Feds Are Investigating Mt. Gox And Other Bitcoin Businesses, Sources Say

Physical versions of Bitcoins developed by computer software engineer Mike Caldwell, Sandy, Utah, on texture, partial graphic
Physical versions of Bitcoins developed by computer software engineer Mike Caldwell, Sandy, Utah, on texture, partial graphic

By Emily Flitter

NEW YORK (Reuters) - The Manhattan U.S. Attorney has sent subpoenas to numerous companies that do business with Mt. Gox and other bitcoin exchanges to seek information on how they handled recent cyber attacks, a source familiar with the probe said on Wednesday.

The office of Preet Bharara subpoenaed Mt. Gox and other businesses to get a better understanding of the nature of the cyber attacks and how the exchanges dealt with them. A spokesman for Bharara declined to comment.

A second source familiar with the case said U.S. federal law enforcement is investigating Mt. Gox, which halted customer withdrawals on February 7 in response to what it termed "unusual activity." On Tuesday, the exchange went dark, leaving customers unable to recover their funds.

Mt. Gox's troubles contributed to a substantial decline in the price of bitcoin, though the digital currency's value varies by exchange. The losses were most dramatic on Mt. Gox, where bitcoin fell to about $135 from $828.99 before February 7.

The chief executive of Mt. Gox, Mark Karpeles, said on Wednesday he is working with others to solve the company's problems.

"As there is a lot of speculation regarding Mt Gox 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," Karpeles said in a statement posted on the Mt. Gox website.

Bitcoin, a form of electronic money independent of traditional banking, relies on a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every bitcoin transaction that is made.

The currency has gained increasing acceptance as a method of payment and has attracted a number of large venture capital investors, but of late has also been under attack from hackers. Bitcoin has caught the eye of regulators concerned with consumer protections and bitcoin's use in money laundering.

Japan's Finance Ministry and police are also looking into the abrupt closure of Mt. Gox, according to the Japanese government's top spokesman.

The price of bitcoin was lately at $562 on United Kingdom-based Bitstamp, the second-most active exchange in the last 30 days by volume, up by about 5.2 percent on the day.

(Reporting by Emily Flitter; Additional reporting by Chris Francescani; Writing by David Gaffen; Editing by Tiffany Wu)