The unpopular story of the vicious collapse of the biggest bitcoin exchange as of 2014 seems unending, after CEO Mark Karpeles was recently spared the rigors of spending 30 months behind bars.
The Mt Gox Collapse
Mt. Gox has become no less than a cautionary tale in the more matured crypto world of 2019, a reminder of how poor security can cause the collapse of a billion dollar powerhouse. If any crypto exchange feels too big, just ask Mt Gox. It is no fluke that Coinbase has a dozen personnel working daily on its security.
For a company which started as an online exchange for Fantasy card traders and Magic trade monsters, it should come as no surprise that it was in the long run unable to shoulder heavier responsibilities such like 70 percent of the world’s Bitcoin trades. Jared McCaleb who founded The Magic: The Gathering Online eXchange in 2006 only to convert it to a Bitcoin exchange and sell it four years later to Software Engineer Mark Karpeles, explained he sold the exchange to allow it reach the potential it was always meant to reach. Mt Gox did reach its potential, becoming the largest cryptocurrency exchange in the world in its time, only to falter catastrophically barely three years after its acquisition by Software.
Mt. Gox owes much of its failure to the sordid and poor backend technology that its millions of daily trades were built upon. Brock Pierce, one of the foremost crypto celebrities and serial investor—who has not hidden his huge ambition to raise the fallen Mt. Gox from its ashes by the way—recently told TechCrunch he wanted to buy Mt. Gox before its eventual collapse in 2014 but decided against it. He attributed one his reasons to Bitcoin-skeptic Goldman Sachs, and the other mostly due to the weak technical foundation that the exchange was built on.
“My biggest investor was Goldman Sachs. Goldman was not a fan of me buying the biggest Bitcoin exchange due to the regulatory issues,” he explained. However, the technical foundation of Mt Gox was the final deciding factor. “I thought there was a big risk factor in the Mt. Gox back-end. That was my intuition, and I’m glad it was because my intuition was dead right.”
Karpeles Escapes Jail
After the fall of the exchange which saw it embroiled in a pool of bankruptcy issue and lawsuits and filed claims, Mt. Gox reportedly and miraculously announced that it had found 200,000 bitcoins in an old wallet, reducing its deficit to 650,000 Bitcoins. Mark Karpeles was however soon found culpable of lying to inflate the company’s assets by more than $33 million.
However, because the CEO has been found with no direct links to embezzlement of funds, he has been handed a two and half years suspended sentence instead, and would not be serving the jail term, except if found guilty of another major offense within four years.