Quote from: Peter R on February 27, 2014, 02:45:47 AM

Quote from: derpinheimer on February 27, 2014, 02:19:26 AM

What would they gain from being a fractional reserve Huh

WARNING: PURE SPECULATION

I'm changing my tune. Yesterday I thought the 750,000 BTC figure was FUD to get certain Gox creditors to voluntarily accept 10 cents on the dollar for their GoxBTC. The theory I'm leaning towards now is that the 750,000 BTC figure is true and Gox has indeed been operating as a fraction reserve.

The theory is that sometime in 2011--probably after the crash from $30 to $10--MtGox was lax with security and a group of thieves or hackers was able to steal about 500,000 to 1,000,000 BTC. At the time, this only represented $10 million dollars.

To avoid discrediting bitcoin and embarrassing himself, Mark pretended that nothing happened. He knew that BTC withdrawals were roughly balanced by BTC deposits (typical fraction reserve banking) and he hoped to slowly earn back the bitcoins through trading fees.

Meanwhile, the thieves worked to mix their coins with non-stolen coins and slowly sold them off, thereby driving the bitcoin price eventually to $2 later in the fall of 2011. It was this extra selling pressure that continued through the remainder of 2011 and 2012 that kept the price of bitcoin artificially depressed.

Meanwhile MtGox was buying coins whenever it had spare cash. But as the price of bitcoin exploded in the spring of 2013 they saw their liabilities in $ terms increase tremendously. But at this point they had to keep going, even using customer deposit money to buy coins from other exchanges or individuals.

The problems at MtGox (probably due to extreme stress of MK) got worse, and MtGox lost market share, slowly dwindling down MtGox's small supply of coins.

MtGox purposely mixed immature coins into withdrawal transactions, and later used the malleability excuses, all to buy time to somehow get more coins and make good on withdrawals.

But eventually all hope was lost. Their supply of coins dwindled down to 2,000 BTC while their bitcoin liability were a huge 750,000 BTC.

And here we are today. If this theory is correct, there are 750,000 less bitcoins in existence than what everyone thought.

Very good theory, But if that's the case that will defiantly be consider a Ponzi Scheme, in which Mark, will be setting in prison for 15-25 Yrs, if process here in the US.