News Archive


Shares fall, euro at 2014 high on euro zone inflation


NEW YORK (Reuters) – Stocks on Wall Street zoomed to a record high on Friday, shrugging off a revised downward estimate to U.S. growth, while the euro hit its highest level this year after inflation in Europe stabilized, cooling expectations of looser monetary policy.

The benchmark Standard Poor’s 500 stock index surged to an intraday record after a round of mostly positive economic data. A discouraging read on U.S. gross domestic product, however, cast some doubt on whether higher equity valuations are justified.

GDP expanded at a 2.4 percent annual rate, down sharply from the 3.2 percent pace reported in January and the 4.1 percent logged in the third quarter, the Commerce Department said.

But the pace of business activity in the U.S. Midwest rose slightly in February, beating expectations and snapping a three-month run of slower growth, the business barometer from the Institute for Supply Management-Chicago showed.

Contracts to buy previously owned U.S. homes edged up in January after a weather-related hit at the end of 2013, and U.S. consumer sentiment rose marginally in February even as concerns about extreme weather persisted, a survey showed.

“The million-dollar question is how much of the slowdown is because of the weather, and how much is because of the economy getting weaker?” said Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia, with $125 billion in assets under management.

“The market continues to believe that weather is behind most of it, and we generally agree with that, but we will need to see a pick-up” in growth, he added.

MSCI’s all-country world equity index .MIWD00000PUS rose 0.48 percent, while stocks in Europe rebounded on the relatively stronger U.S. data.

European shares initially dipped as euro zone inflation data came in at 0.8 percent, one-tenth of a percentage point above expectations, lessening the prospect of new monetary stimulus measures from the European Central Bank.

The pan-European FTSEurofirst 300 index .FTEU3 subsequently edged up 0.04 percent to 1,345.99.

The Dow Jones industrial average .DJI rose 83.71 points, or 0.51 percent, to 16,356.36. The Standard Poor’s 500 Index .SPX was up 9.24 points, or 0.50 percent, at 1,863.53. The Nasdaq Composite Index .IXIC was up 11.73 points, or 0.27 percent, at 4,330.66.

The euro gained as traders had expected a slower pace of inflation in the euro zone and subsequent lower interest rates.

Major currency markets have been broadly stable as investors retreated from emerging markets to safer bets like the euro, dollar, yen and Swiss franc.

“The euro certainly looks good, everything is in place for more gains. But I wouldn’t race out and buy it at the moment,” said Graham Davidson, FX trader with NAB in London.

The euro rose 0.73 percent to 1.3808, rising above $1.38 for the first time this year. The dollar pared losses against the Japanese yen, trading near break-even at 102.12.

Oil had dropped below $109 a barrel as the revised U.S. GDP estimates curbed the demand outlook. The severe U.S. winter had supported oil prices earlier this year, but concerns about demand from the United States and China, the world’s No. 1 and No. 2 oil consumers, have recently weighed on prices.

But crude prices rebounded on the stronger U.S. data.

Brent crude rose 7 cents to $109.03 a barrel. U.S. oil rose 18 cents to $102.58.

U.S. Treasury debt prices fell, reversing Thursday’s gains, as stronger-than-expected economic data led to profit-taking and set the market on track for its biggest weekly loss in a month.

The 10-year U.S. Treasury note fell 12/32 in pricing, pushing its yield up to 2.6852 percent.

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U.S. fourth-quarter GDP: link.reuters.com/guw34t

U.S. consumer sentiment: link.reuters.com/hem86v

Pending home sales: link.reuters.com/tax34t

(Reporting by Herbert Lash; Additional reporting by Jamie McGeever in London; Editing by Dan Grebler)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/qJrW3pyJw8M/story01.htm

Is this the end for New Prosperity?

The federal authorities in Canada have again blocked Taseko Mines Ltd from developing its C$1.5 billion (US$1.3 billion) New Prosperity coppergold project in British Columbia.

The decision comes after an October federal environmental assessment panel report found serious flaws in the Vancouver-based company’s project.

Taseko said it “fundamentally disagrees” with the ruling and believes politicians in Ottawa made their decision on a panel report “which contains serious flaws.”

The panel had claimed the project would have “significant adverse environmental effects” on the water quality, fish and the fish habitat in the nearby Fish Lake.

Nevertheless, the government of British Columbia has given New Prosperity the green light.

Taseko argued that the project, which has 1,010Mt of measured and indicated resources at 0.41g/t Au and 0.24% Cu, using a 0.14% Cu cut-off grade, can “be built to a high standard of environmental integrity, including the full protection of Fish Lake.”

Russell Hallbauer, president and CEO of Taseko, said: “At the invitation of the federal government in 2010, Taseko committed C$300 million to address the concerns from the first panel review and submitted a new proposal. After a second lengthy and costly federal review, the federal government has once again stood in the way of development of an important project to British Columbia.”

The company would now go forward with the federal judicial review it started in December that challenges certain of the panel findings and “the panel’s failure to comply with principles of procedural fairness.”

“Taseko will take the necessary steps to protect this valuable asset, but at the same time, will also look at other opportunities to increase shareholder value,” the company said.

Article source: http://www.mining-journal.com/production-and-markets/is-this-the-end-for-new-prosperity

Japan, Turkey scrap talks on tank engine supply deal


TOKYO (Reuters) – Mitsubishi Heavy Industries (7011.T) has lost a potential deal to supply tank engines to Turkey because of restrictions that remain in place on Japan’s military exports, officials in Turkey and Japan said.

The development shows the limits of Japan Prime Minister Shinzo Abe’s effort to dismantle a near total ban on Japanese weapons exports that has shut the country’s defense contractors out of overseas markets since World War Two.

Abe is pushing to ease the terms of Japan’s self-imposed weapons export restrictions in part to lower Japan’s defense procurement costs as part of a bid to build a more robust military to counter the rising regional power of China.

Mitsubishi Heavy had been under consideration to supply engines for the Altay tank being developed by Turkey’s Otokar (OTKAR.IS) since last year.

But on Thursday Murad Bayar, Turkey’s undersecretary for state-run defense industries, told reporters that the potential deal had been quietly dropped in talks with Tokyo.

“We have agreed with Japanese authorities to leave this topic off the agenda and focus on other areas of co-operation,” Bayar said.

Turkish Prime Minister Tayyip Erdogan had raised the issue of Japan’s co-operation in supplying tank engines when Abe visited Ankara in May. The approach by Erdogan sparked a round of talks between officials from the two countries and a visit to Turkey by Japanese engineers, officials in Japan said.

A spokesman for Mitsubishi Heavy said the company had no comment because the discussions were a “government matter.”

Yoshihide Suga, Japan’s Chief Cabinet Secretary, said on Friday that he was not aware of the status of the talks with Turkey but said any agreements would be based on the policies that limit Japan’s military.

Japan, which renounced the right to wage war in its postwar constitution, effectively banned arms exports in 1967.

Under new guidelines being developed by Abe’s coalition government, exports would be approved by the trade ministry if they were judged to serve peaceful missions or if joint development of a weapon was deemed to enhance national security, a person with knowledge of the review has told Reuters.

But the more lax arms exports standards under consideration by the Abe administration would still carry a requirement that Japan be consulted before weapons using Japanese technology were exported to other countries.

Talks with Turkey on the Altay tank broke down on that point at the working level, officials in Japan told Reuters. Turkey has hoped to export the Altay to other countries.

In a deal announced last month, India became the first country to agree to buy military aircraft from Japan since the war. Under the preliminary deal worth an estimated $1.65 billion, ShinMaywa Industries (7224.T) would supply amphibious aircraft to India’s military.

(Writing by Kevin Krolicki; Editing by Neil Fullick)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ILM9a7HQilw/story01.htm

Mexican telecoms bill to raise pressure on Slim: draft


MEXICO CITY (Reuters) – Mexico will give its new telecoms regulator sweeping powers to police dominant telecommunications companies, right down to their prices and discounts, according to a draft bill that fleshes out a constitutional reform passed last year.

The spearhead of efforts to curb the power of telecoms mogul Carlos Slim, the Federal Institute for Telecommunications (IFT) will be able to force phone companies to seek approval every year for interconnection and infrastructure-sharing terms, according to a draft of the legislation obtained by Reuters.

It is part of a massive remit granted to the IFT that allows the watchdog to order phone and TV companies to sell assets, share networks and infrastructure and revoke concessions.

The local mobile and fixed-line units of Slim’s firm America Movil as well as broadcaster Televisa are widely expected to be declared dominant by the IFT.

Slim, who became one of the world’s richest men after taking control of Mexico’s former state telephone monopoly at the outset of the 1990s, controls around 80 percent of Mexico’s fixed-line business and about 70 percent of the mobile sector.

Televisa has more than 60 percent of the TV market, and many Mexicans complain it exerts too much political influence. However, the broadcaster’s economic power lags far behind Slim.

The telecoms overhaul has raised hope that the government is serious about finally breaking the stranglehold of a select few over Latin America’s second biggest economy.

Without naming America Movil, Marcela Guerra, a senator in the ruling Institutional Revolutionary Party, said a week ago Mexico had been left behind in the race to revamp its telecoms industry because one company had enjoyed “absolute” dominance.

“There has been no effective regulation,” she said.

REFORM DRIVE

The 134-page draft proposal, which comprises hundreds of articles, combines two existing laws and reforms several others, is a working document and is subject to change.

Governing the implementation of last year’s telecoms reform, the bill is expected to be sent to Congress in the next few days. The telecoms reform forms a central plank of a wider raft of economic measures ranging from taxes to energy that President Enrique Pena Nieto pushed through Congress last year.

Last year’s constitutional reform already ensures Televisa will face more competitors due to the planned auction of new TV networks, but the secondary laws go into particular detail on how the government intends to cut Slim down to size.

A range of offers from the dominant telecommunications player, including promotions and discounts, will only be authorized with the express approval of the IFT, the draft said.

The dominant company could also have to “submit to the IFT annually for approval” a host of services for other companies connecting to their infrastructure and network.

The dominance ruling from the IFT, expected next week, will be critical to the implementation of the reform.

LAST RESORT

The regulator will also have the power to vet any plans by companies to divest assets if they are so ordered.

Still, a break-up of the companies looks unlikely in the foreseeable future, and the head of the IFT has said it is only likely to be used as a “last resort” to spur competition.

Many of the powers detailed in the draft existed under Mexico’s old telecoms law. But the former industry regulator, known as Cofetel, was unable to apply them because companies were able to file injunctions preventing the previous antitrust watchdog, Cofeco, from declaring them dominant.

Mexican lawmakers were adamant this had to stop.

Pena Nieto’s constitutional reform last year made the IFT the highest authority on antitrust issues in telecoms and broadcasting, while separate legal changes mean companies can no longer seek injunctions against decisions by the regulator.

Last week the IFT said Mexico’s broadcasters must offer public channels to their pay TV competitors at no charge.

That would require dominant market players Televisa and TV Azteca to allow competitors like Dish Mexico to transmit their so-called free-to-air channels on its own satellite system.

New rules known as “must offer, must carry” oblige pay television services to offer the public channels.

(Additional reporting by Elinor Comlay and Christine Murray; editing by Jonathan Oatis and Matthew Lewis)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/UQNVwfYP0SI/story01.htm

Japan’s factory output jumps, inflation up but anxiety lingers


TOKYO (Reuters) – Japan’s factory output rose in January at the fastest pace in more than two years and core inflation hovered at five-year highs, suggesting the economy has enough momentum to withstand an expected hit from a sales tax hike scheduled for April.

Other data were equally upbeat, with labor demand improving and household spending rising in a sign the world’s third-biggest economy is on course to shaking off two decades of stagnation even as it steers through some speed bumps.

Domestic consumption is seen supporting activity as shoppers brought forward purchases, but the recent debate in markets has centered around an expected chill in demand after the tax hike and the risks that it may take the wind out of the government’s growth strategy.

“I’m not that confident about the economy after the sales tax hike,” said Norio Miyagawa, senior economist at Mizuho Securities Research Consulting Co.

“Consumer spending will not be as strong as it is now. There are a lot of uncertainties about exports. Once the BOJ realizes that consumer prices are not accelerating, it will start to debate other measures.”

After decades of sluggish growth, the economy shifted into higher gear over the last year after Prime Minister Shinzo Abe launched an aggressive cocktail of monetary and fiscal stimulus policies.

However, markets are starting to worry about the durability of the rebound, especially as exports have failed to substantially perk up while business investment and wages growth have trailed expectations.

The planned sales tax hike to 8 percent from 5 percent has added to the uncertainty, although policy makers have said that they are prepared to look past a temporary dip in activity.

Bank of Japan board members have voiced confidence in recent weeks that the economy is on track for a moderate recovery, suggesting that they see no immediate need for further easing.

Japan’s industrial output rose 4.0 percent in January to levels last seen before the October 2008 Lehman collapse, Indicating that robust domestic demand is underpinning the economy as consumers rush to beat the national sales tax hike.

The rise beat the median forecast for a 3.0 percent as firms ramp up output of cars and consumer appliances. It marked the fastest gain since output rose 4.2 percent in June 2011 after a plunge caused by the March earthquake and tsunami.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 1.3 percent in February but decrease 3.2 percent in March, trade ministry data showed.

“Effects of the last-minute demand is clearly emerging. March forecast suggests that firms may be front-loading output earlier than previously thought,” said a ministry official.

Some analysts blame the last sale tax hike in April 1997 for exacerbating a downturn in the economy when it was also hit by the Asian financial crisis.

A Reuters poll last week showed the BOJ is expected to ease policy further by this summer to help boost the economy as the effects from Abe’s stimulus strategy begin to wane.

Analysts expect the economy to contract in the April-June quarter as consumer spending falls sharply after the sales tax hike takes effect, before rebounding in July-September.

INFLATION AT FIVE-YEAR HIGH

Japan’s core consumer price index (CPI), which excludes fresh food prices but includes oil products, rose 1.3 percent year-on-year in January, ahead of the median estimate for a 1.2 percent annual increase.

That matched a 1.3 percent annual increase in December – the fastest in more than five years.

The central bank maintained its massive monetary stimulus at last week’s policy meeting, aiming to meet a 2 percent price goal around early 2015, which is seen by many analysts as overly ambitious.

The biggest risk for policymakers is a rapid deterioration in business and consumer confidence, especially if data after the tax hike shows the economy slowing more sharply than expected.

However, the BOJ has said it will proactively adjust policy to head off major risks to the economy.

“If risks force us to change our projections toward meeting our 2 percent inflation target, we’ll make necessary policy adjustments,” BOJ Deputy Governor Hiroshi Nakaso told parliament this week.

Still, most analysts expect that inflation will struggle to pick up pace in the coming months as the effects of a weak yen on imported goods taper off. There are also worries private consumption could lose steam after the sales tax is raised.

Meanwhile, external risks are also a worry, especially as it could dent Japan’s exports. Renewed stress in emerging markets last month sent Japanese stocks down on concern it could hurt the economy.

Japan’s jobless rate was unchanged at a six-year low of 3.7 percent in January.

The jobs-to-applicants ratio edged up to 1.04, meaning more than one job is available per job seeker. The ratio matched the median estimate and hit the highest since August 2007, underlying the strength of the job market.

Household spending rose 1.1 percent in the year to January, blowing past the median estimate for a 0.2 percent increase.

That marked a fifth straight month of annual gains and an acceleration from a 0.7 percent annual increase in December as consumers spent more on clothes, cars and domestic travel.

(Editing by Shri Navaratnam)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/_7IZ8v9mo8k/story01.htm

Asian stocks advance, take comfort from Yellen’s comments


TOKYO (Reuters) – Asian stocks managed to shrug off early losses on Friday and push higher, inspired by gains on Wall Street after U.S. Federal Reserve Chair Janet Yellen’s comments underscored her confidence in the U.S. economy.

Yellen’s testimony to a Senate committee helped the SP 500 .SPX shrug off fears of rising tension in Ukraine and Russia and close at a record high. But the fear factor still helped the yen rise against the dollar and euro on its traditional safe-haven appeal.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.2 percent, on track for a weekly gain, while Tokyo’s Nikkei stock average .N225 erased most losses and ended the morning session just a few ticks shy of flat.

Tokyo got some help from data showing Japanese factory output rose in January at the fastest pace in more than two years and core inflation stood close to a five-year high.

Optimism about the Japanese economy will likely support the mood even as wariness might cap the upside, said Hikaru Sato, a senior technical analyst at Daiwa Securities in Tokyo.

“Investors are avoiding risks as they are staying cautious about the situation in Ukraine and emerging markets’ assets,” Sato said.

Yellen said on Thursday the Fed will continue to determine whether recently severe winter weather was behind recent signs of weakness, and reemphasized that it would take a “significant change” to the economic outlook to sway the Fed from its plans to taper its stimulus.

“Her openness bolstered risk appetite because it assures a gradual course of tapering by the central bank with the only risk being a smaller and not larger reduction,” BK Asset Management managing director Kathy Lien said in a note to clients.

An unexpected rise in U.S. durable goods orders, excluding transportation, also helped distract investors from an increasingly unstable situation in Ukraine.

Armed men seized the parliament in Ukraine’s Crimea region on Thursday and raised the Russian flag.

Fighter jets along Russia’s western borders were on combat alert, the Defense Ministry was quoted as saying on Thursday by Interfax news agency.

The unrest prompted investors to seek the safety of U.S. Treasuries, pushing yields to two-week lows. The yield on the 10-year note inched up to 2.647 percent in Asia, from its U.S. close of 2.642 on Thursday.

The dollar’s early gains against the yen unraveled, with the U.S. unit shedding about 0.3 percent to 101.86 yen, moving back toward a one-week low of 101.70 yen touched on Thursday.

“Isolated incidents from Ukraine will continue to move the dollar at least until elections are held there in May,” said Masafumi Yamamoto, chief strategist at Praevidentia Strategy in Tokyo.

“Any losses the dollar suffers against the yen will be temporary, however, as bargain hunters will be ready each time, supported by the notion that real military conflict will be unlikely,” Yamamoto added.

The euro was nearly flat on the day at $1.3707, pulling away from the previous session’s two-week low of

$1.3641.

It also surrendered territory to the yen, losing 0.3 percent to 139.62, moving back in the direction of a more than two-week low of 138.75 yen touched on Thursday.

China’s yuan, meanwhile, has fallen 0.8 percent against the dollar for the week and is set for the biggest weekly loss on record.

In commodities trading, gold prices were flat with spot gold trading at $1,332.35, but was on track for its fourth week of gains.

Oil slipped, taking its cues from unrest in the Ukraine, with Brent crude down about 0.1 percent at $108.89 a barrel. U.S. oil was down 0.3 percent at $102.07, but it was still on track for a monthly gain of over 4 percent.

(Additional reporting by Ayai Tomisawa and Shinichi Saoshiro in Tokyo; Editing by Shri Navaratnam and Eric Meijer)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/qJrW3pyJw8M/story01.htm

EBay founder rejects Icahn’s call for PayPal spinoff


(Reuters) – EBay Inc founder and Chairman Pierre Omidyar rejected investor Carl Icahn’s call to separate the company’s fast-growing PayPal payments unit, saying the businesses were better off together.

Omidyar, who is the largest shareholder in eBay with a stake of 8.37 percent, said separating PayPal from eBay was not a new idea and the board had evaluated the option but decided to keep the businesses together.

Icahn, who disclosed a 2.15 percent stake in the e-commerce company last week, had also accused two long-time eBay board members, Marc Andreessen and Scott Cook, of having business interests that directly competed with eBay.

“Instead of having an honest discussion about a reasonable question, Mr. Icahn has chosen to attack the integrity of two highly respected and qualified board members, Scott Cook and Marc Andreessen,” Omidyar said in a statement.

Venture capitalist Marc Andreessen defended the corporate-governance practices of the technology industry in an interview with the Wall Street Journal saying, “If I’m on a public board and that public company is looking at buying a company in a certain space and one of my startups is in that space, I will not be part of that conversation.”

“This has been established over decades of corporate governance and there’s nothing unique to tech about it,” Andreessen told the Journal. (link.reuters.com/ved37v)

(Reporting by Supantha Mukherjee and Varun Aggarwal in Bangalore; Editing by Kirti Pandey and Supriya Kurane)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/7G_asjLRqEU/story01.htm

Lawsuit against Google over Gmail faces hurdle, U.S. judge says


SAN JOSE, California (Reuters) – A U.S. judge on Thursday said some plaintiffs accusing Google of improperly scanning their email faced a significant hurdle in their attempt to move forward with the lawsuit as a class action.

Litigation brought by nine plaintiffs, some Gmail users, some not, was consolidated before U.S. District Judge Lucy Koh in San Jose, California, last year. The plaintiffs maintain Google violated several laws, including federal anti-wiretapping statutes by systematically crossing the “creepy line” to read private email messages in order to profit, according to court documents.

The case is being closely watched as it could alter how tech companies provide email service.

Koh must decide whether the lawsuit can proceed as a class action, which would allow the plaintiffs to sue as a group and give them more leverage to extract a larger settlement. However, at a hearing on Thursday, Koh said plaintiff attorneys faced a “huge hurdle” to show that non-Gmail users were entitled to class action status.

Google argues in court papers that the identity of impacted non-Gmail users can only be ascertained by sending an email notice to all non-Gmail users whose addresses are on file in Google’s systems, and then sifting through the responses. That kind of procedure would be unprecedented and unworkable, Google argued.

Koh did not issue a formal ruling on Thursday.

A group of media companies, including Reuters, has asked Koh to make public several documents that both sides submitted to the court under seal. Koh has not yet ruled on that request.

The case in U.S. District Court, Northern District of California is In Re: Google Inc. Gmail Litigation, 13-md-2430.

(Reporting by Dan Levine; Editing by Ken Wills)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ktbU1jUUQKI/story01.htm

Japan says any bitcoin regulation should be international


TOKYO (Reuters) – Any regulation of the bitcoin crypto-currency should involve international cooperation to avoid loopholes, Japanese vice finance minister Jiro Aichi said on Thursday.

Commenting on the closure this week of Tokyo-based Mt. Gox, once the world’s biggest exchange for the bitcoin virtual currency, Aichi said the ministry would respond to the problems “if necessary”, after finding out exactly what happened.

“It’s not just the Ministry of Finance; many other agencies are related,” Aichi told a news conference. “As for its legal position, a currency (under Japan’s jurisdiction) would be coins or notes issued by the Bank of Japan. At the very least, we can say bitcoin is not a currency.”

U.S. Federal Reserve Chair Janet Yellen, appearing on Thursday before a Senate committee, said the Fed has no jurisdiction over bitcoin but that Congress should consider ways to regulate such virtual currencies.

The Mt. Gox website and Twitter feed went blank on Tuesday after weeks of turmoil. It suspended withdrawals on February 7 following a series of cyber attacks, leaving customers unable to recover their funds.

A document circulating on the internet saying that more than 744,000 bitcoins – worth around $423 million at current rates – were missing from Mt. Gox was created by a Tokyo-based consulting firm, said Ryan Selkis, a blogger who initially leaked scans of the document. Selkis, who uses the handle “twobitidiot”, said in an email that the “Crisis Strategy Draft” had been written by consulting firm Mandalah in meetings with Mt. Gox CEO Mark Karpeles.

A director at Mandalah told Reuters the firm had never been contracted by Mt. Gox to do “strategic planning” but declined to comment further.

On Wednesday, Karpeles had sought to assure investors that he was working with others to solve the problems. “As there is a lot of speculation regarding Mt. Gox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues,” he said in a statement posted on the Mt. Gox website.

MT. GOX REBRANDING?

While proponents of bitcoin hail its anonymity and lack of ties to traditional banking, regulators have become increasingly interested in the digital currency due to its volatility and usage by criminal elements.

Bitcoins are created, or “mined”, in a process using a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every bitcoin transaction that is made. At current prices, the bitcoin market is worth about $7 billion.

The document leaked this week by Selkis – who says he sold all his bitcoins – said 744,408 bitcoins, or about 6 percent of the 12.4 million bitcoins in circulation, were “missing” due to thefts that exploited “malleability” in the code governing transactions, which the Bitcoin Foundation and others have blamed on Mt. Gox’s customized software.

“Mt. Gox has been broken and it was obvious there was something really bad going on there for nearly a year. They were processing withdrawals very slowly and generally being very opaque about what was going,” said Mike Hearn, a bitcoin developer in Switzerland.

The leaked crisis plan proposed that Mt. Gox reduce its liabilities, switch off the exchange for a month while bringing in transition advisers, and reset all social network channels while rebranding under a different CEO.

Karpeles told Reuters in April 2013 that Mt. Gox was seeing daily inflows of $5-$20 million. He told Forbes his company hadn’t been able to keep up with all the changes as it became the largest exchange in the world.

The crisis plan said Mt. Gox had liabilities of $174 million, based on an assumed exchange rate of $160 per bitcoin – well below the $550 or so offered for bitcoins at other exchanges on Thursday – against assets of $32 million. A financial statement included in that document said Mt. Gox was expected to make $2 million in net income in the year to end-March, a sevenfold increase on the previous year.

It also said Mt. Gox turned a profit in its second year of existence, banking $286,000 in net income. Those figures match a 2013 report by credit research firm Tokyo Shoko Research, which was reviewed by Reuters. It said Mt. Gox “had a strong start”.

Mt. Gox had 600,000 customers at the time, the research report said – 30 percent from the United States, 10 percent from Britain and just 300 in Japan. Given that most users are overseas, any court case to retrieve missing funds would be more likely in the United States than Japan, said Ken Kiyohara, a lawyer at Jones Day. “It probably comes under the (Japanese) Financial Services Agency’s (FSA) remit, but giving a reason for that in one sentence is impossible,” he said.

Officials at the FSA and Finance Ministry each told Reuters bitcoin does not fall within their purview, while the Bank of Japan says only that it is studying the bitcoin phenomenon, which Governor Haruhiko Kuroda has called “interesting.”

People who had bitcoins at Mt. Gox are more definitive.

“It was the only place you could buy bitcoin directly with yen, so it hurts that it’s gone,” said Ryoichi Taga, a fellow at the Japan Digital Money Association.

NOBODY HOME

Manhattan U.S. Attorney Preet Bharara has sent subpoenas to Mt. Gox, other bitcoin exchanges and businesses that deal in bitcoins to seek information on how they handled recent cyber attacks, a source familiar with the probe said. A spokesman for Bharara declined to comment.

Mt. Gox is under investigation by the U.S. federal law enforcement, according to a second source familiar with the case, while a third said the U.S. Federal Bureau of Investigation was monitoring the situation.

The federal probe was spurred by information provided by the Bitcoin Foundation, an advocacy group for the digital currency, Bloomberg reported. The foundation could not be reached immediately for comment. Karpeles, a founding member of the foundation, resigned from its board on Monday.

In Singapore on Thursday, Tembusu Terminals set up what it said was the city-state’s first automated tele-exchange machine (ATM) for buying bitcoins – at the downtown Spiffy Dapper bar – a week after the finance minister said bitcoins weren’t regulated by the ministry or the central bank.

Karpeles’ whereabouts in Japan were still unclear. The main Mt. Gox office remained deserted on Thursday, with bubble wrap inside the windows. The company said last week it was moving back to a previous office for “security reasons”. The company’s cubicle in the other office in Tokyo’s Shibuya area was inaccessible.

A concierge at Karpeles’ home – an upscale apartment near Shibuya – appeared to speak to someone on the intercom before saying there was nobody home.

(Additional reporting by Emily Flitter and Chris Francescani in New York, Jim Finkle in Boston,; Chris Peters in Bangalore, Bill Trott in Washington and Nathan Layne and Takaya Yamaguchi in Tokyo; Editing by Ian Geoghegan)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ILUUoIibXGk/story01.htm