When ‘George Clooney’ crashed bitcoin to below $0.01
This isn’t the worst hack to ever hit Mt. Gox, but it could be the most entertaining
Sem_Sem/Shutterstock and Adobe Stock modified by Blockworks
This is a segment from the Supply Shock newsletter. To read full editions, subscribe.
“The scenario of bitcoin going to zero does not exist anymore. BTC is playing much the same role as gold did in the early days of banking.”
You’ve probably come across that exact post on X, shared by a scambot posing as a reply-guy — bait that leads to some fraudster posing as an analyst.
Still, it’s true. The scenario of bitcoin going to zero really does not exist anymore.
Obviously, I don’t need to convince you of that. But it wasn’t always this way. Bitcoin actually did go to zero on this day, 14 years ago, localized entirely on Mt. Gox, of course.
Stacked against the swathes of scandals that plagued Mt. Gox, this particular incident seems small, with only 2,000 BTC reported lost (under $30,000 at the time).
The significance was in the spectacle. Practically all bitcoin trading volume occurred on Mt. Gox before mid-2011, making it the one and only venue for bitcoin price discovery.
Bitcoin had peaked at more than $26 in the first two weeks of June — an all-time high that would stand for close to two years. Prices were now on their way down, but at least one YouTuber noticed they were correcting a little too quickly.
“You are watching a crash in real time. We are down to 4.8 [dollars], 4.6, 4.5, 4.4. I’ve been watching this since about 17. I’ve not seen a single uptick in this market. It’s going straight down. I would be fascinated to know what news is associated with this. I’m sure we’re going to find out. Three and a half, 3.3, 3.2… and 3.1,” BitcoinChannel commentated over the Mt. Gox’s price feed.
“Well, I’m all broken up about my $99. The main thing I’m broken up about is I could have had 33 bitcoins [$560 then, $3.5 million now]. So we’re going to see how low this thing goes.”
Within three minutes, the price of bitcoin on the exchange had flatlined at $0.01, with not a single positive tick observed on the way down.
BitcoinChannel was right: there was some news about Mt. Gox. It had been hacked.
Two days earlier, a pseudonymous hacker under ~cRazIeStinGeR~ had offered for sale Mt. Gox’s entire database of user accounts for sale on Pastebin. The next day, then-new owner Mark Karpelès warned of an increase in thefts from user accounts, but appeared to blame the victims themselves.
“So far I have 10 known cases of people whose coins were stolen (someone logged in on the account using their password, traded USD for BTC, withdrew all the BTC). Considering we have now over 60000 accounts (2 months ago we had 10 times less), this seems to be a problem coming mainly from users.”
The pastebin that sent bitcoin to zero
As it turned out, ~cRazIeStinGeR~ may have told the truth. Preceding the crash, an unidentified user on the long-gone InsidePro password recovery forums, “georgeclooney,” asked for help in cracking hashed passwords from the stolen database.
A number of the hashes were weak and were quickly brute-forced, according to a timeline of events pieced together by investor Marc Bevand. “Some users discovering the leak have run password brute-forcers themselves against the hash list and easily broke hundreds of them. Contrary to previous claims from the MtGox owner, this indicates that many accounts had been compromised for at least days, if not weeks, before today’s attack.”
And considering georgeclooney knew about the hashes before the database was leaked online, Bevand concluded that they were likely the same person who sent bitcoin spiraling.
At exactly 36 seconds past 5:15pm, UTC, on June 19, 2011, that person placed a number of orders to sell hundreds of thousands of bitcoins at once. Bevand reported that it took 30 minutes for Mt. Gox to process those orders and had been totally unresponsive during that time, as is reflected in BitcoinChannel’s video.
In total, the hacker had traded more than $1.5 million BTC out of a total daily volume of $1.8 million. They then appeared to attempt to buy bitcoin back on the way up for more profits, as did other users, driving bitcoin’s price back up to a few dollars.
The price of bitcoin on Mt. Gox during the crash (source: BitMEX).
One user in particular, “Kevin,” claimed to have bought 259,684 BTC for $3,000 ($0.016 on average) but was only able to withdraw 643 BTC before Karpelès took Mt. Gox offline to sort through the mess.
In the end, Mt. Gox was saved due to its $1,000 withdrawal limits for both US dollars and bitcoins (the latter of which was unknown to the public until this event). These limits contained most of the damage to the platform’s internal, offchain order books.
Karpelès opted to roll back the trading engine to before the compromised accounts began their coordinated dumps, a move which faced controversy at the time. It’s believed up to around 900 accounts may have been affected, and the platform would stay closed until August.
It could be that the hacker knew about the withdrawal limits, and chose to crash the price of bitcoin, perhaps as part of a plot to siphon up to 100,000 BTC, if they were priced at $0.01 apiece, thereby skirting the $1,000 cap.
“Or perhaps, as it is sometimes the case, the attacker’s purpose was simply to cause mayhem for fun (think a script kiddie doing random things). Not all attackers are like the well-prepared robbers in Ocean’s 11, with a precise plan of action. This is probably the simplest explanation,” Bevand wrote.
Get the news in your inbox. Explore Blockworks newsletters:
- The Breakdown: Decoding crypto and the markets. Daily.
- Empire: Crypto news and analysis to start your day.
- Forward Guidance: The intersection of crypto, macro and policy.
- 0xResearch: Alpha directly in your inbox.
- Lightspeed: All things Solana.
- The Drop: Apps, games, memes and more.
- Supply Shock: Bitcoin, bitcoin, bitcoin.
