[chemgear]

http://money.cnn.com/2014/02/25/tech...gox/index.html

The shutdown of Mt.Gox -- one of the world's largest bitcoin exchanges -- and the potential loss of more than $400 million worth of bitcoins is the result of abysmal mismanagement at the company.

Mt.Gox is blaming a costly computer hack for its current troubles. But in reality, the company was in dire financial straits long before that. Cash flow issues are to blame, as the exchange balanced a tiny revenue stream with a giant burning hole in its pocket.

The fact that Mt.Gox's management potentially lost all of its customers' deposits to theft is nothing short of gross incompetence. The cyberthieves would have needed to trick Mt.Gox repeatedly -- withdrawing money, faking a receipt and demanding yet another withdrawal. Now imagine doing that for a prolonged period -- unnoticed -- to the tune of millions of dollars and emptying the company's accounts.

The lack of transparency is also astounding. A company with millions of dollars is staying silent about what's going on. At most, it offers the occasional cryptic message assuring customers it's "closely monitoring the situation and will react accordingly."

U.S. officials like New York State's top financial regulator, Benjamin Lawsky, jumped at the opportunity to say this is exactly why more government regulation is necessary. U.S. Senator Tom Carper, who heads the homeland security committee, called it a lesson for policymakers.

Mark Williams, a former Federal Reserve bank examiner, said Mt.Gox's failure shows the risk inherent in sending your cash to Bitcoin exchanges -- most of which are located abroad in places like Slovenia and Hong Kong. There's little assurance you'll ever get that money back.

"The problems at Mt.Gox -- lack of strong controls and tight regulation -- are systemic to the Bitcoin industry. The reputational damage will spread," Williams said. "What was the largest exchange is now a collapsed tower of toxic sludge."