Mt Gox Files Bankruptcy as Customers Lose Faith in Exchange - Update 3

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Mt Gox Files Bankruptcy as Customers Lose Faith in Exchange - Update 3

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Mt Gox's customers feel it'll be easier to get US$ out than Bitcoins, if the exchange crashes.

Update 3: "First of all, I am very sorry," said Mark Karpales at a news conference in Tokyo earlier today, as Mt Gox filed for bankruptcy protection. Over half a million worth of bitcoin has been lost, apparently to hackers. According to Mt Gox, 750,000 of its customers' coins have gone missing, as well as 100,000 of its own.

It has 127,000 creditors in bankruptcy.

The first US lawsuit has already been filed, in Chicago District Court. Plaintiff Gregory Greene, with a $25,000 wallet lost to Mt Gox, alleges that the company and Karpales were negligent, and committed fraud.

Source: Reuters

Update 2: The CEO of Mt Gox, Mark Karpales, has said the bitcoin exchange is working hard to resolve its issues, and asks that his staff not be contacted for information. Further updates, Karpales promises, will be published via the Mt Gox site.

"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," says Karpales, "and working very hard with the support of different parties to find a solution to our recent issues."

Source: Guardian

Update: While not confirmed yet, early reports indicate that Mt Gox has shut down, probably for good. The site no longer exists, and neither does Mt Gox's Twitter account. A joint statement from other bitcoin providers says:

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. There are hundreds of trustworthy and responsible companies involved in bitcoin. These companies will continue to build the future of money by making bitcoin more secure and easy to use for consumers and merchants. As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today.

Source: Ars Technica

Original Story: When Bitcoin exchange Mt Gox announced that, due to DDoS attacks, trade was suspended, Mt Gox's customers began to worry. Would the exchange collapse? If it did, what would happen to its Bitcoin reserves? So Mt Gox's customers have been selling off the contents of their Bitcoin wallets, reasoning that, even if they can't get the cash right away, it will be easier to reclaim US$ from Mt Gox's wreckage than it will be to get Bitcoins back.

Mt Gox's coin value is currently at a high of $308.49 per, and a low of $248.14. Meanwhile Bitstamp is trading at $623.68 at time of writing, while Bulgaria's BTC-E is comfortably in the $603 to $617 range. In other words, it's about 50% cheaper to buy cryptocurrency at Mt Gox right now, though of course the trade itself is still subject to Mt Gox's ongoing freeze.

It's all about bankruptcy, in the end. If the worst befalls, it's up to the courts to decide what happens next. Imagine trying to persuade a judge, whose grasp of technical issues may be shaky, the value of a cryptocurrency. The value of a US$ debt is a much more quantifiable proposition. Of course, Mt Gox might not go under; but its customers can't be sure.

Mt Gox promises its customers it will have a workaround soon, and when that happens wallet withdrawals will be permitted. "Thank you again for your support, and we look forward to resume Bitcoin withdrawals as quickly as possible."

Source: Wired

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This is certainly interesting. I wonder how it'll pan out in the end and if it'll affect the rest of these.. uh... money things. Only time will tell it seems.

Mt Gox's coin value is currently at a high of $308.49 per, and a low of $248.14.

Those are some extremely expensive peanuts.

LovsBatl:

Mt Gox's coin value is currently at a high of $308.49 per, and a low of $248.14.

Those are some extremely expensive peanuts.

Technically they are 'cryptopeanuts'.

Halyah:
This is certainly interesting. I wonder how it'll pan out in the end and if it'll affect the rest of these.. uh... money things. Only time will tell it seems.

Not good, for one it'll flood the market with coins and second the loss of confidence will not go unnoticed.

Huh, wonder how this will effect my assorted cryptocurrencies. Mine are all at either VirCurEx or CEx.io, with a bit of BitCoin also at blockchain.info.

BigTuk:

Halyah:
This is certainly interesting. I wonder how it'll pan out in the end and if it'll affect the rest of these.. uh... money things. Only time will tell it seems.

Not good, for one it'll flood the market with coins and second the loss of confidence will not go unnoticed.

So that means the bitcoin followers are in for a really nasty surprise if things don't improve for them. I wonder how that'll effect future attempts at making these cryptocurrencies.

Asking as a novice, does this mean that you can now buy Bitcoins for roughly $300 at the Mt Gox and then sell them for $600 at the other markets?

Product Placement:
Asking as a novice, does this mean that you can now buy Bitcoins for roughly $300 at the Mt Gox and then sell them for $600 at the other markets?

As of right now you can't make withdrawals so no. You basically buy these coins at half price and hope the company survives and will have doubled your money, or they go and you lose it all.

Somehow, over the last two months of Bitcoin's spectacular collapse, no one's said "market bubble".

Because I think that covers it perfectly.

Somebody tell me, after the last econocmic collapse because of "virtual money", who thinks the best currency is one that is not real?

lacktheknack:
Somehow, over the last two months of Bitcoin's spectacular collapse, no one's said "market bubble".

Because I think that covers it perfectly.

Really? Where have you been reading? I have seen the word bubble thrown around quite a bit with regards to both Bitcoin in particular and Cryptocurrencies in general.

Falterfire:

lacktheknack:
Somehow, over the last two months of Bitcoin's spectacular collapse, no one's said "market bubble".

Because I think that covers it perfectly.

Really? Where have you been reading? I have seen the word bubble thrown around quite a bit with regards to both Bitcoin in particular and Cryptocurrencies in general.

Mostly just here. Since I half no stake in cryptocurrency, I haven't sought out more info beyond the Escapist's coverage.

lacktheknack:

Falterfire:

lacktheknack:
Somehow, over the last two months of Bitcoin's spectacular collapse, no one's said "market bubble".

Because I think that covers it perfectly.

Really? Where have you been reading? I have seen the word bubble thrown around quite a bit with regards to both Bitcoin in particular and Cryptocurrencies in general.

Mostly just here. Since I half no stake in cryptocurrency, I haven't sought out more info beyond the Escapist's coverage.

Making fun of bitcoin is common practice on Reddit (although not on /r/bitcoin obviously) and bubble is used around every other word. It's speculative investment, made worse by the fact that you are speculating in something with absolutely no actual value whatsoever. Honestly it's a sillier bubble than when the dutch tulip debacle.

the whole thing is like the messed up idea of some eve online players i bet trying to bring that backstabbing into the real world..

its my conspiracy and im sticking to it !

Mister Chippy:

lacktheknack:

Falterfire:

Really? Where have you been reading? I have seen the word bubble thrown around quite a bit with regards to both Bitcoin in particular and Cryptocurrencies in general.

Mostly just here. Since I half no stake in cryptocurrency, I haven't sought out more info beyond the Escapist's coverage.

Making fun of bitcoin is common practice on Reddit (although not on /r/bitcoin obviously) and bubble is used around every other word. It's speculative investment, made worse by the fact that you are speculating in something with absolutely no actual value whatsoever. Honestly it's a sillier bubble than when the dutch tulip debacle.

Interesting, I had heard that the Tulip Debacle had mostly been debunked and that the rise and fall of prices weren't so much on the tulips themselves but on the futures contracts being turned into options contracts via Parliamentary ratification of new Guild rules. Is there some information about that situation which suggests it actually was a speculative bubble or am I just recalling my facts badly? The latter would be no surprise to me.

Can someone please just take Bitcoin out behind the shed and put it out its misery Old Yeller style? This is becoming embarrassing.

When I heard this news and the continuing details, I imagined the owners of Mt.Gox with black robber masks, stripey clothes and large bags of coins with the Bitcoin logo on them being chased through the countryside by Japanese cops dressed like Bobbies equipped with truncheons, all the while Yakkity Sax is playing. Maybe a lady in a bikini would wander in, then a large gorilla, possibly Shriners with the little tiny cars? Anyone else?

Seriously though, the clusterfluff from this debacle would make a great movie. I mean, they closed their offices, moved, shut down their website, and there are reports that their PO boxed is stuffed with old mail. I can also imagine them huddling on the floor of a darkened room while someone is banging on the door. They respond "No, Eees noowhan hoome. Go avay pleeess!"

Scrumpmonkey:
Can someone please just take Bitcoin out behind the shed and put it out its misery Old Yeller style? This is becoming embarrassing.

I believe this update constitutes 'Wish Granted'. What will your second and third wish be?

(Make it a good one and erase Bob Dylan.)

FalloutJack:

Scrumpmonkey:
Can someone please just take Bitcoin out behind the shed and put it out its misery Old Yeller style? This is becoming embarrassing.

I believe this update constitutes 'Wish Granted'. What will your second and third wish be?

(Make it a good one and erase Bob Dylan.)

Well i don't think Bitcoin is fully dead yet so I'll hold off on my wishes in case i end up with in some kind of "Monkey's Paw" situation.

Look internet, i know you think you're cool and hip and all investing your money "Outside the system maaaan" but you have effectively fallen into a worse trap than the investment and currency markets you thought you were getting away from.

Mister Chippy:
made worse by the fact that you are speculating in something with absolutely no actual value whatsoever.

as opposed to? What other speculative good with perhaps exception of actual goods such as wheat or gold has actual value? most speculative good - USD has no actual value either.

So they have ran away with all the bitcoins then? What happens now though? If they try to cash them in, sell them or try to buy anything can the stolen currency be traced? Unless I am way off the mark for some reason its obviously fraud in most Countries so I guess they could be arrested, in most fraud cases the authorities will try to recover the goods or money so being able to trace the stolen coins would help.

Strazdas:

Mister Chippy:
made worse by the fact that you are speculating in something with absolutely no actual value whatsoever.

as opposed to? What other speculative good with perhaps exception of actual goods such as wheat or gold has actual value? most speculative good - USD has no actual value either.

USD has the backing of the United States, basically a promise that it won't go under in a fantastically flashy manner as bitcoin keep threatening to do.

Bitcoin has the backing of absolutely nothing. No country, no company, no product. It doesn't matter that there are some other things people invest in that have no actual vale, it's still a stupid bubble held aloft by nothing but speculation.

Mister Chippy:

Strazdas:

Mister Chippy:
made worse by the fact that you are speculating in something with absolutely no actual value whatsoever.

as opposed to? What other speculative good with perhaps exception of actual goods such as wheat or gold has actual value? most speculative good - USD has no actual value either.

USD has the backing of the United States, basically a promise that it won't go under in a fantastically flashy manner as bitcoin keep threatening to do.

Bitcoin has the backing of absolutely nothing. No country, no company, no product. It doesn't matter that there are some other things people invest in that have no actual vale, it's still a stupid bubble held aloft by nothing but speculation.

Not really. USD has the backing of central bank of america. It does have some reserves, and largest gold reserve on earth too, but nowhere clsoe enough to covering even 5% of the USD value. And US itself has the largest debt in the world. i dont think over 10 trillions of debt is good backing. remember when they were on the verge of economical downfall just last year?
USD can go under, the ONLY thing stopping it from doing so is OUR TRUST in the value of the currency.

The backing you imagine has been outed with the end of gold standard. Unless you consider promises a fair backing. I for one would not consider government promise enough if we went so far as to currency collapsing.

also to note is that was majority of actual USD is OUTSIDE of US and their control. if, say, china would decide to dump all thier USD on the market USD would basically collapse.

Strazdas:

Not really. USD has the backing of central bank of america. It does have some reserves, and largest gold reserve on earth too, but nowhere clsoe enough to covering even 5% of the USD value. And US itself has the largest debt in the world. i dont think over 10 trillions of debt is good backing. remember when they were on the verge of economical downfall just last year?
USD can go under, the ONLY thing stopping it from doing so is OUR TRUST in the value of the currency.

The backing you imagine has been outed with the end of gold standard. Unless you consider promises a fair backing. I for one would not consider government promise enough if we went so far as to currency collapsing.

also to note is that was majority of actual USD is OUTSIDE of US and their control. if, say, china would decide to dump all thier USD on the market USD would basically collapse.

Ok, allow me to point out the most obvious logical flaws in what you just said.

#1: The whole "largest debt in the world" thing is just inaccurate, and even then it's based on a very flawed idea of how the economic system works. Read this for a quick explanation of why:
http://www.forbes.com/sites/johntharvey/2012/02/26/national-debt-not-largest/

#2: Why is gold inherently valuable? It's not. It's just what we decided was valuble for quite a while. However as the economic system matured we no longer needed to put our faith in the value of gold and moved it over to currency. If you were suddenly in a post apocalyptic wasteland, gold would be just as valueless and any paper money. It's just a shiny rock.

#3: We weren't exactly on the verge of economic downfall, that was a political squabble between two groups of hardheads who refused to budge on various issues.

#4: The promise from one of the most powerful governments in the world that they will do their best to maintain the value of their own currency is probably the best promise you can take. Like you said, tons of people, governments, and corporations around the world have incredibly large portions of their assets in USD. Nobody would do anything to attempt to crash the USD, because doing so would be catastrophic to everyone. Simply put, the USD has the backing of the entire world, since if it were to ever be in trouble it would cause a total financial meltdown. Nobody like China would ever decide to dump the USD because that would fuck them just as badly as it would hurt anyone else. Besides, the promise of a very powerful government will always be better than lack of any promise or stability whatsoever.

TL;DR - Bitcoin has absolutely no intrinsic value, no support aside from rabid followers, and crashes whenever touched by a light breeze. In fact, it's currently in the middle of crashing right as we speak.

J Tyran:
So they have ran away with all the bitcoins then? What happens now though? If they try to cash them in, sell them or try to buy anything can the stolen currency be traced? Unless I am way off the mark for some reason its obviously fraud in most Countries so I guess they could be arrested, in most fraud cases the authorities will try to recover the goods or money so being able to trace the stolen coins would help.

as others have said you are basically relying on the good will of others not to screw you over as its anonymous. i know the japanese police briefly looked into it and basically said we arent touching it with a 10 foot pole you silly people.

on CNN a few hours ago you have people who lost thousands camped outside mt gox.. well the building thats now deserted and empty of furniture

so yeah they seem to of done a runner and there is absolutely nothing anyone can do unless said people who lost alot of money happened to be doing lots of illegal things with said bitcoins and will track down the thieves who owned company and introduce them to various power tools.

wombat_of_war:

J Tyran:
So they have ran away with all the bitcoins then? What happens now though? If they try to cash them in, sell them or try to buy anything can the stolen currency be traced? Unless I am way off the mark for some reason its obviously fraud in most Countries so I guess they could be arrested, in most fraud cases the authorities will try to recover the goods or money so being able to trace the stolen coins would help.

as others have said you are basically relying on the good will of others not to screw you over as its anonymous. i know the japanese police briefly looked into it and basically said we arent touching it with a 10 foot pole you silly people.

on CNN a few hours ago you have people who lost thousands camped outside mt gox.. well the building thats now deserted and empty of furniture

so yeah they seem to of done a runner and there is absolutely nothing anyone can do unless said people who lost alot of money happened to be doing lots of illegal things with said bitcoins and will track down the thieves who owned company and introduce them to various power tools.

Whether its counted as a currency in the eyes of the law and whether or not organisations trading them are subject to the same kind of regulation a financial exchange would be its still fraud and/or theft and if the Japanese authorities where refusing to look into it that's wrong and incompetent, fraud is fraud whether someone runs away with silver coins or supermarket coupons.

They have started an investigation though, I think you are referring to the buck passing between Japan's typical financial regulators as none of them are admitting to having jurisdiction over the exchange in their capacity as financial regulators. Whether thats because of legislative gaps or because of egg on face isn't clear yet, I think the law will be sorted out in the future though with this incident on top of all the money laundering accusations. The police are investigating it as fraud and/or theft though, just not in the same way they would investigate a bank or foreign currency exchange just yet. The Japanese financial ministry has opened an investigation as well, the US are getting involved as well so if those involved have assets in America they might lose them as well as get arrested if they turn up there.

So "not touching it with a 10ft pole" is a little bit inaccurate.

Mister Chippy:

#2: Why is gold inherently valuable? It's not. It's just what we decided was valuble for quite a while. However as the economic system matured we no longer needed to put our faith in the value of gold and moved it over to currency. If you were suddenly in a post apocalyptic wasteland, gold would be just as valueless and any paper money. It's just a shiny rock.

Actually gold is an INCREDIBLY useful metal in electronics of all kinds and in many different industrial processes and products. It is the best electrical conductor, it is the best conductor of heat.

Gold is needed to create every single modern computer and mobile phone. There is gold in your RAM, gold in your motherboard, Gold in your smartphone, gold on your HDMI cables etc etc etc. Gold, platinum and other precious metals are so vital to electronics that there has been a recent push to try and replace them because there is a very real concern of simply running out.

The group known as noble metals such as Palladium, Gold, Platinum etc all share these similar properties and as such are highly useful in many many fields.

So gold does have an intrinsic value based on its usefulness. As you said a Bitcoin does not. Commodities like gold are susceptible to speculation but they have an underlying use and worth not tied to being a commodity.

Scrumpmonkey:
Actually gold is an INCREDIBLY useful metal in electronics of all kinds and in many different industrial processes and products. It is the best electrical conductor, it is the best conductor of heat.

Gold is needed to create every single modern computer and mobile phone. There is gold in your RAM, gold in your motherboard, Gold in your smartphone, gold on your HDMI cables etc etc etc. Gold, platinum and other precious metals are so vital to electronics that there has been a recent push to try and replace them because there is a very real concern of simply running out.

The group known as noble metals such as Palladium, Gold, Platinum etc all share these similar properties and as such are highly useful in many many fields.

So gold does have an intrinsic value based on its usefulness. As you said a Bitcoin does not. Commodities like gold are susceptible to speculation but they have an underlying use and worth not tied to being a commodity.

I know it's useful, I was just pointing out that the "value" attached to it is primarily as a result of everyone agreeing it's valuable, similar to other forms of currency. Gold doesn't have some sort of innate power that means it will always be worth something.

Mister Chippy:

I know it's useful, I was just pointing out that the "value" attached to it is primarily as a result of everyone agreeing it's valuable, similar to other forms of currency. Gold doesn't have some sort of innate power that means it will always be worth something.

Gold isn't a currency when traded on the reserve markets. It is a COMMODITY. Most people fail to make this vital distinction when it comes to Bitcoins too. Bitcoin is not a currency, it is a commodity. It is not sanctioned legal tender.

Gold is a different commodity because, as i stated, some of it's value in the 21st century does come from its usefulness. It is like iron or copper, it is traded in the same way. Gold is also decorative, you can't make Bitcoin jewelry.

Scrumpmonkey:

Gold isn't a currency when traded on the reserve markets. It is a COMMODITY. Most people fail to make this vital distinction when it comes to Bitcoins too. Bitcoin is not a currency, it is a commodity. It is not sanctioned legal tender.

Gold is a different commodity because, as i stated, some of it's value in the 21st century does come from its usefulness. It is like iron or copper, it is traded in the same way. Gold is also decorative, you can't make Bitcoin jewelry.

I know it ain't a currency right now. I was talking about using the gold standard, in which gold really was the currency.

Anyways I kinda did a shitty job with that gold point. I just wanted to point out at least one reason why the gold standard was stupid.

Mister Chippy:

#1: The whole "largest debt in the world" thing is just inaccurate, and even then it's based on a very flawed idea of how the economic system works. Read this for a quick explanation of why:
http://www.forbes.com/sites/johntharvey/2012/02/26/national-debt-not-largest/

#2: Why is gold inherently valuable? It's not. It's just what we decided was valuble for quite a while. However as the economic system matured we no longer needed to put our faith in the value of gold and moved it over to currency. If you were suddenly in a post apocalyptic wasteland, gold would be just as valueless and any paper money. It's just a shiny rock.

#3: We weren't exactly on the verge of economic downfall, that was a political squabble between two groups of hardheads who refused to budge on various issues.

#4: The promise from one of the most powerful governments in the world that they will do their best to maintain the value of their own currency is probably the best promise you can take. Like you said, tons of people, governments, and corporations around the world have incredibly large portions of their assets in USD. Nobody would do anything to attempt to crash the USD, because doing so would be catastrophic to everyone. Simply put, the USD has the backing of the entire world, since if it were to ever be in trouble it would cause a total financial meltdown. Nobody like China would ever decide to dump the USD because that would fuck them just as badly as it would hurt anyone else. Besides, the promise of a very powerful government will always be better than lack of any promise or stability whatsoever.

TL;DR - Bitcoin has absolutely no intrinsic value, no support aside from rabid followers, and crashes whenever touched by a light breeze. In fact, it's currently in the middle of crashing right as we speak.

1. Were talking about External debt because that is the onle that actually matters in current economy. National debt or its part of GDP much less so, even then it is currently 70% of your GDP which is simply a terrible state to be in.
I could also pick apart the flaws in your article, but im sure your smart enough to do that yourself. Having large debt during a world war 2 is much different than having one now.
The current US external debt is 15,930,000,000,000 USD and is larger than whole European Union combined. 2013 GDP of US was 16.8 trillion, which is astonishing 94,8%. Almost your whole economy is covered by your external debt.

2. gold is inherently valuable due to its value in eletroconductivity. You know there isnt an electronic device without gold now right? you want radio? theres gold in it. computer? gold in it. phone? gold in it. The amount of gold that is used as "Shiny rocks" is close to 10% of all gold use in the world. You could of couse make the same case with something we are even more relient on, like fresh water, but i just used gold as an example that is usually used as "Secure investment".

3. yes you were. Economists agree that having your debt above 70% level is a no-return zone for economic collapse. Yes there was a lot of political squabling, because your government seems to be run like kids playground where people just throw hissy fits and gobble toys, but the economical danger is very real.

4. USDs popularity leads to its strenght. However its worth noting that for the past decade its value was falling (with obvious exceptions like the bump when Osama was killed). And as USD is being phased out slowly as well (china is slowly getting rid of USD and instead changing it to other currencies such as Swiz franks as well as precious metal reserves), the world will be less and less dependant on USD. Yes, USD is the most backed currency we have, and that was the entire point - even the most reliable currency is extremely unreliable.

No currency has intrinsic value and only has support of its followers. Its just that most currencies we have have followers we call countries. Currencies do crash, see the post-crysis euro crash panic for example. Bitcoin is a very young currency that has very limited capitalization and large speculation influence, of course its going to go all over the place, any currency would. in fact countries that left soviet union in its collapse (like mine) specifically banned speculation for some time and set price rules to avoid exactly that and it still happened. Massive inflation and deflation variation. It stabilized somewhat afterwards, but then we got tied to euro and could no longer see our actual currency value (which btw fallen if we take economy into account).

Scrumpmonkey:
SNIP

Actually gold is an INCREDIBLY useful metal in electronics of all kinds and in many different industrial processes and products. It is the best electrical conductor, it is the best conductor of heat.

SNIP

Pretty sure you mean silver. Gold is used in electronics on top of more conductive metals like silver and copper because of it's electroplating properties and because it is corrosion resistant.

Holy shit thats a lot.

Going by this bitcoinexhangerate.org website, the 750,000 is worth $408 million.

Yep.

Holy shit thats a lot.

Strazdas:
3. yes you were. Economists agree that having your debt above 70% level is a no-return zone for economic collapse.

Economists agree nothing of the kind. Even the authors of the paper that famously showed a correlation to growth drop-off at 90% debt had to walk that conclusion back because it turned out to be a bug in their Excel file. Moreover, while a collapsing economy tends to automatically cause a spike in debt, the vice-versa has never been shown to be a significant factor. And why would it? The notion is "crowding out" where national debt scoops up too much investment capital, which makes perfect sense unless you've got huge surpluses of investment capital, which happens to be exactly the situation we see (in fact it would be basically impossible to have a "bubble" driven economy without such a surplus).

Strazdas:
4. USDs popularity leads to its strenght. However its worth noting that for the past decade its value was falling (with obvious exceptions like the bump when Osama was killed). And as USD is being phased out slowly as well (china is slowly getting rid of USD and instead changing it to other currencies such as Swiz franks as well as precious metal reserves), the world will be less and less dependant on USD. Yes, USD is the most backed currency we have, and that was the entire point - even the most reliable currency is extremely unreliable.

"Extremely unreliable"? Please. Compared to what? Certainly not gold or bitcoin. Really, we could use a drop in the dollar. Having an overvalued currency is nice for buying cheap stuff from abroad, but it kind of sucks for trying to be competitive in the international market.

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