The Mt. Gox scandal is one of the most famous and largest scams or hacks in the history of cryptocurrencies. This disaster occurred at a time when cryptocurrencies were still in their infancy, and it greatly affected people’s confidence in Bitcoin and cryptocurrencies.
What is Mt. Gox?
Mt. Gox was founded in 2010 in Japan and was considered the largest Bitcoin trading platform in the world, handling about 70% of the total global Bitcoin trading at the time.
The platform's name is taken from "Magic: The Gathering Online Exchange" because it started as a card game marketplace before transforming into a Bitcoin trading platform.
How did the scandal happen?
1. Exposure to hacking:
In 2014, the platform announced that 850,000 bitcoins (worth about $450 million at the time) had disappeared due to a major security breach.
The reason behind the hack was security vulnerabilities that had been exploited over the years. It is believed that many coins were stolen gradually since 2011.
2. Bankruptcy:
Following the incident, the platform filed for bankruptcy and shut down its operations entirely, leaving users without any compensation for a long time.
This loss had a devastating effect on the cryptocurrency market, as the value of Bitcoin subsequently fell dramatically.
3. Investigations and suspicions:
Investigations revealed that the problem was not only the hacks, but also the mismanagement of the platform.
CEO Mark Karpeles was charged with fraud and falsifying financial statements, and was later arrested.
What happened next?
After years of legal disputes, about 200,000 bitcoins of the lost funds have been recovered, but it is still far less than the total amount stolen.
The court has appointed a legal guardian to return the money to affected investors, but the process is slow and complicated.
Impact of the incident on the cryptocurrency market:
1. Decline in confidence:
New investors are afraid to enter the cryptocurrency market due to the lack of protection and regulation.
2. Enhancing security:
The incident prompted major platforms to improve their security systems and learn from mistakes.
3. Lessons learned:
The importance of keeping coins in personal wallets (Cold Wallet) instead of leaving them on platforms.
Current status:
To this day, the Mt. Gox incident remains controversial. Many of those affected are still awaiting compensation, and Bitcoin itself has continued to grow to record highs, making the scandal one of the most prominent examples of the risks of cryptocurrencies.
