Shutdown of Mt. Gox Rattles Bitcoin Market

Closure Raises Concern About the Future of Unregulated Virtual Currency.

The virtual currency bitcoin suffered the biggest setback in its five-year history after a major exchange shut down on Tuesday, stoking concern about the future of a digital form of money traded by professional investors and ordinary people, but regulated by no one.

The abrupt closure of Tokyo-based Mt. Gox underscored the risks of a virtual currency that has seen a meteoric rise in the past year. Unlike a U.S. bank failure, in which deposits are insured by the government, there may be little recourse for people whose money is locked up in the shuttered exchange.

Federal prosecutors in Manhattan subpoenaed Mt. Gox this month, asking the bitcoin concern to preserve certain documents, among other things, according to a person familiar with the matter.

Once the pre-eminent marketplace for buyers and sellers of bitcoin, Mt. Gox stopped all transactions on Tuesday, and its website disappeared. The site later came back, carrying only a message that said the halt was “for the time being in order to protect the site and our users.”

The announcement came after the exchange had been experiencing technical issues for months, including a hacking attempt two weeks ago. Adding to the worries was an unconfirmed report circulating online that said Mt. Gox had lost almost 750,000 bitcoins in a long-running theft. That would represent about 6% of bitcoins in existence and be valued at about $400 million at current prices.

Bitcoin prices briefly plunged more than 23% on Tuesday, based on the CoinDesk price index of two other virtual-currency exchanges. Late in the day, one bitcoin fetched about $538, down 1.2% from Monday.

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