Mt. Gox insolvency may lead to bankruptcy

The Mt. Gox exchange has been the largest financial exchange for Bitcoin throughout most of the currency’s existence. All of that changed in recent weeks, when a error in the exchange’s transaction protocol led Mt. Gox to halt all Bitcoin withdrawals, according to The New York Times.

On Monday, Feb. 24, the exchange appeared to be on the verge of collapse, and that night, a number of other exchanges told the news source that Mt. Gox would shortly be filing for protection under the bankruptcy law as a result of months of uncertainty and a major theft. An unverified document circulating through the Bitcoin world claimed that the exchange had lost about 744,000 Bitcoins – roughly 6 percent of the 12.4 million Bitcoins in global circulation.

The day before, the financial institution’s chief executive, Mark Karpeles, resigned from his position at the board of the Bitcoin Foundation, a nonprofit digital currency advocacy group, according to The New York Times.

While users have been selling rights to Bitcoins trapped on the Mt. Gox exchange for well below market price, the most recent price for the currency is at $515.67 as of 2:30 p.m. EST on Feb. 25, according to the Coindesk Index.

As of 10:30 p.m. EST, on Feb. 24 the Mt. Gox exchange was offline, and users navigating to the site were met with a blank page, according to Re/code. It remains unclear whether holders of coins trapped in the Mt. Gox exchange will able to retrieve the coins or fiat currency held by the exchange. Re/code was unable to independently verify with Mt. Gox whether it would be filing for protection under the bankruptcy law, as the exchange is currently refraining from making public comment.