The Collapse of Mt Gox and its Meaning for You

February 2014.

Mt Gox collapses.

It’s not a mountain.

Mountains don’t collapse.

The largest Bitcoin exchange in the world – gone.

What happened?

Hazy area.

If one reads through the company’s press releases, it seems they themselves are not sure. Or, they’re trying to cover up that they got hacked, big-time.

Company’s claiming a black-swan event. Software goes into a crazy loop. Transaction shows as failed. However, system releases Bitcoin. Do this over and over again. You’re down 750k Bitcoin. Half a billion dollars. Hmmmmmmmmmm. Not buying it.

It’s probably not an inside job. Trail would’ve been too hot.

They’ve actually and probably gotten hacked. Possibly in the earlier days. Perhaps they tried to cover it up for the longest time, till it was no longer possible. There came a time then, it would seem, to throw in the towel and declare bankruptcy, coupled with the release of an unbelievable explanation.

Do the math. Conjecture.

We are down to conjecture, after an abominable event like this, where retail investors along with handlers, dealers and the works get fried.

For heaven’s sake.

Makes you rethink Bitcoin majorly.

Diversification is a safe thing. However, not at the cost of converting your computer into a big red flag.

There are two kinds of computers in the world. Those with Bitcoin or its cousins, and those without.

Currently, those with are targets.

There’s no better system of storing Bitcoin.

Banks aren’t taking it up systematically.

Dollar lobby is too strong.

It’s not letting Bitcoin settle.

Who was behind the possible hack?

You tell me.

Why would anyone sacrifice one’s sleep?

No tension, please.

We don’t wish to lose sleep over the fact that our computer might get hacked in the night. Also, will the cousin’s ever sort themselves out?

If criminals could hack Mt Gox, what are the chances of one’s desktop surviving?

Yeah, where does that leave you?

Till Bitcoin gets accepted more systematically, and till mainstream banks start storing it for you in their cyber-lockers, I’m afraid this leaves you off the Bitcoin demand-list.

Yeah, safety first.

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Your Personal War in Cyberia

Are you illiterate?

Literacy is not just alphabetical.

The meaning of literacy has expanded itself into your cyber world and also into your financials.

I mean, can you call yourself literate without knowing computer and financial basics?

I don’t think so. Not anymore. Times have changed, and so must you, in case you want to be called literate.

One of the first things one learns during one’s quest for financial literacy is the operation of one’s netbanking.

Once you are logged in, you soon realize, that your assets are under attack, and must be appropriately secured.

Login password, secure login, phishing filter, security questions, transaction password…you are learning fast. Your vocabulary is changing. Your defences are up. Yes, you are at war.

What kind of a war is this?

More of a cold war, till it gets hot for you, which can happen, but is not a must.

Worst-case scenario is that someone cleans you out. As in, a cyber thief steals all your money that was reflecting in your netbanking.

Your common-sense should tell you that your netbanking password is the all-important entity. Tell it to no one. Store it in a password safe. Keep changing it regularly. Don’t forget to update it in your safe. The safe of course opens with its own password, and is in sync between your mobile and your desktop. On both your mobile and your desktop, internet security prevails. Meaning, don’t use an el cheapo antivirus. Use a good one. Pay for it.

If there is a large amount reflecting in your account for a number of days without being used, secure it. Even if someone hacks in, available amounts should be as minimal as possible. Let the hacker first deal with unsecuring a secured amount. This gives you a time-window, during which you read and respond to any sms sent by your bank, that a secured amount has now been unsecured. The shot has been fired, your watchman has alerted you, and you now need to respond.

For the amount to be actually transferred out of your account, one more thing needs to happen. The hacker needs to set up a new payee under third party funds transfer. Some banks take three days for this, during which they coordinate with you whether or not you really want this payee to be set up. Other banks have a one-time password (OTP) system, where a transfer can only be activated by an OTP sent by sms to the registered mobile number linked to the account. Works.

Nevertheless, hackers seem to be getting around these systems, because one hears and reads about such cyber thefts all the time. However, the window created by your systems in place gives you crucial time to respond.

What is your first response, after becoming aware that you are under cyber attack?

Relationship manager (RM) –  call him or her. After you’ve alerted your RM, login if you can, and secure any unsecured amount. Change your login and transaction passwords, along with security images, words, questions and answers. Delete all payees. Logout. Close all windows on your desktop. Clear all history, cache, temporary files, cookies and what have you. Run a virus cum spyware scan. Clean any viruses, then shut your computer.

How does one go about securing unsecured amounts?

Make a 7 day fixed deposit with your unsecured amount. Or, configure your mutual fund operations through your Netbanking itself, and transfer the unsecured amount to a trusted liquid scheme offering 18-20 hour liquidity, all through your netbanking. Pretty straight-forward.

After you’re done, join your RM in finding the loophole. If you’ve incurred a loss, file a police report along with an application for reimbursal, citing all security measures you undertake as a given while also outlining the chronology of your actions after you realized that you were under attack.

That’s about it, I can’t think of anything else that you could do. If you can, please comment.

Right then, all the best!