Bitcoin investors collectively lost the equivalent of hundreds of millions of dollars when one of the world's biggest Bitcoin exchanges, Mt. Gox, went offline Tuesday.
In the case of a bank heist or a financial crime involving dollars, it's likely a law enforcement agency would provide the public with assurance that there will be a formal investigation. For now, none in the U.S. appear willing to make that commitment in regards to the Mt. Gox incident.
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"We're aware of it, and we're looking into it," an FBI spokesperson told Mashable. The spokesperson, who asked to remain anonymous, stopped well short of calling the agency's current efforts an investigation.
The Mt. Gox situation highlights the difference between Bitcoin and more traditional currencies. Bitcoin, the most popular and valuable cryptocurrency, was designed to avoid central regulation like those that governments impose on state-backed currency.
Unlike money in a checking or savings account, Bitcoin is not backed by the Federal Deposit Insurance Corporation (FDIC) . Its disappearance alone will not spark an all-out investigation from the U.S. government. Law enforcement will not get formally involved until there's some certainty that illicit activity occurred such as embezzlement or computer hacking. This is similar to other investments, where the value of a portfolio can go down through market action, but suspicions embezzlement or insider trading would be investigated.
"There's got to be a criminal action," the FBI spokesperson said. "The FBI doesn't investigate every bad investment."
A criminal investigation into the situation may not be far off. The federal prosecutor's office in New York has issued a subpoena to Mt. Gox compelling the company to preserve certain documents, according to a Wall Street Journal report that cited an anonymous source with knowledge of the situation.
The report on the subpoena does not specify if the nature or scale of government's alleged probe. In response to our inquiry, a spokesperson for the federal prosecutor would not confirm or deny a possible investigation.
Another reason U.S. law enforcement may be keeping its hands off for the time being, at least publicly, is because Mt. Gox is a Japan-based company. Japan's Chief Cabinet Secretary Yoshihide Suga, at a Wednesday new conference, said the country's Financial Services Agency and National Police Agency are "gathering information" about the situation, but he also stopped short of calling it a criminal investigation.
While law enforcement is taking a wait-and-see approach, many in the Bitcoin community have already concluded wrong-doing has occurred. The source of their suspicion is a Mt. Gox document titled "Crisis Strategy Draft," which leaked to the public Tuesday around the same time the company's website went down.
The document, which warns "this could be the end of bitcoin," is how the world learned of the disappearance of some 744,408 bitcoins — the equivalent of about $350 million — from Mt. Gox due to a "transaction malleability" glitch. Right now, most members of the Bitcoin community are just trying to figure out if it was outsiders who exploited the glitch and made off with the nearly 750,000 bitcoins or if Mt. Gox is culpable.
As for Mt. Gox, the company is "working very hard with the support of different parties to find a solution to our recent issues," according to a message from CEO Mark Karpeles that was posted to Mt. Gox's website Wednesday morning.
Meanwhile, the Bitcoin investors who lost money have been commiserating and sharing their stories on public forums such as Reddit. Erik Voorhees, a popular Bitcoin entrepreneur who said he lost 550 bitcoins or about $300,000 on Mt. Gox, wrote a short manifesto on the Bitcoin subreddit about how he believes the incident does not spell doom for Bitcoin and other digital currencies.
"We are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world," Voorhees wrote. "This is the harsh truth. We are building the channels, the bridges, and the towers of tomorrow's finance, and we put ourselves at risk in doing so."
The question remains as to whether or not law enforcement agencies will help the Bitcoin community mitigate that risk.
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