Mt Gox Saga Explained

Osman Gazi Güçlütürk
7 min readJun 17, 2019
Mt Gox Logo

In a previous story, I had explained the infamous DAO Hack in detail. However, the DAO hack was not the first or the last hack in the wild world of crypto tokens. In this story, I will explore the first major crypto hack, the infamous Mt Gox, the effects of which still could not be recovered.

Mt Gox had been founded by Jed McCaleb in 2010, sold to Mark Karpeles in March 2011 and it was the biggest Bitcoin exchange in late 2013-early 2014.

Mt Gox went through two hacks in 2011 and 2014 respectively. The one in 2011 was relatively small and manageable. The attackers managed to take over the account of an Mt Gox auditor by stealing hot waller private keys that were stored in a wallet.dat file. By using the privileges of that account, the attackers were able to arbitrarily assign himself a large number of Bitcoins and, by selling these Bitcoins, they reduced the price of Bitcoin to 1 cent from 17 USD. Then they withdrew approximately 2000 BTCs from this low price. Additionally, approximately 650 BTC were purchased by Mt Gox customers from that low price.

On the front side, Mt Gox seemed to be handling this crisis in a reasonable manner. Karpeles issued an extensive statement explaining the hack, the recovery procedure, and measures that would be taken, including but not limited to compensation for 2000 stolen BTCs and transferring a substantial amount of Bitcoins into cold wallets. In early 2013, Mt Gox was, once again, the largest Bitcoin exchange. However, things were not that good behind the scenes.

In May 2013, Mt Gox was sued by CoinLab, a US start-up that was supposed to conduct Mt Gox’s US operations, for 75 Million USD over Mt Gox’s breach of an exclusivity clause by servicing directly to customers in the US as well as its failure to deliver the necessary information.

Also in June and August, the US government seized 5 Million USD in total from Mt Gox for operating for involving into unlicensed money transmitting activity.

The second Mt Gox hack, on the other hand, was the first major crypto hack. In February 2014, more than 850.000 Bitcoins, 750.000 of which were owned by Mt Gox customers, were stolen from Mt Gox. Although this hack is commonly cited separately from the 2011 hack, it has been reported that the theft was spread over time and Mt Gox had…

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Osman Gazi Güçlütürk

Lawyer | IP&IT&Blockchain Law| PhD Candidate in Law & Computer Science| Self-taught Coder | LL.B. (Galatasaray) - LL.M. (LSE) - M.A. (Ankara) - MJur (Oxon)