Tokyo based Mt Gox, the largest Bitcoin exchange, has shut up shop and the million people with bitcoins in it have lost all. It is not the first time it has had these problems – it lost 400,000 bitcoins in 2011. Many other exchanges have also been hit.
Reuters reports that a document circulating on the Internet, purporting to be a crisis plan for Mt. Gox, said more than 744,000 bitcoins were "missing due to malleability-related theft", and noted Mt Gox had $174 million in liabilities against $32.75 million in assets. Reuters said It was not possible to verify the document or the exchange's financial situation.
A statement on Bitcoin's website said, "In the event of recent news reports and the potential repercussions on Mt Gox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly."
The latest disaster may well spell the end for Bitcoin. Like all currencies, it is ultimately based on trust, which is constantly being challenged.
However, at the time of writing the Bitcoins were holding their value at more than US$500 on the open market.