Monday, May 26, 2014

Report Suggests MtGox Fraud Led to $1200 Bitcoin Price

Crypto Coin News reports:
It turns out that the extreme rise in the bitcoin price near the end of the 2013 may not have had much to do with China, Silk Road, or government hearings in the United States. Although those three factors are often cited as the reason the price skyrocketed to over $1000 near the end of the year, a new report suggests that there was some price manipulation going on behind the scenes at MtGox. Although the report falls short of placing guilt upon Mark Karpeles or anyone else at MtGox, fraud is definitely an accusation that has been on the minds of many individuals in the Bitcoin community over the past few months. The report includes a large amount of evidence based on publicly available data related to trading patterns on the MtGox platform over the course of 2013.
The basis of the claims of price manipulation in the “Willy Report” revolved around the activities of two trading bots: Willy and Markus. These bots were actually noticed by many avid Bitcoin traders back in 2013, and the suspicious activity related to the bots was discussed on various Bitcoin forums. The activity of these bots were actually rather obvious to people who were watching the charts and live trades take place during the day, and it was clear that someone was either attempting to manipulate the bitcoin price or simply take an extremely large position in the cryptocurrency. In total, the report estimates that roughly $112 million was used to purchase around 270,000 bitcoins through the use of trading bots. The vast majority of this activity took place in November, which is when the bitcoin price went from around $200 to over $1000.
Tying the Bots Back to MtGox
While many bitcoin speculators understood the existence of these trading bots during the bitcoin price rise, recently released details shed some light on who may have been behind all of that extra liquidity in the bitcoin market. A large number of different facts surrounding the trades made by Willy and Markus point to an inside job by MtGox, and it’s at least possible that these trades were manufactured with no real money changing hands.

Bottom line: A typical pump and dump operation. Phony trades are generally a part of pump and dumps.

Via FORTUNE Magazine in 2007, on a stock pump and dump (my emphasis)
"Using sophisticated computer hacking and identity theft techniques to break into the accounts of innocent online brokerage customers, these perpetrators effectively cut out the middleman of the old fashioned pump-and-dump scheme, eliminating phony stock promotions, creating their own artificial trading demand, and consummating their frauds in as little time as a couple of hours," John Reed Stark, SEC Office of Internet Enforcement chief, said in a statement.
wrote in November 2013:
 As for the current increase in the price of Bitcoin, I consider it a very sophisticated pump and dump scheme, run by very professional operators. Hopefully, my warnings about Bitcoin will save some from chasing fool's gold.  I don't know how high Bitcoin will climb, I do know, however, that many will lose a lot when the jig is over.


  1. Another Wenzel fail. That bot was responsible for 7% of only one exchange operating during that time. Hardly the cause of the bubble.

    I guess anything to get a negative Bitcoin headline though huh Wenzel?

    1. No. It is more evidence that you have no clue. Prices move at the margin. I can create 100,000 shares of buying with a 1,000 share trade if I do it right, You are clueless about trading AND Bitcoin.

  2. This may be the reason for the price spike. But, it is wrong to conclude that a price spike is unlikely to happen again. Why? Because greed motivated to first bot-scam and greed does not go away. At BTC's current prices, there are 7.2 billion reasons why someone might game the market again, especially if no one goes to jail for the Mt. Gox scam.