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The Man Who Lost Everything with Bitcoin

He was up $500,000 one minute, $50,000 in debt the next. It might be the first documented account of bitcoin-induced bankruptcy.
April 18, 2013, 1:32pm
Image: Flickr

Over the last couple of months, bitcoin has blown up. The untraceable cryto-currency caught the attention of curious economists, Europeans fearing a government crackdown, salivating financiers, and even, apparently, grad students with a weakness for gambling. So this was probably bound to happen: One man, high on bitcoin, just lost his entire savings online.

The man, who claims he's a grad student (studying math, of all things), recently posted the following on Reddit: "Starting with almost nothing, I made almost $500,000 gambling with Bitcoin. I then lost it all in about 60 seconds. I am now $50k in debt and will most likely lose my job, my visa status, my fiancee. AMA."

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His user name is WinnersAndLosers, an account he created for expressly to relay his depressing and probably-not-made-up tale. He says his name is Bob, though he also mentions that he may have changed the names of all those involved in his narrative.

"This is a story of luck, hope, greed, despair, stupidity," he writes.

According to his Reddit testimony, Bob initially bought into bitcoin as an investment, and was lured into the online bitcoin gambling site Bitzino after his girlfriend turned him on to black jack for the first time. He says that he "played for small stakes, made some money, then took a couple of bad beats." He turned to roulette, and quickly recouped his losses.

"This was the beginning of the end," he says. I'll let Bob take over from here.

On April 1, Bitcoin broke $100 for the first time. I played more and more, and the value of my winnings increased more and more. I was suddenly into big money. By April 10, I had worked my way up to almost $500,000. I realized how lucky I was to have this amount of money. It was Bitcoin, but it was one click away from being in my bank account: this was real money.

That morning, the crash began. I kept playing. On April 10 I lost all my profits.

At this point I was in full-tilt mode. Mt.Gox was closed for a 24-hour cooldown following the crash, but even this 24-hour period was not enough for me. A part of me just shut off, and this was when I made the Really Big Mistake. I dipped into my student tuition loan (around $50,000). I turned into an animal, and I lost everything.

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I literally went almost mad at this point. Out of grief I contacted bitzino and exchanged some pitiful emails. They were very supportive, emotionally4 . I am not even sure what I hoped to achieve (I did not sleep for 2 days, drank and took a lot of anti-anxiety meds, which can make you act in weird ways).

My fiancee knew I was upset, and I owned up that I lost a lot of money. I said it was due to the crash (which did happen on the same day). She could see the charts so she believed me, but she does not know that I lost every single cent. Lies, but I felt that I did what I had to do (her dad had a major gambling and alcohol problem, so I really could not break her heart like that.)

The money that I lost is for tuition. It's just under $50k as I already said. The most immediate payment is due end of May, which is around $5k (the remainder of this academic year). The rest ($40k) is due over the following academic year (13/14). If I can pay off the $5k I will at least survive until the summer and maybe nobody will notice. I have not told anybody what happened, except my flatmate who I have known since high school and am pretty close with.

The reality is I will most likely be forced to withdraw from the program, because the payments are due September and Christmas and my visa status does not permit me to work part-time. I will have to return home to England and I will lose my fiancee.

Thus ends the first documented tale of a bitcoin-induced bankruptcy. I've reached out to 'Bob', and I'll follow up if he responds. I'm curious as to whether the sense of unreality that accompanies the currency—I own a bitcoin, and I still can't really wrap my head around the notion that it's actually a fungible commodity—made it easier to move huge quantiies of the stuff. The bitcoin markets are so volatile, the currency so mythologized, it was probably hard to get a grip on the gravity of each bet as things spiraled out of control.

Certainly seems like it. I'll end here with Bob's own words of wisdom, gleaned from the fallout of his own personal bitcoin hell:

"I honestly do not feel that I was fully in control of my actions. If it happened to me, it can happen to you too, and I sincerely hope that after reading this, it never will."