Ultimate Catastrophe: How MtGox Lost Half a Billion Dollars and Nearly Killed Bitcoin by Hunter Mark

Author:Hunter, Mark
Language: eng
Format: epub
Publisher: CONTENT:ED Media
Published: 2023-11-27T00:00:00+00:00

Chapter 13 – Private Investigations

In March 2014, while the Bitcoin world was still trying to come to terms with the astronomical losses at MtGox, three men sat around a table at Teddy’s Bigger Burger restaurant in Tokyo and discussed how they could find out what everyone concerned wanted to know: what happened at MtGox. Kim Nilsson was there, as was security researcher and fellow Bitcoin enthusiast Jason Maurice, known as ‘Wiz’, and Daniel Kelman, he of the short-lived MtGox community takeover attempt. Kelman and Maurice had met at a Bitcoin meetup shortly after the MtGox collapse, where Kelman had mentioned that he was keen to hunt down the MtGox millions. This was understandable given that Kelman held $400,000 worth of bitcoins on MtGox at the time of its collapse.

Maurice had mentioned that Nilsson might be a useful ally in the attempt to track down the bitcoins, and, following preliminary discussions, the trio were now sitting at a table in the burger bar mapping out their campaign. What had started as a plan to crack the MtGox case in isolation had quickly expanded as the three men came up with an entire business model based around the concept of tracing cryptocurrency thefts on behalf of exchanges and law enforcement agencies. With other cryptocurrencies emerging and the space seemingly on the verge of a growth explosion, there could soon be a huge demand for blockchain forensics. The three decided on the name Wiz Security (WizSec), and the self-styled Bitcoin security specialists got to work.

WizSec realised that while the amount of MtGox data made available through leaks and other sources following its collapse was voluminous, it was also fragmented (a ‘ticker tape of Mt Gox trades’ as Maurice would later call it), with only bits and pieces of the puzzle available online. WizSec decided that its first port of call would be to Mark Karpelès to try and get a complete dataset. As Nilsson explained during a presentation during the 2017 Breaking Bitcoin meetup in Paris, he and his team ‘put on their best smiles’ and went to see Karpelès to ask if they could have a copy of the full MtGox database for their analysis. Karpelès declined their request, leaving WizSec with only what it could find for itself. This also put it at a disadvantage compared to the Japanese investigators who had naturally gained access to the full database from the outset, although WizSec did have something going for it, something that Nilsson explained in a 2015 presentation of his MtGox findings to The Foreign Correspondents’ Club of Japan:

The MtGox case is huge, there’s a huge amount of data. There are millions of addresses, millions of transactions, and this is simply not possible to analyse and investigate manually. You need to have some sort of specialist tools, and…since Bitcoin is so new, these tools basically don’t exist yet, so you need to create them yourself.

While these requirements set law enforcement on the back foot from the outset, WizSec had no such

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