Mt. Gox finds 200,000 bitcoins in “old-format wallet”

[Blue_Tires]

25. MtGox finds 200,000 Bitcoin down the back of the couch

I don’t think any of us thought that MtGox was particularly well managed but the more we find out the worse it all seems to get. For today they’ve announced that they’ve just found 200,000 Bitcoins that had slipped down the back of the couch. No, really, someone running an exchange, offering a safekeeping and conversion facility, managed to just lose in their own systems over $115,000,000 at today’s prices, and what was once worth $200,000,000. It was in an old wallet that they thought was empty you see:

There’s two implications of this announcement. The first being that the organisation wasn’t, in fact, an organisation at all. It was a bunch of script kiddies having a lark. This isn’t, perhaps, the greatest of surprises to anyone who has been following the story.

The second is that MtGox has clearly been trading insolvently since June 2011. For those not entirely current on accounting law (and why should you be? This is a most, most, boring area) this is one of those no-nos that every entrepreneur is warned about. It’s OK to go bust: failure is how we learn. But don’t cross over into fraud and deception which is what insolvent trading is.

Think through what is being said here. They found these Bitcoin in an old wallet that was used before June 2011. And they’ve only just found them: therefore, between June 2011 and March 7 2014 they had a hole of 200,000 Bitcoin in their accounts. Yes, they were still there: but the management must have known that they didn’t have them for it to be even possible for them to have just found them. At which point the management should have stopped trading. Because with that 200,000 hole there’s no way that they could have met their accumulated financial obligations. This is what it means to trade insolvently. To pretend that you’ll be able to meet past, current and future financial obligations while knowing that you’ll not be able to do so.

http://pando.com/2014/03/21/mtgox-finds-200000-bitcoin-down-the-back-of-the-couch/