Manhattan U.S. Attorney Preet Bharara and the Federal Bureau of Investigation are probing possible criminal violations tied to the shutdown of Bitcoin exchange Mt. Gox, two people familiar with the matter said.
The shuttering of the Tokyo-based exchange, once the world’s largest for digital currency transactions, comes after months in which Bitcoin’s price soared and it attracted increased attention from investors, customers and regulators over possible money-laundering and fraud. Japanese authorities said earlier they are probing the exchange’s shutdown as well.
Reports that hackers may have pilfered more than $390 million in Bitcoin from Mt. Gox prompted companies from San Francisco to London as well as their industry group, the Bitcoin Foundation, to assure users of the currency that their funds won’t disappear due to theft or mismanagement.
“This is certainly not the end of Bitcoin,” the foundation said yesterday in an e-mailed statement. “As our industry matures, we are seeing a second wave of capable, responsible entrepreneurs and investors who are building reliable services for this ecosystem.”
Bharara’s office requested documents from businesses that provide Bitcoin services, said the people, who requested anonymity because the matter isn’t public. One of the people said that the matter is in its preliminary stages.
Bitcoin was introduced in 2008 by a programmer or group of programmers under the name Satoshi Nakamoto. The digital currency, based on a peer-to-peer software protocol, has no central issuing authority, and uses a public ledger to verify transactions while preserving user anonymity.
Mt. Gox, which had the largest market share of all digital currency exchanges as recently as April 2013, went offline yesterday after halting customer withdrawals Feb. 7. A document posted on the Internet labeled a “Crisis Strategy Draft” said Mt. Gox had lost 744,408 Bitcoins as a result of theft that “went unnoticed for several years.”
There is no contact information on the paper and no one at Mt. Gox has publicly verified its legitimacy. Calls and e-mails to the company in Tokyo went unanswered.
Mt. Gox went offline to “protect the site and our users,” according to a statement on its website. “We will be closely monitoring the situation and will react accordingly.”
The shutdown of Mt. Gox triggered renewed calls for better security and consumer protection from several U.S. and state officials. Senator Tom Carper, a Delaware Democrat who held the first hearings on Capitol Hill, said the potential losses at Mt. Gox underscored the need for clear rules.
“As any industry matures it will face growing pains and there will be individuals who believe they can use the fog of uncertainty to cover up their follies,” Carper said.
Jennifer Queliz, a spokeswoman for Bharara, said the office would neither confirm or deny the existence of a federal investigation. His office has previously filed charges against Bitcoin operators of the Silk Road and BitInstant exchanges.
Mt. Gox Chief Executive Officer Mark Karpeles resigned this week from the board of the BitcoinFoundation. The turmoil at the exchange highlighted how most Bitcoin-related companies are still operating in a regulatory gray zone.
“Tailored regulation could play an important role in protecting consumers and the security of the money that they entrust to virtual currency firms,” Benjamin Lawsky, superintendent of financial services in New York, said in a statement.
Japanese officials are investigating the closing of the Mt. Gox exchange, Chief Cabinet Secretary Yoshihide Suga said today. The Financial Services Agency, Finance Ministry and police are gathering information on the matter and will take steps as needed after assessing the situation, he said at a news briefing in Tokyo.