Where are they now? Mt. Gox bitcoin thieves, users and missing BTC

Posted: 7 March 2018 7:00 pm

Several years after the theft of 650,000 BTC, now worth $7 billion, the saga might be drawing to a close.

Mt. Gox was one of the original bitcoin exchanges. It got its start as the trading grounds for assets from a digital card game before morphing into the world's leading bitcoin market place and, inevitably, a hub for various shady online activities.

The Mt. Gox hack in late 2013 was probably one of the most famous in crypto history, leading to the loss of 650,000 BTC, now worth over US$7 billion, and throwing bitcoin prices into a malaise that lasted for years.

It's now known that it took place over a long time, with hackers gradually siphoning off user funds and hollowing the exchange from the inside out until it suddenly collapsed. This might have come as an unpleasant surprise to the person who painstakingly manipulated bitcoin prices from about $150 to $1,000 in late 2013, only to see Mt. Gox suddenly collapse and undo their work.

According to a BBC report, most of the stolen coins ended up at Mt. Gox's rival exchange, BTC-e, which is operated by a British company, Always Efficient LLC. According to the FBI, BTC-e was known as a criminal hub.

Always Efficient is probably a shell company designed to launder the proceeds of crime, said Duncan Hames of Transparency International.

"People laundering money will set up a network of companies to create layers between the original crime and their attempts to then integrate the proceeds of their crime into the economy. They simply enable a series of transactions to take place to create this distance and to obscure the trail of the proceeds of crime."

Where are they now?

So where did all the pieces land?

The thieves

Under British law, companies are required to publish a list of "persons with significant control (PWSC)" over the company. But Always Efficient lists its PWSC as Andrei Zakharov, a DJ in a Moscow nightclub. When tracked down by a Russian journalist, Zakharov said he knew nothing about the company.

At the moment, the main suspect might be the man behind the man behind BTC-e and the laundering of the Mt. Gox funds, a Russian national named Alexander Vinnik.

Vinnik was arrested while on vacation in Greece in 2017 and has denied having any connection with Always Efficient, although the BBC has reportedly seen documents linking Vinnik to the laundering of Mt. Gox funds and the distribution of the money. It's not clear whether he was also behind the hacking.

"BTC-e is just a web platform for buying and selling Bitcoin - not an exchange. As such it cannot be held responsible for the source of money used to buy Bitcoin, no more than a bureau du change can be held responsible for exchanging a stolen $100 note into pounds sterling," Vinnik said to the BBC through his lawyer.

Today, Vinnik is still being held in Greece while local authorities try to detangle the two extradition requests they've received for Vinnik: one from the USA and one from Russia.

The bitcoin

Most of it's probably long gone now. It has probably been put back into circulation and cashed out through various shell companies.

Whether the now-laundered fiat currency is technically the same bitcoin that was stolen from Mt. Gox might be equal parts a philosophical and a legal question.

With 650,000 BTC stolen, Mt. Gox was left with 200,000 BTC which has been sold off over time.

Mt. Gox

Mark Karpeles, who owned Mt. Gox at the time of its insolvency, was arrested and charged with embezzlement and manipulation of data. None of these charges relate to the theft of the bitcoin but were discovered in the subsequent investigation.

Karpeles denies the charges and says he's working to make sure affected customers get their funds back.

"I am very sorry that when I was in charge things happened the way they did," he said. "It felt like… when you fall from a building and you see the ground getting closer, and you feel like you are about to die."

The 200,000 remaining bitcoin

Mt. Gox declared bankruptcy following the incident, and the remaining bitcoin were held as part of the proceedings. Funnily enough, under Japanese law (Mt. Gox was based in Tokyo), those bitcoin are still valued at roughly about $400 each, the amount they were worth at the time of the bankruptcy. But since then, bitcoin prices have shot up and those 200,000 BTC remaining are worth over $2 billion.

Over half a billion dollars worth of those bitcoin have since been sold off, inadvertently crashing bitcoin prices several times in the process, so even after its death Mt. Gox is still collapsing bitcoin prices. This sell-off is believed to have been used to fulfill obligations to creditors at the $400 per BTC price.

The trustee still has about 165,000 BTC and BCH, worth around $1.5 billion and $150 million respectively. The fate of these coins is still in limbo, but many affected customers are still pushing to see their bitcoin refunded at the current price. If this ends up happening, there are probably going to a few new overnight millionaires on the block.

It might not happen though. Under Japanese bankruptcy law any remaining proceeds will technically go to Mark Karpeles, currently out on bail. This would drop the entire $1.5 billion fortune on him, much to the consternation of Mt. Gox users who are only being refunded their losses at prices equivalent to $400 per stolen coin.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, SALT, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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