Mt. Gox "Discovers" 200,000 Bitcoins – What Else Are They Hiding?

In a development that can only deepen suspicion about what really caused the demise of Mt. Gox, the bankrupt Bitcoin exchange made a surprise announcement late Thursday that it had found 200,000 bitcoins in an "old-format wallet."

As with most of the explanations coming from Mt. Gox Chief Executive Officer Mark Karpeles since the Bitcoin exchange first started having serious problems back in February, the idea that a business operation could "forget" and then find a sum equivalent to $120 million strains credulity.

"Mt. Gox had certain old format wallets which were used in the past and which, Mt. Gox thought, no longer held any Bitcoins," Karpelès wrote in a statement posted to the exchange's mostly dormant website.

Karpeles said Mt. Gox found the bitcoins March 7 after rescanning the old wallets, which the exchange then reported to the Japanese bankruptcy court.

The discovery means Mt. Gox has more in assets than anyone thought, but that amount appears to be a moving target even now.

Note: Western civilization could easily come to an abrupt halt from a terrorist cyberattack. Scary, yes. But it also means that the companies who can repulse those attacks are in for enormous paydays...

"Please note that the reasons for their disappearance and the exact number of bitcoins which disappeared is still under investigation and that the above figures may still change depending on the results of the investigation," Karpeles wrote.

Translation: This story is far from over.

Mt. Gox filed for bankruptcy in Japan on Feb. 28 following a three-week suspension of customer bitcoin withdrawals. The Bitcoin exchange, once the world's largest, said it had lost 750,000 customer bitcoins and 100,000 of its own to unknown hackers. The total of 850,000 bitcoins was valued at $480 million at the time and represented 7% of all the bitcoins ever created.

Karpeles claimed that hackers used a flaw in the Bitcoin code to take all but 2,000 of the bitcoins stored at Mt. Gox, although coding experts said Mt. Gox should have known of the flaw and been able to take measures to protect its accounts.

And Karpeles never really explained how such huge sums could disappear with no one at the Mt. Gox exchange noticing.

The timing of the "discovery" of the 200,000 lost bitcoins also raises some questions.

"Today in court we got relief... specifically to track the 180,000 bitcoins, which we've been monitoring. Hours later, Mt. Gox claimed it 'found' these bitcoins," Steven L. Woodrow, a partner at law firm Edelson, told Reuters. Earlier this month, Edelson filed a class-action suit in Chicago on behalf of Mt. Gox customers who lost money.

"It appears Mt. Gox realized we were close and decided to acknowledge that it owned these 180,000-200,000 bitcoins," Woodrow said.

Despite the discovery, the class-action suit is the only hope that Mt. Gox customers in the United States have for reclaiming any portion of their lost funds.

Even then, Mt. Gox filed for a Chapter 15 bankruptcy in the U.S. last week in part to protect its assets from the class-action suit.

What do you think is going on at Mt. Gox? Do you find the sudden discovery of 200,000 bitcoins at all suspicious? Or do you think Karpeles and his team were simply incompetent? Sound off on Twitter @moneymorning or Facebook using #bitcoin or #mtgox.

Despite the problems at Mt. Gox, people continue to look for new ways to invest in Bitcoin. We've seen the Winkelvoss twins' plans for a Bitcoin ETF, the quadruple-digit surge of the currency itself, and now, signs that Wall Street heavyweights are lining up behind a Bitcoin hedge fund...

Related Links:

• Reuters:
  Mt. Gox Says It Found 200,000 Bitcoins in 'Forgotten' Wallet