Bitcoin users to gather in Tokyo amid MtGox woes

TOKYO, Japan – Bitcoin users in Tokyo will gather on Thursday, February 27, for a meeting set to be dominated by the shuttering of the MtGox exchange amid claims of a multi-million dollar theft.

Dozens of members of “Bitcoin Tokyo” are expected to be at their weekly get-together, with some of them bracing for six-figure losses stemming from a claimed emptying of the digital vaults at the Japan-based MtGox.

“It’s going to be dominated by the issue,” said Jonathan Waller, co-organizer of the group, which works to promote the virtual currency in Japan.

Waller is one of a reported one million people who had an account at MtGox, the first exchange for the crypto-currency, and says his deposit was worth more than $100,000.

“We want to share information and discuss” what has happened, he said, adding that he was angry but felt quite powerless.

“We can’t help. We just have to wait and see,” he said.

Bitcoin continued its rollercoaster ride Thursday, trading near the $600 mark, according to the Winkdex index, down 6.0 percent in 24 hours. (READ: Investing in bitcoins? 4 things to consider)

The value swing – characteristic of a currency that began life worth a few cents and topped out well above $1,000 – came as Japanese authorities began probing the MtGox debacle and as a US lawmaker called for the unit to be banned.

The MtGox website, which went dark on Tuesday, remained largely empty save for a message from Mark Karpeles, the France-born chief executive who has not been seen in public for several days.

“As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues,” he said.

“Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.”

Bitcoin derivatives

A Bitcoin derivatives company – btc.sx – said it was suspending trading “due to the current closure of our main partner exchange.”

The company, which allows investors to carry out leveraged trades against the future price of a Bitcoin, said: “All customer balances are secure and we will honour any withdrawal requests.”

Founder Joe Lee is described on the company website as “a Bitcoin enthusiast whose parallel interest in finance and technology took him on a journey ending up in MtGox’s Tokyo offices.”

In Washington, Senator Joe Manchin wrote to federal regulators urging a US ban on Bitcoins.

“This virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy,” Manchin said in his letter to the Federal Reserve and other regulatory heads.

“I urge regulators to take appropriate action to limit the abilities of this highly unstable currency.”

Japanese authorities began a probe Wednesday into the MtGox exchange as the Wall Street Journal reported US prosecutors had already served a subpoena on the firm.

The crisis at MtGox first gained wide recognition on February 7 when the company halted withdrawals, citing a flaw in the software that supports Bitcoins, which it said could allow hackers to steal them.

Other exchanges said the problem was not with Bitcoin, but rather with MtGox, which critics say was not robust enough to handle the volume of transactions it was getting.

In the weeks after the suspension the price of a Bitcoin on MtGox dropped and sat at around a quarter of the global average before the website went offline on Tuesday.

A document circulating online and purporting to be a MtGox “crisis strategy” said the firm might have lost more than 744,400 Bitcoins in a theft that had gone unnoticed for years.

That number of Bitcoins would be worth more than $400 million at present rates and represents around five percent of all the Bitcoins in existence. – Rappler.com