The Rise and Fall of the World's Largest Bitcoin Exchange | Wired Enterprise | Wired.com
The building that houses the Mt. Gox offices in Tokyo. Photo: Ariel Zambelich/WIRED
Mt. Gox is based in Japan, the spiritual home of bitcoin. WIRED recently asked for a meeting with the company’s principals, hoping to understand why the company is having so much trouble transferring money in the U.S. But they declined, even though we were making the trip from San Francisco to Tokyo.
‘Because it’s such a difficult time for us, we can’t talk to journalists without first talking to our lawyers’— Mt. Gox
So we turned up at the company’s offices, hoping to change their minds. Apparently, the company has recently moved locations. It’s now on the second floor of a small office building in Tokyo’s Shibuya neighborhood, not far from the city’s largest railway station. Its name is listed on the placard just inside the front door, as is something called the Bitcoin Cafe. When we asked the building’s Japanese receptionist to speak with Gonzague Gay-Bouchery, the company’s manager of business development, she suggested we sit in the lobby while she called up to the company, and eventually, she told us that Gay-Bouchery was out of the office. When we asked for another employee, we were told to wait again, and eventually, we were greeted by someone who represented the company.
He told us that both Gay-Bouchery and Mark Karpeles were out of town, and he declined to talk about the company’s business. “Because it’s such a difficult time for us, we can’t talk to journalists without first talking to our lawyers,” he said. He did tell us that the Bitcoin Cafe is a Mt. Gox project set to open in December, but he wouldn’t let us see the space or take photos, and he wouldn’t give his name.
The company has declined to talk to us on several other occasions. And though it may very well have a good legal reason for keeping mum, the longer Mt. Gox remains in lockdown, the more concern it raises across the globe. When he was interviewed in April, Karpeles oversaw the exchange that booked 70 percent of Bitcoin trades. Now that number is closer to 14 percent, according to the Genesis Block.
Roger Ver, photographed in San Francisco. Photo: Ariel Zambelich/WIRED
One person who will speak for Mt. Gox is Roger Ver. Ver lives across the street from Mt. Gox, and he just happens to be one of the world’s most enthusiastic and vocal bitcoin evangelists. He helps run the Tokyo Bitcoin Meetup Group, and some have called him the “Bitcoin Jesus.”
In June 2011, when a hacker broke into the Mt. Gox system, wired a large amount of money to himself, and temporarily drove the value of bitcoins on the exchange to nearly nothing, Ver helped the company sort out the mess. And amidst its more recent troubles, with many claiming that Mt. Gox is insolvent, he shot a video from inside the company’s offices, assuring investors that the company’s has ample funds in its Japanese bank account and that it was just having trouble moving this money across borders.
Skeptics call this “the hostage video,” a play on Ver’s wooden delivery. But he says that although they asked him to make the video, he wasn’t coerced in any way, and he’s adamant that Mt. Gox is merely having trouble reaching agreements with U.S. banks, which are needed to transfers funds into U.S. accounts. “I consider the guys at Mt. Gox my friends,” he says. “Right before my eyes, Mark logged into his bank account at the biggest bank in Japan and showed me the account balances in their accounts. That’s not proof that Mt. Gox is solvent or not. But it’s definitely proof that … whatever is causing all their wire transfer delays, it is not a lack of money in the bank.”
But he also paints the company as a small operation that isn’t necessarily suited to the global, around-the-clock nature of internet business. When Mt. Gox was hacked, he says, he worked to help right the company’s system until late on a Friday, and when everyone finally headed home and he asked what time he should return the next day to get the exchange back up and running, he was told they would all take a break until the following Monday.
‘A lot of the early bitcoiners are 19-year-old kids, still living at home with their parents, and they don’t have any business experience’— Roger Ver
For Ver, Mt. Gox and Karpeles are very much a microcosm of the larger bitcoin community. “Bitcoin is coming from a bunch of young computer nerds who saw this thing and thought it was neat,” he says. “A lot of the early bitcoiners are 19-year-old kids, still living at home with their parents, and they don’t have any business experience.”
Though he considers Karpeles and others at Mt. Gox his friends, Ver doesn’t recommend buying bitcoins there. Prices on Mt. Gox are higher than they are on other exchanges — a reflection of the difficulties customers have withdrawing their funds. “Anybody who has enough information about what’s going on in the bitcoin world, you would not buy your bitcoins on Mt. Gox,” he says.
Dan Held, the founder of bitcoin market data company, Zero Block, has less sympathy for Mt. Gox. He points out that the U.S. government warned businesses like Mt. Gox that they’d need to register as money services businesses in March of this year. But Mt. Gox didn’t do this until months later — after the feds has seized its bank accounts. “A lot of it, I think, is incompetence,” he says.
Despite its woes, Mt. Gox is still pulling in new customers. According to Ver, this is because of its reputation as the world’s biggest bitcoin exchange. “They just think Mt. Gox is the biggest and the best, and they don’t know,” he says of new customers. If they don’t know about Mt. Gox’s trading delays, a large part of that blame must go to Mt. Gox itself, which has downplayed its difficulties on its website.