So, Mt. Gox filed for bankruptcy protection in Tokyo on Friday. The details emerging today of the magnitude of the losses are frankly, staggering. Karpeles may have overseen the loss of up to half a billion dollars worth of Bitcoins. The first lawsuit has already been lodged by Gregory Greene in the US District Court in Chicago. Mr. Greene had approximately $25,000 worth of Bitcoin. Greene’s money is gone; everyone’s money is gone. Mt. Gox has lost roughly 750,000 of client’s Bitcoins as well as 100,000 of its own, almost 7% of total circulation.
Karpeles apologized today before saying:
“The Bitcoin industry is healthy and it is growing. It will continue, and reducing the impact is the most important point.”
This may not fully reassure Mr. Greene or the many other small investors that are now finding themselves to be significantly poorer.
The cost of Mt. Gox going forward
Assuming the direct cost to investors will be in the region of half a billion dollars, and this close to the event this may prove not be an accurate assumption, let us then look at the indirect costs of the collapse. Bitcoin and almost every other cryptocurrency, with the exception of Ripple, has taken a heavy hit. There is a problem out there with contagion. Politicians tend to be negative towards cryptocurrency as it forces them to address new issues and there are powers available to them which have been honed on the creation and tracking of fiat money. Statements from politicians on both sides of the Pacific Ocean are adding fuel to the flames and we must remember that it is the bad news that sells newspapers. Bitcoin has clearly been damaged and the cynics are waiting in the wings, smiling and readying their “I told you so” speeches. Karpeles is right about one thing though, the Bitcoin project is ongoing and is strong and will survive.
The cost of the collapse of Mt. Gox may well end up topping one Billion dollars and the true cost may not be fully assessed in the short term. Investors are currently looking at the situation and are surely taking advice. It is blindingly that the level of oversight was not what they, as clients, should have reasonably expected. Gregory Greene has hit the ground running in Chicago with his legal team. This will certainly not be the last lawsuit. Remember as you listen to the bankers and politicians going forward that there is another agenda. Remember that crypto is the enemy. Let me leave with a quote from the late Josiah Stamp, a British Civil servant, an industrialist, an economist, a statistician, a writer and… oh, yes… a banker.
“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.”
Josiah Stamp (1880-1941)