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Bitcoin's Mt.Gox Files for Bankruptcy, User Sues

TOKYO ─ Mt. Gox, once the world's biggest bitcoin exchange, filed for bankruptcy protection in Japan on Friday, saying it may have lost nearly half a billion dollars worth of the virtual coins due to hacking into its faulty computer system.

The collapse caps a tumultuous few weeks in which the company has remained virtually silent after halting trades of the crypto-currency, shaking the nascent but burgeoning bitcoin community.

Wearing a suit instead of his customary T-shirt, Mt. Gox's French CEO Mark Karpeles bowed in contrition and apologized in Japanese at a news conference at the Tokyo District Court, blaming his firm's collapse on a "weakness in our system," but predicting that bitcoin would continue to grow.

"First of all, I'm very sorry," he said. "The bitcoin industry is healthy and it is growing. It will continue, and reducing the impact is the most important point."

Angry investors have been seeking answers for what happened to their holdings of cash and bitcoins on the unregulated Tokyo-based exchange.

Gregory Greene, who estimated his bitcoin stake at $25,000, filed a lawsuit in the U.S. District Court in Chicago late Thursday, saying Mt. Gox had failed "to provide its users with the level of security protection for which they paid."

Baker & McKenzie, a Chicago-based law firm that represents Mt. Gox, declined to comment. It is not yet clear if the firm is representing the exchange in this lawsuit.

Mt. Gox said the exchange, used overwhelmingly by foreigners, had lost 750,000 of its users' bitcoins and 100,000 of its own. At the current bitcoin price of about $565, that would total some $480 million ─ representing about 7 percent of the estimated global total of bitcoins.

Mt. Gox said there was a discrepancy of 2.8 billion yen ($27.4 million) in its bank accounts when it checked on Monday. The exchange had liabilities of 6.5 billion yen ($63.67 million), dwarfing its total assets of 3.84 billion yen, the company said. It had 127,000 creditors in bankruptcy, just over 1,000 of whom are Japanese.

-Reuters