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MtGox Situation: Crisis Strategy Draft

MtGox Situation: Crisis Strategy Draft

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4.08

(13)
|Views: 661,476 |Likes:
Published by twobitidiot
I believe in the authenticity of this report and have confirmed these numbers from multiple sources.
I believe in the authenticity of this report and have confirmed these numbers from multiple sources.

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Categories:Types, Presentations
Published by: twobitidiot on Feb 25, 2014
Copyright:Attribution Non-commercial

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03/28/2014

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Crisis Strategy Draft
 
Situation
For several weeks MtGox customers have been affected by bitcoin withdrawal issues that compounded on themselves. Publicly, MtGox declared that “transaction malleability” caused the system to be subject to theft, and that something needed to be done by the core devs to fix it. Gox’s own workaround solution was criticized, and eventually a fix was provided by Blockchain.info. The truth, it turns out, is that the damage had already been done.
At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years.
 The cold storage has been wiped out due to a leak in the hot wallet. The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public. We believe in the value of Bitcoin, its potential to change the world, and its principles of transparency. Most importantly we care about the customers of MtGox and other bitcoin-based businesses who will be affected. The likely consequences will be larger than this localized financial damage, and we believe that the benefits of keeping MtGox stable and running outweigh the risks. This isn’t about saving MtGox anymore.
 
To avoid a chaotic situation, we propose:
1- Immediately reduce liabilities as much as possible with partners
 With actual assets using arbitrage/ injecting new coins to erase them from the books. Informing and asking selected Bitcoin main players to ask for their help. The MtGox price is low, making it possible to erase a significant portion of the debt, but it needs to be done quickly. Injections in coin are most useful (enough to run the exchange) but some cash is also needed to not run a fractional reserve.
2- Switch off the MtGox exchange temporarily (1 month) while announcing a restructuring and re-branding
 On a freshly branded static homepage, post a letter from Mark Karpelès stepping down as CEO of MtGox, bringing in transition advisors, and citing poor organization and technology. Moving to a new country (Singapore?) could be helpful.
3- Push the new branding (ready) and reset all SNS channels for communication:
 Using Facebook, Twitter, etc with the new branding, we will give constant updates, changing the tone of communications and informing stakeholders on all progress: new advisors, team members, location, fee structure. We need to inspire confidence.
4- Set up a competent team and redesign the service and codebase:
 Announce a new CEO, talented developers, and trusted business people to establish a new business model. ( Finance, marketing strategy, IT, developers, Customer support). Build a low-cost, profitable business again that gives customers a reason to stay (low fees, stability, etc) while we work off our debts to stakeholders.
4 Parts Strategy

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James Bowery reviewed this
Rated 1/5
If you take a look at the page that says "Financial Assets and Liabilities", they list their Bitcoin assets as "2,000" and the Bitcoin liabilities as "744,408" all of which they count as "theft" that took place over a 5 year period.

That means that over a period of 5 years, they lost 99.7% of their Bitcoins and didn't notice it until recently.
Rated 5/5
As soon as I learned of Mt Gox's closure and going offline I became very suspicious. I feel this was an inside job, an epic heist from within the people running Mt Gox. A full criminal investigation is needed. It's very unfortunate that this final meltdown, the exchange going offline etc, took place during the very same week that bitcoin ATMs opened in the US. If bitcoin is to survive, the temptation of mega-theft from within the exchanges has to be addressed else it will happen again.
Shaun Hanner reviewed this
Rated 4/5
Mt Gox has absolutely no credibility. Nobody should take anything they say as fact, nor should any leaked information, whether genuine or fictitious, be given any credibility. Anybody with even a crude understanding of finance could see this coming -- the BTC value on Mt Gox compared to the other exchanges alone smacks of ponzi. Only the public ledger can ultimately tell us where the BTC went, don't buy this malleability issue for a second. Gox had a problem, they knew about it, they tried to game the market price of BTC for as long as they could and when that became unsustainable they halted withdrawls, then halted trading. They inflated their BTC price to draw in coins, they then lowered it to play the other side of the arbitrage coin again creating an influx of coins and it all evaporated. Only 2,000 coins in the wallet and no cold storage? The CEO of Mt Gox is a criminal. They will move to Singapore to avoid criminal prosecution. People should distance themselves from Gox, the CEO and any attempt to rebrand this atrocity.
Patricio Quegles reviewed this
Rated 5/5
MtGox is playing "Too Big to Fail"
Aaron Thomas reviewed this
Rated 5/5
Halvor: "When I read though it there are a few statements in it that I find to be only too well suited as ammo against bitcoin in itself."
You hit the nail right there.. It's in Gox's best interest at this point to devalue the currency as much as possible. The vast majority of their liability is in BTC.. For every $100 that BTC drops, they're in the hole by $75,000,000 less. They knew this when they initially blamed malleability for their problems, and they're continuing with the same tactic now. The best thing other exchanges can do is call them on it.
Vineet Pinto reviewed this
Rated 5/5
Different lipstick, same pig!
Todd Hendrix added this note
I don't think they will be successful re-branding but grab the popcorn anyways
Chadwich Holshouser added this note
They switched to Midas in 2013...
newfination added this note
Anybody knows who are the stakeholders of MtGox? - Founders? - other owners? - Investors?

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