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Bitcoin exchange Mt Gox comes under US lens

Thursday, 27 February 2014 - 6:00am IST | Place: Mumbai | Agency: dna

Gets subpoena by federal prosecutors.

Bitcoin exchange Mt Gox has been issued a subpoena or legal summons from US federal prosecutors in New York after it became defunct, The Wall Street Journal reported on Wednesday.

Mt Gox, considered the world's biggest bitcoin exchange disappeared in thin air after its CEO, Mark Karpeles, resigned from Bitcoin's Foundation Board on Sunday following a bug in the design of the currency that led to a virtual loss of $443 million.

The company's technical staff hadn't accounted the bug in Bitcoin, allowing cyber attackers to mislead Mt Gox with fake receipts. When Mt Gox discovered it was under attack, it stopped investors from pulling out their money. The access continues to be restricted.

The Tokyo-based Mt Gox abruptly halted trading on Tuesday and is now defunct. The government of Japan is now garnering information about the exchange. Mt Gox could be hauled up by the authorities for the cash it had exchanged in lieu of bitcoins, say sources familiar with bitcoin transactions.

"The relevant agencies and ministries such as the police and the ministry of finance are trying to grasp the actual situation," chief cabinet secretary, Yoshihide Suga, told a press conference on Wednesday.
Mt Gox did not respond to emails send by dna.

A leaked document of Mt Gox said: "For several weeks Mt Gox customers have been affected by Bitcoin withdrawal issues that compounded on themselves".

At this point, 744,408 bitcoins were missing due to malleability-related theft.

Bitcoins get traded on the exchange against the US currency. The virtual currency is the brainchild of Satoshi Nakamoto, a pseudonymous person or group that designed the Bitcoin in 2008. Mining of bitcoin is done by computers through softwares freely available on the internet. However, there is no monitoring authority and several central banks, including the Reserve Bank of India, do not recognise the currency as a legal tender.

A group called Team Circle comprising Coinbase, Bitstamp, BTC China and Blockchain.info in a statement said, "This tragic violation of the trust of users of Mt Gox was the result of one company's abhorrent actions and does not reflect the resilience or value of bitcoin and the digital currency industry."

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