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Bitcoin Scam - MTGox Finds 200,000 Behind Sofa, How Many More Hidden in old Socks, Coat, Shoes?

Currencies / Bitcoin Mar 30, 2014 - 03:43 AM GMT

By: Nadeem_Walayat


MtGox which stands for 'Magic the Gathering' and not 'Mount Gox' that the mainstream broadcast press still mistakenly reports it as, has apparently found 200,000 of the estimated 800,000 missing bitcoins behind what amounts to an electronic sofa, as MtGox reveals that 200,000 bitcoins worth approx $100 million were found in an old digital wallet kept off line (old hard drive) that effectively blows a hole in their whole story to date of being innocent victims of 'bitcoin transaction malleability' (causing transactions to be issued twice) as the means by which theft of the MTGox bitcoins took place that MtGox representatives have been spouting of since at least Mid Feb when the web site filed for bankruptcy.

“barely 386 bitcoins could have been stolen using malleability attacks from MtGox or from other businesses. Even if all these attacks were targeted against MtGox, MtGox needs to explain the whereabouts of 849,600 bitcoin.” - University of Zurich

MtGox latest revelations follows an analysis of the block chain by researchers at the University of Zurich that failed to identify such mass theft of bitcoins by means of transaction malleability where the estimate is put at less than 500 rather than the 800,000 suggested by MtGox and therefore as I have alluded to several times since the MtGox debacle began that most of the 'lost' bitcoins or their fiat currency conversion remain with those behind MtGox rather than to have been stolen by outside hackers.

25 Feb 2014 - Bitcoin Ponzi Scam Crash Update - MTGox Vanishing Act, Who Will be Next ?

'Magic the Gathering' has been busy throwing up a smoke screen for several weeks as to what has actually happened to its customers 750,000 bitcoins with statements such as that the exchange had been subject to hacking, cracking and theft the truth of which can only be ascertained via a police investigation that will look at the evidence, if they can find any left as the MTGox has shut its offices and melted away, busily deleting any evidence that it actually ever existed as evidenced by its Twitter account having been wiped blank.

Now it is upto the authorities to determine whether an estimated $375 million fraud has taken place or not, that apparently sought to hook investors to deposit their funds into the fictional currency and then to vanish in a puff of smoke, leaving investors literally crying outside its former offices with stories of how their bitcoin holdings running into the hundreds of thousands of dollars have just vanished.

In fact if one follows the logical conclusion then MtGox being exposed to 'transaction malleability' may not have been by chance but rather by design i.e. to hide a crime within a crime so as to create enough smoke and mirrors to disappear with the bulk of bitcoin holdings.

If MtGox representatives under pressure of criminal investigation by the Japanese police can apparently just happen to find 200,000 bitcoins behind an electronic sofa then how many more hundreds of thousands of bitcoins would they find following further pressure for instance form the FBI?

If as little as 500 is actually estimated to have been stolen by outsiders then this suggests that the current outstanding balance of some 600,000 remains with the insiders. So watch this space for many more hundreds of thousands of bitcoins to be conveniently found in old electronic socks, shoes, coat pockets, drawers etc over the coming months. Though don't ever expect to see all of the missing bitcoin balance materialise because I suspect much (many $ millions) of it has been spent living the high life at bitcoin customers expense!

Proponents of the bitcoin scam continue to point to a relatively stable price whilst convientely forgetting what actually tends to happen in terms of price for holders of bitcoins parked at the multitude of exchanges (web sites) such as MtGox as they disappear in a puff of smoke taking the worthless price based valuations with them.

As I explained in my last bitcoin article that the bitcoin scam is meant to operate in such a manner of presenting a calm stable price to allow the pump and dump storm to take place that seeks to hard earned fiat currency from the crypto-currency noobs.

02 Mar 2014 - Bitcoin the Perfect Scam, Price Does Not Reflect True Dangers of Holding Bitcoins -

Bitcoin Exchanges are a Ponzi Scam

The bitcoin exchanges have been busy distancing themselves from MTGox as if they are something different, more trustworthy, when the truth is they are the SAME - NO DIFFERENT!

In fact you are all being duped for they are not really exchanges at all! They are NOT akin to the stock exchange or commodities exchange but just websites that some techies set up that may have started out honest but greed will get the better of them just as it did with MTGox because as MTGox illustrated the prices being quoted are meaningless, there is no volume!

Unregulated Bitcoin exchanges are the natural consequence of the crypto currency scams for their primary purpose is to entice new entrants to buy bitcoins that the exchanges say they hold. How do they achieve this ? They do it by producing fancy trading graphs that show the price of bitcoins as rising and being high which encourages the fools to send the exchanges their hard earned money that they will never see again!

This is what the exchanges do, they get fools to send them money for bitcoins that allegedly NEVER existed, this is why when MTGox went bust it stated that some 800,000 bitcoins disappeared when the truth is that they probably never existed!

It is as I warned several months ago a PONZI SCAM! The exchanges pay out those selling / transferring their bitcoins out with money from new investors as long as new investors are greater than those exiting the ponzi scam continues.

The bitcoin exchanges make it very easy to BUY bitcoins with them but make it near impossible to withdraw, transfer out, as their primary purpose is to suck as many investors into their vortex as possible. So watch this space for whether or not the authorities in Japan charge MTGox with being a Ponzi Scam.

The Anatomy of CraptoCurrency Scams

Take this as a concise guide as to how crypto-currency scams tend to work.

1. New crapto-coins craptocurrency is developed allowing the creator and his friends to easily mine approx 1/3rd of the total potential supply before going public.

2. Holders of crapto-coins agree to withhold their supply from the market before it goes public.

3. Start to promote the craptocurrency by handing out free crapto-coins to the media, with likes of Max Keiser at the top of the list to start pumping.

4. Crapto-coins start trading and immediately jump in price due to limited supply.

5. Illiquid crapto-coins have a high market capitalisation due to a high price and number of coins (not) in circulation which encourages more media exposure and interest.

6. Many fools jump on the bandwagon buying expensive hardware to mine crapto-coins given the high price per crapto-coins (over 90% of mined supply with-held from market).

7. Many websites appear that add the tag exchanges to them to give the air of authority that suck in entrants by producing graphs and data that gives the illusion of rising prices and volume of trading when in reality they are nothing more than Ponzi scams as they limit withdrawals.

8. As interest and prices continue to rise, the creator and his friends slowly offload supply onto the fools until the price crashes and the noobs have been bled dry or holdings vaporise MTGox style.

9. The crapto-coins hoarders wait for the dust to settle and noobs to be encouraged once more into buying as the price is stable and then repeat the dump and crash several times more.

That's how Bitcoin and ALL craptocurrency scams work

Source and Comments:

Nadeem Walayat

Copyright © 2005-2014 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, stocks, housing market and interest rates. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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