Major Bitcoin Exchange Said To Be Insolvent

A major bitcoin exchange has gone bust after secretly racking up catastrophic losses, other virtual currency companies said Tuesday -- a potentially fatal blow for the exotic new form of money.

The Web site of Tokyo-based Mt. Gox was returning a blank page Tuesday. The disappearance of the site follows the resignation Sunday of Mt. Gox CEO Mark Karpeles from the board of the Bitcoin Foundation, a group seeking legitimacy for the currency, and a withdrawal ban imposed at the exchange earlier this month.

Prominent members of the Bitcoin community -- including San Francisco-based wallet service Coinbase and Chinese exchange BTC China -- sought to shore up confidence in the currency by saying Mt. Gox's collapse was an isolated case of mismanagement. They said it had abused users' trust, but did not offer details on how.

"As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today," the statement said.

Documents purportedly leaked from the company lay out the scale of the problem. An 11-page "Crisis Strategy Draft" published on the blog of entrepreneur and Bitcoin enthusiast Ryan Selkis says that 740,000 bitcoins are missing from Mt. Gox, which roughly translates to hundreds of millions of dollars' worth of losses, although figures are fuzzy given Bitcoin's extreme volatility.

"At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public," the draft said.

In a post to his blog, Selkis said that the document was handed to him by a "reliable source" and that several people close to the company had confirmed the figures. Reached by phone, he declined further comment. The Japanese government, meanwhile, has not announced any formal investigation.

The scandal may cost customers dear.

At the Tokyo office tower housing Mt. Gox, bitcoin trader...

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