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Leaked Mt. Gox Document Linked to Consulting Firm Mandalah

(@twobitidiot) | Published on February 27, 2014 at 11:00 BST

Earlier this week, I published a document I received from a reliable source entitled “Crisis Strategy Draft”, which was allegedly a roadmap to show how Mt. Gox could recover from insolvency despite the mind-blowing loss of nearly 750,000 customer bitcoins.

Since that initial leak, I have had a number of conversations with industry insiders who have spoken about the situation both on and off the record.

They have confirmed the best news possible for Bitcoin given the damning evidence documented in the leaked presentation: Mt. Gox acted alone in its deceit, and ultimately failed in its desperation, to find an investor willing to bail them out.

Although Mt. Gox CEO Mark Karpeles would only admit that the leaked document was “more or less authentic” during a chatlog obtained by Fox Business, I have confirmed that it was, in fact, prepared by Mt. Gox representatives.

Mandalah’s role

The presentation was created (at least in part) by employees at global consulting firm Mandalah.

The actual author(s) of Mt. Gox’s 27-page business plan (another leaked Mt. Gox document – seen below) may be ambiguous, but the final publisher of this latest file was revealed to be one of Mandalah’s junior employees in Tokyo.

Representatives from Mandalah declined to elaborate on any specifics regarding its relationship with Mt. Gox, citing confidentiality agreements, but they did claim to have never been contracted by Mt. Gox to do “strategic planning” and say they lacked access to sensitive financial information or customer data. A representative clarified:

“Our mission with MtGox has always been to help them create better products and services…our main interest is in bitcoin and creating amazing experiences with it, and MtGox’s customers are the #1 thing on our minds these days.”

A source claims that the same junior staffer who published the business plan document also attended an alleged emergency investor meeting just one day after the “Crisis Strategy Draft” was created.

According to that source, it was at this meeting in which Karpeles and colleague Gonzague Gay-Bouchery first outlined the extent of Mt. Gox’s losses.

The fallout

The chain reaction that followed was rapid. The solicited investors rebuffed Karpeles and his colleagues’ pleas for a bailout, demanded the company come clean to customers and stakeholders immediately, and then notified other industry executives, including those at the Bitcoin Foundation, of the catastrophic losses at Mt. Gox.

These executives promptly reached out to regulatory authorities and began crafting a joint statement condemning Mt. Gox.

Sources also tell me that multiple investors who were approached restricted their own employees from buying or selling bitcoin themselves as soon as they realized the extent of the damage at Mt. Gox.

Further allegations

Mt. Gox has allegedly never conducted a single audit of its customer deposits, and it is believed that Karpeles may have been the only one within the company to have knowledge of how to actually tap the exchange’s cold storage.

It remains unclear exactly how this type of storage leak could have happened over a multi-year period without any knowledge on the part of the executives at Mt. Gox.

As a result of Karpeles’ apparent “Wizard of Oz” status within the organization, it also appears unlikely that the true technical cause of the leak will be fully understood until the embattled CEO speaks. Whether that will happen during an interview or a possible criminal case is unclear.

The latter seems likely, however, as one source believes that Karpeles knew about the pervasive damage of the transaction malleability attacks for several weeks and was engaging in an arbitrage scheme that leveraged the depressed Mt. Gox price to reap gains on other exchanges.

This was allegedly happening well before the exchange’s breaking point this past weekend.

Going forward

Mark Karpeles and Mt. Gox representatives were unreachable for comment, despite repeated attempts.

However, three major industry players that were initially tied to Mt. Gox “acquisition” rumours have either released statements or confirmed (via backchannels) unequivocal denials of any improper ties to Mt. Gox.

The Bitcoin Foundation, Blockchain.info and SecondMarket have by all accounts acted ethically and professionally in the face of a serious scandal. Their speedy clarifications and apparent cooperation with authorities is commendable and suggests that Mt. Gox was a mere bad apple in an otherwise good bunch.

Mt. Gox lived among the Bitcoin community for several years as an early pioneer. Luckily for the industry, it appears to have died alone.

 

Business Plan MtGox 2014-2017 by twobitidiot

 

Ryan Galt is a blogger, entrepreneur and freelance opinion writer for CoinDesk. His opinions do not necessarily reflect CoinDesk’s. You may email him at [email protected], or follow him on twitter @twobitidiot.

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