Major bitcoin exchange said to be insolvent

TOKYO - One of the world's largest bitcoin exchanges has seemingly disappeared, delivering a severe blow to the virtual currency as it struggles to gain legitimacy.

A coalition of virtual currency companies said Tuesday that Tokyo-based Mt. Gox went under after secretly racking up catastrophic losses.

Mt. Gox's website was returning a blank page Tuesday. The disappearance of the site follows the resignation Sunday of Mt. Gox CEO Mark Karpeles from the board of the Bitcoin Foundation, a group seeking legitimacy for the exotic new form of money. The exchange had imposed a ban on withdrawals earlier this month.

Prominent supporters of bitcoin - including San Francisco-based wallet service Coinbase and Chinese exchange BTC China - sought to shore up confidence in the currency by saying Mt. Gox's collapse was an isolated case of mismanagement. They said it had abused users' trust, but did not offer details.

"As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today," the statement said.

Since its creation in 2009, bitcoin has become popular among tech enthusiasts, libertarians and adventurous investors because it allows people to make one-to-one transactions, buy goods and services and exchange money across borders without involving banks, credit card issuers or other third parties. Criminals like bitcoin for the same reasons.

For various technical reasons, it's hard to know just how many people around the world own bitcoins, but the currency has attracted outsize media attention and the fascination of millions as an increasing number of large retailers such as Overstock.com begin to accept it.

Speculative investors have jumped into the bitcoin fray, too, sending the currency's value fluctuating wildly in recent months. In December, the value of a single bitcoin hit an all-time high of $1,200. In the aftermath of the Mt. Gox collapse Tuesday, one bitcoin stood at around $470.

Central banks across the globe have been hesitant to recognize bitcoin as a legitimate form of money, and Mt. Gox's virtual vanishing isn't helping.

Mt. Gox "reminds us of the downside of decentralized, unregulated currencies. There is no Federal Reserve or IMF to come to the rescue. There is no deposit insurance," said Campbell Harvey, a professor at the Duke University Fuqua School of Business who specializes in financial markets and global risk management.