Tech Bankruptcy
February 28, 2014
Mt Gox files for bankruptcy protection in Japan
Reuters reports that Bitcoin exchange Mt Gox has filed for bankruptcy protection in Japan, after disclosing that it lost about $480 million dollars in Bitcoin to hackers.
Labels: bank robbers, bitcoin, mt gox
¶ 10:37 AM 0 comments
February 26, 2014
Back to the Mattress: Mt Gox and the Future of Bitcoin
A true digital currency is the holy grail of the on-line world. Since the start of the Internet, a long series of folks have been trying to find the on-line equivalent of cash - some kind of digital token that is secure, easy to transfer and, for most of the people who have joined the hunt, anonymous. Bitcoin provides the latest foray into this arena, and the Bitcoin story provides the latest example of the basic truth that payment systems are always dependent on the support of a strong, trustworthy third party.
This truth applied to traditional currencies, like this:
Or these:
Valued when their backing governments existed, when the government support failed so did the currency.
The digital world is no different. When "virtual" banks tried to build a business around Linden Dollars in Second Life, problems quickly developed. Customers of Ginko Financial, an unregulated Second Life investment bank, swarmed the "doors" at the first hint of trouble, causing a run on the bank and its collapse.
The rapid increase of Bitcoin popularity is creating a similar dynamic. At one point the largest trader of Bitcoin, Mt Gox started to encounter pronounced difficulties handling transactions as the result of regulatory issues. Customers started to move business to different exchanges, and on February 7 Mt Gox halted withdrawals. Four days later, another exchange, BitStamp, also suspended withdrawals, citing difficulties caused by denial of service attacks against its servers that could potentially affect the security of its transactions.
On February 24, Mt Gox shut down completely. Customers might have lost up to $480,000,000. Although, Bitcoin value has been plunging as a result of the shutdown and other disturbances in the Bitcoin infrastructure. So, the actual loss might be significantly less.
As of today (February 26) visitors to its website received this informative and reassuring message:
February 26th 2014
Dear MtGox Customers,
As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.
Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.
Sincerely,
Mark Karpeles
And so it goes.
The lesson, as I pointed out before, is that any currency, even a virtual one, requires a reliable and trustworthy controlling authority. An imaginary person simply does not cut it. ¶ 9:17 PM 0 comments
This truth applied to traditional currencies, like this:
The digital world is no different. When "virtual" banks tried to build a business around Linden Dollars in Second Life, problems quickly developed. Customers of Ginko Financial, an unregulated Second Life investment bank, swarmed the "doors" at the first hint of trouble, causing a run on the bank and its collapse.
The rapid increase of Bitcoin popularity is creating a similar dynamic. At one point the largest trader of Bitcoin, Mt Gox started to encounter pronounced difficulties handling transactions as the result of regulatory issues. Customers started to move business to different exchanges, and on February 7 Mt Gox halted withdrawals. Four days later, another exchange, BitStamp, also suspended withdrawals, citing difficulties caused by denial of service attacks against its servers that could potentially affect the security of its transactions.
On February 24, Mt Gox shut down completely. Customers might have lost up to $480,000,000. Although, Bitcoin value has been plunging as a result of the shutdown and other disturbances in the Bitcoin infrastructure. So, the actual loss might be significantly less.
As of today (February 26) visitors to its website received this informative and reassuring message:
February 26th 2014
Dear MtGox Customers,
As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.
Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.
Sincerely,
Mark Karpeles
And so it goes.
The lesson, as I pointed out before, is that any currency, even a virtual one, requires a reliable and trustworthy controlling authority. An imaginary person simply does not cut it. ¶ 9:17 PM 0 comments
February 17, 2014
Understanding Electronic Discovery: Its Not Just About Protecting Your Client
Reading a recent Massachusetts Lawyers Weekly, I spotted an item in the Bar Discipline column that highlighted the dangers of not staying up to date with technology. A litigation attorney, let's call him Paul, failed to understand the rules governing electronic discovery, resulting in his client deleting electronic data and the Massachusetts Board of Bar Overseers issuing a public reprimand.
Paul represented a client accused of taking confidential information with him when he left his employer to work for a competitor. Allegedly, the client had transferred the information from his old laptop to a new one, used a computer software program to delete the stolen information from the old laptop, and then returned the old laptop to his former employer. In late 2006, his former employer sued him, and obtained a TRO requiring the client to return to his former employee any information that he had taken. Instead of complying with the order, the client instead deleted the files from the new laptop. About five months later, plaintiffs' counsel advised Paul that they planned to file a motion to obtain turnover of the new laptop, and that documents on the new laptop had to be preserved. Paul did not advise his client not to delete relevant files from the new laptop, and his client subsequently deleted some additional files - although without Paul's knowledge.
Then, the court ordered the new laptop be surrendered to the plaintiff's IT expert. Notified of this event, the client told Paul that the new laptop contained confidential information belonging to his new employer and unrelated to the lawsuit. Paul advised his client that these documents could be removed from the laptop before turning it over. When the laptop was turned over, and the deletions discovered, the Court held that the client had engaged in spoliation of evidence.
Reading the reprimand didn't give me the impression that Paul was acting in bad faith - instead he had failed to comprehend the nature of the information on the computer and the need to keep all of the information preserved once the litigation commenced. Used to a paper world, he failed to anticipate and guard against a client who was tempted to delete information, and failed to understand that deleting information from a computer can leave a gap - showing that information was removed but leaving wide open the question of what the removed data contained. By issuing proper warnings to his client, being alert to the possibility of non-relevant trade secrets residing on the laptop, and following appropriate protocols to avoid the release of trade-secrets stored on the laptop, Paul could have avoided the damage to his client.
In its reprimand, the BBO indicated that Paul's failures violated his duty to provide competent representation. In 2012, the American Bar Association adopted revisions to the Model Rules of Professional Conduct, including this language added to the commentary for Rule 1.1:
To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology...
That's a simple change, but one attorneys should take to heart lest they, some day, end up like Paul. Massachusetts hasn't yet adopted the 2012 revision in its commentary to Rule 1.1, but the Massachusetts BBO clearly expects its attorneys to understand the new world of handling electronic evidence. ¶ 1:02 PM 0 comments
Paul represented a client accused of taking confidential information with him when he left his employer to work for a competitor. Allegedly, the client had transferred the information from his old laptop to a new one, used a computer software program to delete the stolen information from the old laptop, and then returned the old laptop to his former employer. In late 2006, his former employer sued him, and obtained a TRO requiring the client to return to his former employee any information that he had taken. Instead of complying with the order, the client instead deleted the files from the new laptop. About five months later, plaintiffs' counsel advised Paul that they planned to file a motion to obtain turnover of the new laptop, and that documents on the new laptop had to be preserved. Paul did not advise his client not to delete relevant files from the new laptop, and his client subsequently deleted some additional files - although without Paul's knowledge.
Then, the court ordered the new laptop be surrendered to the plaintiff's IT expert. Notified of this event, the client told Paul that the new laptop contained confidential information belonging to his new employer and unrelated to the lawsuit. Paul advised his client that these documents could be removed from the laptop before turning it over. When the laptop was turned over, and the deletions discovered, the Court held that the client had engaged in spoliation of evidence.
Reading the reprimand didn't give me the impression that Paul was acting in bad faith - instead he had failed to comprehend the nature of the information on the computer and the need to keep all of the information preserved once the litigation commenced. Used to a paper world, he failed to anticipate and guard against a client who was tempted to delete information, and failed to understand that deleting information from a computer can leave a gap - showing that information was removed but leaving wide open the question of what the removed data contained. By issuing proper warnings to his client, being alert to the possibility of non-relevant trade secrets residing on the laptop, and following appropriate protocols to avoid the release of trade-secrets stored on the laptop, Paul could have avoided the damage to his client.
In its reprimand, the BBO indicated that Paul's failures violated his duty to provide competent representation. In 2012, the American Bar Association adopted revisions to the Model Rules of Professional Conduct, including this language added to the commentary for Rule 1.1:
To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology...
That's a simple change, but one attorneys should take to heart lest they, some day, end up like Paul. Massachusetts hasn't yet adopted the 2012 revision in its commentary to Rule 1.1, but the Massachusetts BBO clearly expects its attorneys to understand the new world of handling electronic evidence. ¶ 1:02 PM 0 comments
