MtGox insolvent long before collapse - FT.com

NEW YORK (Reuters) - MtGox, a bitcoin trading platform that collapsed early last year, was insolvent long before it went bankrupt because thieves practically cleaned it out, the Financial Times reported Sunday, citing a report by independent investigators. Findings by WizSec, an independent consulting firm, showed that bitcoins were periodically being stolen from the Tokyo-based exchange two years before its collapse, the newspaper reported online. The collapse of MtGox, after it lost track of some 850,000 coins worth $500 million (334 million pound), triggered thousands of creditor claims and a police investigation into the collapse is ongoing, the newspaper said. WizSec said most or all of the missing bitcoins were taken from an online pool held for settling daily transactions. The investigators pored over millions of entries on the blockchain, the central ledger that records all transfers between bitcoin addresses, and found a pattern. MtGox-related bitcoins would periodically be sent to a new non-MtGox address, without a withdrawal log entry, often in lots of a few hundred coins at a time, the FT said. These addresses would then be pooled to form bigger addresses holding a few thousand bitcoin. From there, the coins would be deposited in chunks of a few hundred in various bitcoin exchanges and probably sold for cash. "This kind of activity would be hard to interpret as anything but intentional theft," wrote Kim Nilsson, the report's author, and WizSec's chief engineer. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Cynthia Osterman)