Amidst the FTX scandal, Penning’s co-founder and CEO Jimmie Steinbeck is out with another drop with the Pen Team about the (then) largest exchanges and the scandal they themselves created. Experiencing scamming companies in both TradFi and DeFi is nothing new, but hopefully, after the recent fall of FTX, the community will stop allowing history to repeat itself.
MT. GOX
Mt. Gox was a Tokyo-based cryptocurrency exchange that operated between 2010 and 2014. It was responsible for more than 80% of Bitcoin transactions at its peak. Although it is most commonly known as Mt. Gox, the exchange is sometimes referred to as Mt. Gox or Mt Gox. Jed McCaleb created the website that became the Mt. Gox exchange.
It was initially a way for enthusiasts of the card game "Magic: The Gathering" to trade cards online. The name Mt. Gox was created as an acronym for "Magic: The Gathering Online Exchange."
The site was transferred to Mark Karpeles in 2011 in exchange for six months’ worth of revenue. Karpeles became the largest shareholder and CEO.
Mt. Gox was considered the world’s largest Bitcoin exchange at its peak. It handled 70% to 80% of the trading volume. Handling so many transactions gave Mt. Gox an outsized role in determining Bitcoin's market activity. For example, in 2013 it suspended trading for several days to cool down the market.
In 2014, Mt. Gox was “hacked” and hundreds of thousands of Bitcoins were stolen. The company filed for bankruptcy shortly thereafter. In late 2021, creditors and the Tokyo District Court reached an agreement on the Mt. Gox rehabilitation plan, closing a seven and half years of a legal battle. We were many that lost a large amount in this bankruptcy. it was still the early days and we had much to learn about cyber security. That day in 2014 my exchange wallet got 400 bitcoin liter and I never saw them again.
TRADEHILL
At the same time another exchange in the US, TradeHill Exchange, also called TradeHill, was a Bitcoin exchange launched in June 2011 by Jered Kenna, an early Bitcoin enthusiast. It was among the first Bitcoin and cryptocurrency exchanges. Unfortunately, TradeHill essentially ran out of funding after dealing with lawsuits and regulatory issues. They lost their bank partner shortly after expanding and had just moved into bigger offices. At that time, regulation was a lot harder than today. there was no help to get and no regulations or standards to lean up to. Everything had to be done in the making. I myself tried it in Denmark in 2011 and had to stop shortly after.
Later in 2013, Trade Hill reopened after launching a new service called Prime. Prime was a business-to-business digital exchange intended to facilitate the exchange of digital currencies between businesses and large investors.
Unfortunately, the day TradeHill re-launched, the U.S. Financial Crimes Enforcement Network released its new regulation on virtual currencies, which confirmed that anyone selling units of a decentralized virtual currency to another person for real currency or its equivalent is categorized as a money transmitter. TradeHill Shut Down in August 2013.
THE NEW STANDARD
Shortly after we saw 2 new exchanges starting their business, Kraken, and BitStamp, both are today some of the biggest and most respected exchanges among B2B and are also some Penning is using to handle trades for our clients. Penning is on the path of setting a new standard for crypto companies, believing that full transparency is not enough, but being fully compliant is equally important without having to compromise with the principles of DeFi. Setting new standards should not be based on the shoulders of spectacular failures but rather on doing things how they were supposed to from the very get-go. Greed has served no one, but one's own ego, and whether you're on top of a Mountain or in jail, you are all alone.
“Penning down the thoughts” is a series compiled by the CEO and Co-Founder of Penning, Jimmie Hansen Steinbeck. A compilation of his vast experience, knowledge, failures, successes, know-how & ideas. Jimmie has spent the last decade (almost since the birth of bitcoin), working in the crypto, blockchain (also known as Web3) space, as an investor, entrepreneur, and expert advisor to numerous crypto companies.