Mt. Gox records -not related with the hack- and spent 1 year in prison. In 2019 he was sentenced for two and a half years in prison unless he maintains “good behavior” for the next 4 years. Today he is the CTO of London Trust Media and states that he is less interested in cryptocurrencies and wants to avoid more possible trouble.

So always remember: Not your keys, not your coins!

By Federico Rava

DeFi and Web3 enthusiast and researcher. Improving my solidity and DApp development skills.

Twitter @feder_eth  |  Github federava  |  LinkedIn Federico Rava