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•Can Bitcoin outlast the drama to become a currency of the future?
Business reporter Sherry Slater provides a detailed explainer.
Associated Press photos
Mt. Gox CEO Mark Karpeles bows deeply in apology at the Justice Ministry in Tokyo. The bitcoin exchange filed for bankruptcy protection Friday.

Bitcoin exchange files for bankruptcy

Karpeles announces that about $425 million worth of bitcoins have vanished at the Mt. Gox exchange.

– The Mt. Gox bitcoin exchange in Tokyo filed for bankruptcy protection Friday, and its chief executive said 850,000 bitcoins, worth several hundred million dollars, are unaccounted for.

CEO Mark Karpeles, a Frenchman, spoke in Japanese and bowed deeply in front of TV news cameras. He said a weakness in the exchange’s systems was behind a massive loss of the virtual currency involving 750,000 bitcoins from users and 100,000 of the company’s own bitcoins. That would amount to about $425 million at recent prices.

The online exchange’s sudden unplugging this past week, along with accusations that it had suffered a catastrophic theft, has renewed attention to a currency that was created in 2009 as a way to make transactions across borders without banks or other third parties.

It remains unclear whether the missing bitcoins were stolen, voided by technological flaws or both.

“I am sorry for the troubles I have caused all the people,” Karpeles said in Japanese at a Tokyo court.

Karpeles had not made a public appearance since rumors of the exchange’s insolvency surfaced in January. He said in a web post Wednesday that he was working to resolve Mt. Gox’s problems.

The loss is a giant setback to the currency’s image because its boosters have promoted bitcoin’s cryptography as protecting it from counterfeiting and theft.

Bitcoin proponents have insisted that Mt. Gox is an isolated case, caused by the company’s technological failures, and that the potential of virtual currencies remains great.

Debts at Mt. Gox totaled more than $65 million, surpassing its assets, according to Teikoku Databank, which monitors bankruptcies.

Hours before the bankruptcy filing, Japanese Finance Minister Taro Aso had scoffed that a collapse was inevitable.

“No one recognizes them as a real currency,” he told reporters. “I expected such a thing to collapse.”

Japan’s financial regulators have been reluctant to intervene in the Mt. Gox situation, saying they don’t have jurisdiction over something that’s not a real currency.

They pointed to the Consumer Affairs Agency, which deals with product safety, as one possible place where disgruntled users may go for help.

That agency’s minister, Masako Mori, urged extreme caution about using or investing in bitcoins. The agency has been deluged with calls about bitcoins this year.

“We’re at a loss for how to help them,” said Yuko Otsuki, who works in the agency’s counseling department.

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