Mt. Gox Bitcoin Exchange Collapses: 850,000 BTC Reported Missing
What happened
Mt. Gox, which handled 70% of all Bitcoin transactions at its peak, filed for bankruptcy in February 2014 citing the theft of 850,000 BTC (worth approximately $450 million at the time). The losses had apparently accumulated over years through transaction malleability attacks, while the exchange continued operating without detecting the ongoing drain.[1]
What went wrong
Mt. Gox held customer Bitcoin in poorly secured hot wallets and failed to implement cold storage for the vast majority of holdings. A years-long transaction malleability exploit drained funds without triggering any audit or accounting alarm. The exchange kept Bitcoin on a single internal ledger not reconciled against the blockchain.[1]
Lesson learned
Cryptocurrency exchanges must hold customer funds in audited cold storage with minimal hot wallet balances. Blockchain-based assets allow independent proof-of-reserves audits that should be standard practice. A Bitcoin exchange that cannot reconcile its blockchain holdings with its ledger has a fundamental control failure.
Sources
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