The Bitomat.pl Disaster
The third-largest exchange, Poland's Bitomat.pl, loses its wallet.dat. Mt. Gox acquires the insolvent exchange, secretly deepening its own debt.
On July 31, 2011, the operator of Bitomat.pl, the largest Polish Bitcoin exchange and third-largest globally, announced a catastrophic error: he had accidentally overwritten the server's `wallet.dat` file during a virtual machine restart on AWS, permanently erasing the private keys to 17,000 BTC (worth ~$220,000 then). Unlike a hack, this was pure administrative incompetence. The coins were not stolen; they were mathematically locked away forever, unspendable by anyone. The operator had used ephemeral storage on Amazon EC2 without proper backups.
In a shocking twist, Mark Karpelès of Mt. Gox announced days later that Mt. Gox would acquire Bitomat.pl and restore all user balances. At the time, this was hailed as a heroic act of leadership that saved the ecosystem from a crisis of confidence. However, years later, it was revealed that Mt. Gox did not have the funds to cover this bailout. Karpelès simply added the 17,000 BTC liability to Mt. Gox's books, deepening the insolvency that had begun with his own exchange's hack in June.
The Bitomat incident is the 'original sin' of the Mt. Gox collapse. It established a pattern where Karpelès would cover up losses with user funds to maintain the illusion of solvency. It also highlighted the fragility of early infrastructure, where a single command prompt error could destroy millions of dollars.
Key Sources: SiliconAngle: Bitomat Lost Wallet | Wired: The Inside Story of Mt. Gox