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Mt. Gox Turmoil Sends Bitcoin Down More Than $100

Updated from 12:12 p.m. EST with current bitcoin value and information on the founding of a New York bitcoin exchange.

NEW YORK (TheStreet) -- For a time Tuesday, bitcoin owners were watching the value of their investments plummet on a tumultuous morning of news regarding one of the digital currency's major exchanges. 

The Japan-based Mt. Gox exchange has suspended transactions, according to its Web site. The Web site itself disappeared early this morning. Later, when it reappeared, it carried an announcement that it had been acquired. That message was also taken down. The Web site currently has the following message:

In the event of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

The earlier disappearance of the Mt. Gox Web site was accompanied by the public release of a document, allegedly a leaked internal report from the company, titled "Crisis Strategy Draft," that said the CEO Mark Karpeles was stepping down and the company could "go bankrupt at any moment" as the result of previously undetected thefts of bitcoin:

At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years.

At its value this morning, that theft amounts to more than $405 million. During the course of the day Tuesday, the value of 1 bitcoin fell to a low of $418 from $545, according to Coindesk.com. It has stabilized and is currently down 4.6% on the day at $518.84.

A group of bitcoin industry representatives issued a joint statement that painted Mt. Gox's troubles as isolated.

"This tragic violation of the trust of users of Mt.Gox was the result of one company's actions and does not reflect the resilience or value of bitcoin and the digital currency industry," the statement reads, adding "Mtgox has confirmed its issues in private discussions with other members of the bitcoin community." It is signed by the founders of Coinbase and the CEOs of Kraken, Bitstamp.net, BTC China, Blockchain.info and Circle.

he authenticity of the "Crisis Strategy" and some of the Web site announcements -- including, briefly, news that the company had been acquired by Karpeles -- could not be confirmed, but the company has not issued a denial.

Karpeles resigned from the board of the Bitcoin Foundation on Sunday, according to a New York Times report.

Also on Tuesday, SecondMarket, creators last fall of a bitcoin fund called the Bitcoin Investment Trust, announced plans to launch the first New York-based bitcoin exchange, modeled after the Intercontinental Exchange (ICE). Initial membership is expected to be announced in March. The plan still needs approval from the company's board. 

-- Written by Carlton Wilkinson in New York

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