Bitcoin exchange Mt. Gox filed for bankruptcy protection in Tokyo on Friday reports USA Today. The filing came after the exchange shutdown earlier in the week fearing a breach of security that resulted in the loss of 750,000 bitcoins.
Mt. Gox was once the worlds largest exchange for the controversial, virtual currency. At its height it claimed to handle nearly 80 percent of all bitcoin transactions, according to a NBC News story.
Appearing in court on Friday, Mt. Gox CEO Mark Karpeles confirmed that a hacking attack resulted in the loss of 750,000 users’ bitcoins as well as 100,000 of the company’s. At current prices that would amount to about $425 million. Such a loss puts Mt. Gox’s debt at $65 million, a figure which surpasses its assets said Teikoku Databank, a firm that monitors bankruptcies, in an AP story carried by ABC News.
Bitcoins were developed in 2009 as a virtual currency that allowed users to make transactions across international borders without using third parties such as banks or credit cards. The use of the currency had been catching on recently as sites like Overstock.com began accepting it. Such acceptance had spurred speculation and values of bitcoins had begun to fluctuate wildly.
The failure does not come as a surprise to many officials. "No one recognizes them as a real currency," said Japanese Finance Minister Taro Aso. "I expected such a thing to collapse.”
Last year China banned the currency and Vietnam recently followed suit amid the troubles at Mt. Gox.
Proponents of the currency, though, are hopeful that Bitcoin can survive the recent troubles and emerge stronger.
Yang Weizhou, analyst at Mizuho Securities Co. in Tokyo said the bankruptcy filing highlights the need for government regulations to stabilize virtual currencies. Weizhou predicted there would be lawsuits from users who suffered losses in the recent hack and further predicted that such virtual currencies are here to stay.
“It is undeniable," she said. "One must separate the Mt. Gox problem from the overall concept."