NEW YORK, (Reuters) – Manhattan U.S. Attorney Preet Bharara has sent subpoenas to Mt. Gox, other bitcoin exchanges, and businesses that deal in bitcoin to seek information on how they handled recent cyber attacks, a source familiar with the probe said yesterday.
In the attacks – known as distributed denial of service attacks – hackers overwhelmed bitcoin exchanges by sending thousands of phantom transactions. At least three exchanges were forced to halt withdrawals of bitcoins on Feb. 7, including Mt. Gox, which was the largest at the time.
Mt. Gox never resumed service before going dormant on Tuesday, leaving customers unable to recover their funds.
The Tokyo-based company’s chief executive, Mark Karpeles, said earlier on Wednesday that he is working with others to solve the problems.
“As there is a lot of speculation regarding Mt Gox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues,” Karpeles said in a statement posted on the Mt. Gox website. A spokesman for Bharara declined to comment.
Bitcoin, a form of electronic money independent of traditional banking, relies on a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every bitcoin transaction that is made. At current prices, the bitcoin market is worth about $7 billion.
Investors deposit their bitcoins in digital wallets at specific exchanges, so the Mt. Gox shutdown is similar to a bank closing its doors – people cannot retrieve their funds.
While proponents of bitcoin hail its anonymity and lack of ties to traditional banking, regulators have become increasingly interested in the digital currency due to its usage by criminal elements and its volatile nature.
It has been a rough month for bitcoin investors, with cyber attacks on several exchanges, a sharp fall in bitcoin’s value, and rising pressure from regulators. Bitcoin’s price varies by exchange, but the losses were most dramatic on Mt. Gox, where it fell to about $135 from $828.99 before Feb. 7.
“Mt Gox has been broken and it was obvious there was something really bad going on there for nearly a year. They were processing withdrawals very slowly and generally being very opaque about what was going on there,” said Mike Hearn, a bitcoin developer in Zurich, Switzerland.
A second source familiar with the case said U.S. federal law enforcement is investigating Mt. Gox. A third source said the U.S. Federal Bureau of Investigation was monitoring the situation.
Japan’s Finance Ministry and police are also looking into the abrupt closure of Mt. Gox, according to the Japanese government’s top spokesman.
“MALLEABILITY”
Bitcoin has gained increasing acceptance as a method of payment and has attracted a number of prominent venture capital investors, including Andreessen Horowitz and Union Square Ventures.
