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Two days ago, a reddit user on r/mtgoxinsolvency posted this:

One hell of a Christmas gift lol. Finally getting back a portion of the money lost in the infamous 2014 Mt. Gox hack a whole decade later! Most of the comments were along the lines of "Same, I'm stunned." or "Never thought I'd get paid back".

I'm truly happy that the Mt. Gox victims are getting a bit of their hard earned money back. But the truth is, it sucks that this has to be the case for anyone. Just reading that headline makes me cringe - no wonder people find it so hard to trust crypto. Doesn't matter if you lost your assets in 2014 with Mt. Gox or in 2016 with Bitfinex or in 2022 with FTX, Celsius, BlockFi, etc. At the end of the day, people trusted these exchanges with their money and having the money stripped away from you feels like getting stabbed in the back.

As someone who personally took a hit last November, I wish I would have dug deeper into Mt. Gox earlier. I'm not saying it would have guaranteed a different outcome but I would have at least realized the fact that it's the shiniest toys that are the most deceiving. FTX wasn't the first and it certainly won't be the last.

It's worth noting how powerful Mt. Gox was at its peak in 2013. Even FTX wasn't anywhere close that level of dominance.

And just half a year later, in February 2014, the Japan based exchange halted withdrawals, deleted all their tweets, and finally announced that they had lost ~850,000 btc 😢

Now there's a lot more to the hack itself that I won't get into - there's already a ton of good Youtube videos you should watch to dive deeper.

Rather, I wanted to call out something I found absolutely bizarre while doing my research.

In a March 2014 Wired article, there was a statement from a guy who had interviewed at Mt. Gox a few months before the hack. He was so excited to get a chance to work for the company, but was disappointed when he actually entered the office.

Read this paragraph - if your jaw doesn't drop then read it again slowly:

This was an exchange that was handling hundreds of millions of dollars and they didn't have a test environment! Are you kidding me??

The first thought that went into my head was how SBF, Caroline, Gary, & Nishad (FTX execs) pulled off the Alameda backdoor without people realizing. I know they're not exactly the same motives wise, but the point is that it turns out these all mighty powerful companies are handled by people.

And guess what?

Even the most powerful people that seem perfect are just people. And they're figuring things out as they go. This is the communication between Mark Karpeles and Jed McCaleb after the first Mt. Gox hack in 2011..."hey, something bad happened".

Stay Suspicious

Now, why am I writing this letter? Because in the past month, it seems as if we're finally starting to see life again in the market.

This past bull market was my first in the sense that I actually was invested with my time and money. And I learned a lot. What the OGs say is true: you have to experience and stick through a whole cycle to actually understand what a bull & bear market means.

Today's letter is a reminder to myself and hopefully others to stay suspicious this next rally. The shiniest things that are being advertised probably have a catch to them. My job will be to get off social media and question the roots of what's being offered. Dive into the whitepapers, read the docs, look the code, etc. Do whatever it takes to understand the mechanism inside and out.

It can be an exchange rate, NFT loan term, a new model for perps, a bonding curve memecoin, etc. It doesn't matter. Anything that is doing really well out of nowhere should be questioned. There's no such thing as free money.

And it's possible - for example, this was a screenshot Linda Xie posted from her team that identified an issue with Terra/Luna back in 2018...four years before the crash 🔥

Many of us in the weeds of the ecosystem should remember to take a step back every now and then and remember the whole point of crypto: don't trust, verify.

Crypto was established as a parallel path to secretive institutions, private code repos, and closed bookkeeping. Anytime you encounter centralized solutions in the crypto industry, it's probably worth taking a deeper look and asking why x can't be open source or why a certain team is pushing a narrative so hard.

That's all for today's letter. Stay suspicious friends.

- YB