Inside stories Mt. Gox

From the translator: On Habré, there was already a lot about MtGox, but the article appeared a couple of days ago with insiders from the staff of the exchanger seemed to me interesting, as a post-mortem project.



From the outside, the world's largest Bitcoin exchange looks like the greatest example of unfair entrepreneurship. But from the inside, according to those who worked there, Mt. Gox is a sloppy combination of poor management, pofigism and just inexperience.



She went bankrupt, and the disappearance of 460 million dollars stolen by hackers, and the 27.4 million missing from bank accounts, was not such a big surprise for people who knew about the internal kitchen of the Tokyo company. The company, insiders say, was a reflection of the policy of the company's general director (CEO) and the main shareholder, Mark Karpeles, who was more a programmer than a general director, and was sometimes distracted from his duties, even when they were most needed. “Mark liked being the CEO, but his daily routine was boring,” said insider Mt.Gox, who chose to remain anonymous.



Last week, after a leak of an internal document stating that hackers attacked Mt Gox, Karpeles admitted that a significant portion of the money controlled by his company had disappeared. “We had a vulnerability in the system and our bitcoins evaporated. We have created problems for many people, and we regret that this happened, ”said Karpeles at a press conference in Tokyo dedicated to the bankruptcy of the company. This is the second case of hacking the exchange. For the first time, in June 2011, hackers stole $ 8.75 million.

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Bitcoin promises to give a bank account to anyone with a phone, without the need to present a passport. This is definitely an amazing technology that can change the whole world - the first viable, decentralized and reliable form of digital money. It can simplify international payments. But it is also a technology that has been pushed through by a community of people unprepared or unwilling to deal with the basics of everyday business. The new wave of entrepreneurs will be able to bring digital currency to a new level, but for the first few years Bitcoin was a lot of computer geeks with little experience in the financial world. The most vivid example of this is Mark Karpeles.

Bitcoin King

28-year-old Karpeles was born in France, but after a short stay in Israel, he settled in Japan. There he married, posted a video with kote and became a father. In 2011, he acquired the Mt Gox exchanger from American entrepreneur Jed McCaleb.



McCaleb registered the domain mtgox.com in 2007 with the idea of ​​turning it into a trading site for cards of the popular board game Magic: The Gathering. But he did not follow his idea, and later, in 2010, he decided to make this domain a bitcoin exchanger. The idea was simple - a simple place to bring together sellers and buyers of bitcoins. But soon, when he started receiving transactions in thousands of dollars, he realized that it was too cool for him, and he sold his website to Karpeles, a bright programmer, gourmet and Bitcoin enthusiast in one person. In the online forums, Karpeles had the nickname MagicalTamping.



Karpeles immediately began optimizing the backend, making MtGox the most popular bitcoin exchanger in the world. In June 2011, he was hacked, which led to the site being turned off for several days. According to bitcoin enthusiasts Jesse Powell and Roger Ver, who helped the company to deal with the burglary, Karpeles was strangely careless about this crisis. But he and MtGox fulfilled their obligations, earning a reputation as honest players in the Bitcoin community. Other Bitcoin companies were hacked, lost customers' money and simply closed, but MtGox did not.



After the price of bitcoins jumped from 13 bucks in early 2013 to more than $ 1,200 at its peak, Karpeles, as the holder of the company's largest share, became extremely rich. MtGox did not provide a share in the company to its employees, and by the time of the last hack, the company had more than 100,000 bitcoins, or more than $ 50 million. Karpeles owned 88% of the company's shares, and McCaleb owned 12%, according to leaked business plans.



When Karpeles gave an interview to Reuters in the spring of 2013, sitting, really, on a big ball for Pilates - he was the leading player in the world of Bitcoin. He paid up to 5,000 Bitcoins to the Bitcoin Foundation, which develops non-commercial software for Bitcoins, as well as the lobbying group where he was a member of the board (he has since left to remain). And, according to insiders, it was not difficult for him to order flat-panel televisions or dinners for 400 bucks for their employees at Tokyo's headquarters, which occupied three floors in a modern office building. In the elite Shibuya district. “He loves being praised, and he loves being called the Bitcoin King,” said the insider on condition of anonymity. “He always says that he is a member of Mensa, and he has above-average intelligence.”

Citizen karpeles

But in spite of all this, some say that in MtGox one could feel the eve of a catastrophe. Last year, I was able to talk with a software developer about working at a company. “I thought it would be awesome,” said the developer, who wished to remain anonymous. “But there are alarm bells.”

MtGox, he said, does not use version control tools — a standard tool in professional software development. This means that any developer may accidentally rewrite the changes of a colleague working on the same file. According to this source, a test environment has only appeared in the company lately, which means that previously the software was shipped to users who were not tested - which is not very good for a site that provides financial services. And there was only one person who claimed the changes in the code - Karpeles himself. This means that many important security fixes could be expected for weeks before Karpeles peeked into the code. “There’s a complete mess in the code,” the insider said.



By the fall of 2013, the MtGox business was also in disarray. Federal agents fined $ 5 million from accounts in the company because the company was not registered with the government as a banking organization, and MtGox was sued for $ 75 million by a former business partner - CoinLab. US customers complained about huge delays in withdrawing money from the stock exchange - up to several months, and MtGox dropped from first to third place among Bitcoin exchangers.



But Karpeles had a hope for a new project “Bitcoin cafe”. Inspired by the French Bistro, this was supposed to be a stylish party venue in the same building as the MtGox office, a modern glass and metal building, within walking distance of the largest train station in Tokyo. There you could drink beer or wine, paying with Bitcoins through a cash register cracked personally by Karpeles. When Wired tried to meet Karpeles in his office, a company spokesman refused us, a poster of a Bitcoin cafe was already hanging on the building, but the cafe was never to be opened.



One insider said that MtGox had invested $ 1 million in a cafe, adjusting the MtGox office building to Karpeles' requirements. When MtGox collapsed, Karpeles was overly proud that he wrote a hack for a cash register at a cafe.



Another insider said - outside the cafe, he loved to spend time repairing the server, setting up the network and installing gadgets, possibly distracting himself from the real problems that his company met.



In February, when Fortune turned away from him, MtGox stopped paying customers in Bitcoins, citing a lack of digital currency, and after several days of silence from the company, the office was besieged by protesters suspecting the company of insolvency.

Hacking length in years

According to a leaked document from MtGox, which was a shock last week, hackers have stolen from the company for years. The company now says that just over 850 thousand bitcoins have flowed, that is, more than $ 460 million at the exchange rate on Friday. When the bitcoin enthusiast Jesse Powell heard about this, he remembered about June 2011.



After MtGox was hacked for the first time in the summer of 2011, a friend asked Powell for help, and soon the entrepreneur flew from San Francisco to Tokyo. After landing, he rushed to Shibuya Station, where he met with his friend Roger Vue, one of the biggest Bitcoin fans who lived in front of the MtGox building. Unpacking their bags, they rushed to the MtGox office to see how they could help. They worked for a week with Karpeles, other employees, and the help of other Bitcoin enthusiasts. They responded to incoming requests, solved problems on the site and tried to support a small company as much as they could. At some point, Powell rushed to the Apple store and returned with computers for $ 5,000, which could support the case. But two days later, the site was still offline.



Ver and Powell were determined to work on the weekends, but when they arrived at the small office, they were in for a surprise. Karpeles decided to take a day off. Both volunteers were stunned. “I think it was completely insane and demoralized the whole team,” recalls Powell. On Monday, Karpeles returned to work, but he spent most of the day raking mail. “I said, like,“ dude, what are you doing? you can mail at any time. The site is still offline. You have to raise the site. ”



Powell last met Karpeles in January, before the latest hacking news. He launched a rival MtGox called Kraken. They had lunch in Tokyo, and Karpeles looked calm for the future of MtGox. He was excited about his Bitcoin cafe. “It was an outlet for him, a ray of light in a dark realm of affairs with banks and customers complaining every day,” said Powell. “I’m sure Mark was under a lot of pressure for a long time, and the cafe was a fun project.” But now the world has become even darker.