Feds seized $2.9M from Mt. Gox, court docs show
gigaom.comMisleading title, USD funds were frozen, not actual bitcoins.
The worst part is that if we fix the title, the HN mods will "fix" it again.
Doesn't the technical architecture of the Bitcoin system make the seizure of actual Bitcoins by a third-party impossible or at least very difficult?
Yeah definitely more difficult, but it depends on the storage mechanism. But I suppose even if you simply had a private key hidden in some random folder or written down somewhere (there are more secure ways - one is breaking a key into multiple parts and spreading to separate people), it would be hard to locate or identify.
It also depends on what possible legal action those parties might have taken against them for not complying with a disclosure request on those funds.
So basically: "we can't find your money so you're going to jail unless you find it for us?"
I was talking to a friend about encryption the other day and that was his salient point. Unbreakable key? Break it or go to jail.
"Break it or go to jail" is already established law that pre-dates computers ("open this combination safe or go to jail"), but courts have generally held that this law also applies to encryption keys.
And if the contents of the safe are written in code, or some made up language that the courts don't understand, can they compel you to translate them?
Yes, they can. This has also been true for hundreds of years.
Physical security is an integral part of information security. But if governments start doing things like that, what kind of country are we living in?
USA and UK are already doing it:
[1] http://news.cnet.com/8301-31921_3-57364330-281/judge-america...
As always, relevant XKCD: http://xkcd.com/538/
I suppose the bitcoin ethos of a decentralized network - with no single vulnerable point of attack - breaks down once you consider that until you can buy groceries, pay rent, and just generally use the currency everywhere, there's always the last point of vulnerability: wherever you convert it to "actual" money.
But maybe that's an unfair assessment.
For a non-governmental currency that hasn't yet had its 5th birthday, I think bitcoin is doing decently well in terms of merchant acceptance. My personal opinion is that broad merchant acceptance will only come after it is widely used for investment/asset protection (if ever, of course). One indication for this idea is the magnitude by which forex volumes dwarf actual GDP. But it's all speculation :)
Actually seizing the Bitcoins would be very difficult, but there is (AFAIK) nothing stopping the Courts ordering a person not to deal with or dispose of the Bitcoins (or else be in contempt of court).
It appears Mt. Gox CEO Mark Karpeles (MagicalTux on #mtgox) declines to comment: http://www.reddit.com/r/Bitcoin/comments/1kp4uf/gigaom_repor...
(6:39:17 PM) *Blitzboom*: http://gigaom.com/2013/08/19/feds-seized-2-9m-in-bitcoin-funds-from-mt-gox-court-docs-show/
(6:39:59 PM) *Blitzboom*: MagicalTux: good thing we hear this from the media, and not you guys
(6:40:13 PM) *Blitzboom*: now everybody is going to be very calm about this i'm sure
(6:41:55 PM) *Blitzboom*: though i'm sure mtgox has at least 29k BTC even if it didn't have the cash
(6:42:01 PM) *AnonX*: god
(6:42:56 PM) *AnonX*: Reminds me of when the DOJ cracked down on online poker
(6:45:36 PM) *Blitzboom*: MagicalTux: can we hear something substantial now on this?
(6:45:40 PM) *Blitzboom*: cat's out of the bag
(6:45:43 PM) *Blitzboom*: do you have the money or no
(6:46:43 PM) *Blitzboom*: i mean, if you said you have 90% of the money you owe, then even that would be an improvement to the current spread if it's to be believed
(6:46:51 PM) *Blitzboom*: that would be only 10% spread
(6:46:55 PM) *MagicalTux*: Blitzboom: we cannot comment on this
(6:47:10 PM) *Blitzboom*: you can't comment on whether or not you are solvent?
(6:47:21 PM) *MagicalTux*: We can't comment on the legal actions in the US
(6:47:28 PM) *dust-otc*: MagicalTux: as in, compelled by the government not to comment, or advised by your own lawyers not to comment?
(6:47:32 PM) *Blitzboom*: can you comment on your solvency?
(6:47:53 PM) *dust-otc*: Blitzboom: Roger Ver can comment on solvency, apparently
(6:47:53 PM) *Blitzboom*: can you pay out the people you owe?
(6:47:54 PM) *MagicalTux*: I could comment on the fact that our income since April is around 8 million USD
(6:48:14 PM) *MagicalTux*: (anyone seeing trading volume can compute that one)
(6:48:31 PM) *Blitzboom*: all i'm asking is, do you have the money to pay everyone's balance?
(6:48:38 PM) *dust-otc*: MagicalTux: no, they could estimate your revenue, not income
(6:49:02 PM) *MagicalTux*: dust-otc: our transparency reports show the costs of running mtgox, and it hasn't changed muchThey seized these $2.9M months ago, but this re-hashing of the news is causing a run on the money: people are frantically buying bitcoins on MtGox to transfer them out of MtGox (since dollars withdrawals have been somewhat delayed and generally very slow to execute). This is pushing the exchange rate to 120 USD at MtGox, instead of ~100 USD as seen on other exchanges.
Doesn't this arbitrage play work the other way around? Unless you are saying, since money is so difficult to get out of Mt Gox, people are buying coins there, transferring and selling them (at a loss) on other exchanges where withdrawals are faster?
Doesn't that mean that there's some crazy arbitrage potential right now for cycling BTC through exchanges?
You can't do arbitrage if you can't get your dollars out. If you buy Bitcoins for $100 and sell them on Mt. Gox for $120, you're making money on paper but you can't necessarily get your earnings out into your bank account. You'd quickly run out of capital, and in the end you might have your dollars seized.
If I were to do it I'd sell the bitcoins for EUR. SEPA withdrawals are allegedly processed in 1-2 weeks currently.
There is a crazy opportunity. But it comes with risk. Risk that it may take months for you to eventually withdraw the dollars from MtGox to your bank account (wire transfers are executed at a glacial pace as reported by users). By that time, who knows what the BTC exchange rate will be. It may not be possible anymore to then buy BTC at $100 on other exchanges.
The last withdrawal I executed from MtGox (1000 EUR in April) took 3 months to be done (saw the money hit my bank account in July). MtGox was apologetic in support ticket I filed, but did not explain why it took so long other than they had "issues".
> MtGox was apologetic in support ticket I filed, but did not explain why it took so long other than they had "issues".
Elsewhere MtGox employees have explained that their bank has limited them to 10 international wire transfers per day due to capacity issues - they claim at one point they were responsible for 50% of the international wire transfers of their bank, the second largest in Japan. Apparently international wire transfers aren't very popular in Japans o they're all processed manually, which doesn't scale to what MtGox are doing.
> By that time, who knows what the BTC exchange rate will be.
This isn't relevant if you do the following:
1) Transfer USD to Bitstamp from your bank account 2) Buy BTC with your USD on Bitstamp 3) Transfer BTC to Mt. Gox 4) Sell BTC for either EUR or USD on Mt. Gox 5) Transfer EUR/USD to your bank account
In this scenario you are only exposed to exchange rate risk from the time it takes you to transfer BTC from Bitstamp to Mt. Gox and sell it (I think Mt. Gox requires 6 confirmations, so that's - on average - less than an hour currently).
As I see it the largest risk is Mt. Gox defaulting on its USD or EUR obligations, in which case you'll lose everything.
The opposite. Let's say you convert USD to BTC at ~$100 at BitStamp, move the BTC to Gox and sell it at ~$120 USD. You made a 20% profit on paper, but now you have USD that you can't withdraw any time soon, possibly ever.
Since when is Union Square been renamed "Satoshi Square"?