360° Coverage : Bitcoin's Mt. Gox Shuts Down, Loses $409,200,000 Dollars...

2 Updates
Bitcoin's Mt. Gox Shuts Down, Loses $409,200,000 Dollars -- Recovery Steps and Taking Your Tax Losses
Photo Credit: Forbes Business

Bitcoin's Mt. Gox Shuts Down, Loses $409,200,000 Dollars -- Recovery Steps and Taking Your Tax Losses

Feb 25 2014, 5:32am CST | by

Mt. Gox’s shutdown is circulating like wildfire.  Its repercussions are being felt throughout the world.  Mt. Gox was the most public and well-known brand that represented Bitcoin’s exchange market...

Filed under: news

 
 
 

29 weeks ago

Bitcoin's Mt. Gox Shuts Down, Loses $409,200,000 Dollars -- Recovery Steps and Taking Your Tax Losses

Feb 25 2014, 5:32am CST | by

Mt. Gox’s shutdown is circulating like wildfire.  Its repercussions are being felt throughout the world.  Mt. Gox was the most public and well-known brand that represented Bitcoin’s exchange market.  The company’s shutdown is rumored to be caused by a “hack” or “security breach” that resulted in a loss up to 744,000 BTC or $409,200,000 Dollars. (Based on the approximate value just hours ago from Coindesk.com)  This is truly an unfortunate event that has caused the international community to shake its trust in Bitcoin as evidenced by the massive price drop.  This is par the course, when a pillar in the community falls in such a funeral pyre.  The best parallel would be the Bear Stearns’ failure during the 2008 global financial crisis.  Hopefully, Bitcoin won’t follow in the financial system’s footsteps post-Bear Stearns.

This Not The First Time

Mt. Gox was suspected to be hacked before to the tune of 400,000 Bitcoins (Today worth $220,000,000 dollars) in 2011.  At the time of the incident the bitcoins were only worth $9 million dollars, Hackers attempted to sell $9 million dollars’ worth of bitcoins simultaneous on the Mt. Gox network and it caused the market price crashing to zero, before Mark Karpeles, CEO of Mt. Gox, shutdown the exchange.  Mt. Gox was able to recover from this by publicly apologizing and by reimbursing the lost funds.  This was an amount that the company was able to reimburse, but the most recent breach eclipses the 2011 incident and the company is unable to make the same promise again.

Mt. Gox is not the only company to face these problems.  Companies such as MyBitcion lost 154,406 Bitcoins (Today worth $84,923,300 dollars) in an attack in 2011 and Bitcoinica lost 43,554 (Today worth $23,954,700 dollars) in an attack in 2012.  There are a multitude of these incidents, so it is unfair to lay the blame solely on Mt.Gox.  Financial institutions are targets that constantly under attack by unscrupulous individuals.  It is a difficult position for any person or company to withstand.

Focusing On Next Steps

Insurance

Over 1 million people were Mt. Gox customers and they need to know what their immediate options are to deal with their financial losses.  First, it’s important to understand that Mt. Gox is not a bank and it does not protect its users with a system similar to the FDIC or Federal Deposit Insurance Corporation.  This means that there isn’t a neutral third-party protecting the money you held at Mt. Gox.  The FDIC provides insurance up to $250,000 dollars on deposits in bank accounts to help assure us that our money won’t evaporate, if the bank shuts down like Mt. Gox.

Mt. Gox. could have provided the same service by purchasing a separate insurance policy on their BTC deposits.  The insurance would’ve been on behalf of the 1 million users that have lost $409.2 million dollars overnight.  Unfortunately, Mt. Gox does not provide insurance or any assurances for an user’s account.  Thus, we’re left in the wind – cold and unprotected.

Lawsuit

Can we sue or file a claim against Mt. Gox?  Suing Mt. Gox would require an international lawsuit filed under Japanese law, where the company is headquartered and registered by the Tokyo Chamber of Commerce.  Realistically, it won’t be worth our time or money to go after the company.  It’s unlikely that there will be enough assets held within the company to pay off any substantial or meaningful portion of the lost bitcoins.  The legal fees would probably balloon into the millions and swallow what’s left of the fallen company.

What about the officers like Mark Karpeles, CEO?  It would really depend on how Japanese laws would handle the situation.  In the United States, we wouldn’t be able to pierce the corporate veil unless we were able to show gross negligence or some sign of personal fault.  Assuming we were able to obtain a judgment against officers like Mark Karpeles, it is still unlikely that we’d be able to reclaim any amount even close to the $409.2 million dollars.

What Now? Taking Your Losses And Tax Benefits

The single silver lining here is that Americans that fell in this disaster will at least be able to use their losses to help lower their tax burdens.  United States tax law allows capital gain losses to be rolled forward without a statute of limitation.  Thus, your Bitcoin losses will be deductible forever until you’ve used them all.  This means that the $409.2 million dollars is worth a potential $122.8 million dollars in tax refunds.

We’ve already discussed in previous articles that bitcoins are classified as assets used as an investment by most of the Bitcoin community.  Thus, taking your capital gain losses is just part of that process.  You’re permitted to take up to $3,000 dollars in capital losses per year to deduct against your personal income “above the line,” until you’ve exhausted all of your capital losses.  (This is a very good thing!)  I can’t say that this will give much solace to people that lost their accounts at Mt. Gox or the bitcoin community, but I hope that this gives them some measure of good news.

Conclusion

Mt. Gox’s failure is not the end of Bitcoin.  It is a single company failing in a large ecosystemThe other major pillars in the community such as Coinbase, Kraken, Bitstamp, BTC China, Blockchain.info and Circle have issued public statements reiterating my thoughts.  Bitcoin has taken a stumble, but it is up to the community to determine whether this is a scrape they can recover from.  But, it’s important to realize that all wounds heal given enough time.

Source: Forbes Business

 
Update
2

3 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce o ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

3 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 an ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Communicable diseases warning issued after floods in Philippines
Manila, Sep 20 (IANS) The Philippines Department of Health (DOH) Saturday warned the public of the transmission of communicable diseases following the floods that inundated Manila and surrounding provinces.
 
 
Pakistan facing over 6,000 MW power shortfall
Islamabad, Sep 20 (IANS) Pakistan is facing an electricity shortfall of over 6,000 MW, with many parts of Punjab province witnessing outages of 20 hours a day.
 
 
'Most British female students face sexual advances on campus'
London, Sep 20 (IANS) Over one-third of British female university students have faced unwanted sexual advances on campus while studying, reveals a new poll.
 
 
More Hubble observation time goes to men: Study
Washington, Sep 20 (IANS) In a disturbing trend, an internal Hubble Space Telescope (HST) study has found that in each of the past 11 observation proposal cycles, applications led by male principal investigators had a higher success rate than those led by women.
 
 
 

Latest from the Network

John Cusack: Young fame is hard
John Cusack thinks being a child star is ''brutal''. The 'High Fidelity' actor - who appeared in his first film 'Class' aged 16 - believes finding fame at a young age can be a ''damaging'' experience and feels he's had...
Read more on Movie Balla
 
Indian lifters fail to impress at Asiad
Incheon, Sep 20 (IANS) Indian weightlifters began their Asian Games campaign on a disappointing note as all three participating contestants finished at the bottom half of the table in their respective categories in...
Read more on Sport Balla
 
Released Turkish hostages join families in Ankara
Ankara, Sep 20 (IANS) Forty six Turkish hostages released by the Islamic State (IS) militant group returned to the Turkish capital of Ankara by the special plane of Turkish Prime Minister Ahmet Davutoglu and were...
Read more on Politics Balla
 
Indian women shuttlers in semis, men out (Roundup)
Incheon, Sep 20 (IANS) The Indian women's badminton team lived up to its potential to reach the semi-final at the Asian Games at the Gyeyang Gymnasium here Saturday. The shuttlers first beat Macau 3-0 in the Round of...
Read more on Sport Balla
 
Indian medallists at Asian Games
Incheon, Sep 20 (IANS) The following were the medallists for India on the first day of competition at the 17th Asian Games here Saturday: Gold: Jitu Rai: Men's 50 metre pistol shooting Bronze: Shweta Chaudhary: Women'...
Read more on Sport Balla
 
Communicable diseases warning issued after floods in Philippines
Manila, Sep 20 (IANS) The Philippines Department of Health (DOH) Saturday warned the public of the transmission of communicable diseases following the floods that inundated Manila and surrounding provinces. The DOH...
Read more on Politics Balla
 
Indian rowers qualify for Asiad final
Incheon, Sep 20 (IANS) The Indian rowing teams of Dung Dung Sanjukta-Pratap Tarunikha and Roopendra Singh-Manjeet Singh qualified for the final rounds of the women's pair and lightweight men's double sculls,...
Read more on Sport Balla
 
Pakistan facing over 6,000 MW power shortfall
Islamabad, Sep 20 (IANS) Pakistan is facing an electricity shortfall of over 6,000 MW, with many parts of Punjab province witnessing outages of 20 hours a day. Un-announced load shedding in small and rural cities of...
Read more on Business Balla
 
New Zealand opposition leader concedes defeat in elections
Wellington, Sep 20 (IANS) David Cunliffe, leader of New Zealand's main opposition Labour Party Saturday, conceded defeat in the general election. Cunliffe said in a televised address to party faithful that he had...
Read more on Politics Balla
 
Xi's Asia trip new chapter for China's diplomacy: Minister
Beijing, Sep 20 (IANS) Chinese President Xi Jinping's state visits to India, Sri Lanka, the Maldives and Tajikistan opened a new chapter for China's neighbourhood diplomacy, Chinese Foreign Minister Wang Yi said at...
Read more on Politics Balla