Mt. Gox Bitcoin Scandal

Mt. Gox was a bitcoin exchange based in Shibuya, Tokyo, Japan.Launched in July 2010, by 2013 and into 2014 it was handling over 70% of all bitcoin (BTC) transactions worldwide, as the largest bitcoin intermediary and the world’s leading bitcoin exchange. Mt.Gox announced that approximately 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time.Although 200,000 bitcoins have since been “found”, the reason(s) for the disappearance — theft, fraud, mismanagement, or a combination of these — were initially unclear.

How the Hacker did this attack?

Hacker allegedly used credentials from a Mt. Gox auditor’s compromised computer to transfer a large number of bitcoins illegally to himself. He used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes the price corrected to its correct user-traded value.

In October 2011, about two dozen transactions appeared in the block chain that sent a total of 2,609 BTC to invalid addresses. As no private key could ever be assigned to them, these bitcoins were effectively lost. While the standard client would check for such an error and reject the transactions, nodes on the network would not, exposing a weakness in the protocol.