Bitcoin Exchange Was Stealing Coins For Years

The mystery around Tokyo based bankrupt Bitcoin exchange Mt Gox got deeper Tuesday morning. WizSec, a Tokyo-based group that’s been analyzing Bitcoin thefts claims the crypto-currency was going missing from the exchange long before it collapsed.

WizSec’s analysis suggests that the theft goes back to 2011, leading to the 650,00 Bitcoin shortfall when Mt Gox collapsed.

That’s particularly interesting on account of the March 2015 arrests of two US agents – Carl Force from the DEA and Shaun Bridges from the Secret Service – for stealing Bitcoin from Mt Gox in 2013.

WizSec, however, suggests that thefts far pre-dated the efforts of the two.

The smoothness of the decline suggests a long and slow theft [Courtesy of WizSec]

The group claims it has compiled “a surprisingly dependable list of over 2 million Mt Gox addresses”, allowing it to track the exchange’s holdings over time.

Their conclusion: “By the end of 2011 we are past most data gaps, but we are seeing a clear discrepancy of several hundred thousand BTC between expected holdings and actual holdings. Furthermore, if we look closely, this discrepancy seems to be growing over time”

With the thefts taking place starting in 2011 “MtGox operated at fractional reserve for years (knowingly or not), and was practically depleted of Bitcoins by 2013”.

“Bitcoins continuously went missing over time, but at a decreasing pace,” the report states, flatlining in 2013, because “there may not have been any more Bitcoins left to lose”.

Another hint is in the pattern of some transactions: “One recurring pattern eventually stood out: Mt Gox Bitcoins would suddenly get sent to a new non-Mt Gox address, without any withdrawal log entry, often in fairly recognisable amounts of a few hundred BTC at a time.

“Shortly afterwards, these addresses in turn would get gathered up into bigger addresses holding a few thousand BTC. From there, the coins would get deposited in chunks of some hundred BTC at a time onto various Bitcoin exchanges.”

While the researcher, Kim Nilsson, couldn’t identify all the destinations of the aggregated coins, he was able to pick out accounts at Mt Gox, BTC-e and Bitcoinica.

The research report was prepared for an upcoming creditors’ meeting, WizSec says.

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