Jesse Powell - Kraken - the best bitcoin exchange
Jesse is the CEO of Kraken. Kraken is the best Bitcoin exchange for converting to and from US dollars, euros, British pounds and Japanese yen. Founded in 2011, San Francisco based Kraken is consistently rated the top Bitcoin exchange by independent news media and was the first Bitcoin exchange listed on Bloomberg terminals. Kraken is trusted by hundreds of thousands of traders, the Tokyo government and court-appointed trustee, and BaFin regulated Fidor Bank, with an exclusive partnership and full regulatory compliance.
Kraken CEO Jesse Powell discusses exchange business, MtGox receivership and best Bitcoin security practices.
Interview with Jesse Powell on Best Bitcoin Exchange
### PODCAST INTERVIEW TRANSCRIPTTrace Mayer: This is 124th episode of the Bitcoin Knowledge Podcast and we have with us the legendary Jesse Powell, CEO of Kraken (best bitcoin exchange). It's Europe best bitcoin exchange and welcome to the podcast, Jesse.
Jesse Powell: Hey, thanks, Trace. Thanks for having me.
Trace Mayer: Yeah, so just to start off. You've been around bitcoin for a long, long time. You've seen how many exchanges have problems. I mean, you've been intimately involved with a lot of these, cleaning up the messes in a lot of cases. We actually have very actionable information today. We've been busy all day. It's currently 1 o'clock in the morning. You've got a 5 o'clock flight to catch to the consumer electronic show and this morning right before all our meetings Bitstamp lost 19,000 bitcoins.
Jesse Powell: Really?
Mt. Gox and Tokyo Bankruptcy Court
Trace Mayer: Not again. Can you talk a little bit about how you got involved with Mt. Gox created back in 2011 and how that's led to this Kraken (best bitcoin exchange) and getting the receivership from the Tokyo Bankruptcy Court? Let's delve into all of that.
Jesse Powell: Yeah, sure. So many people probably are already aware and I blogged about this and the story is probably known. I went out to Japan in June of 2011 to help Mt. Gox through that hack that they had. Back then it was the first hack that they were aware of. I spent about a week and a half out there helping them get things in order. I came away from that the realization that the bitcoin exchange is probably a most critical piece of the ecosystem. It keeps everything moving. It keeps merchants able to take bitcoins as payments. It keeps price discovery going. When Mt. Gox had gone down, pretty much everything had grounded to a halt. Nobody knew what to do. Nobody knew what the value of a bitcoin was.
Trace Mayer: Yeah. I mean, bitcoins, they've gone from like a dollar to 32 dollars in space of a few months. And then they eventually crashed all the way to 2 dollars after this hack, I mean.
Jesse Powell: Yeah.
Trace Mayer: It's the phrase getting Goxed like -- yeah, I mean, it really attacks at first network effect of bitcoin of speculation.
Jesse Powell: Yeah, definitely. So there's obviously huge counterparty risk with any exchange right now and some of the biggest traders we've spoken to have said that the counterparty risk is really the biggest threat to them. That's why they're worried about leaving a lot of money on the exchange. That's what's preventing them from making the order book more liquid.
Trace Mayer: And arbitrage and spreads in like, yeah, I mean, all of this comes down to why pick up pennies in front of the boulders. Why try and pick up five or ten basis points when you could lose 30% your capital. When someone loses 200,000 or 800,000 bitcoins or 20,000 bitcoins or whatever it is.
Jesse Powell: Yeah. Exactly. So you are -- you said risking your entire fortune for a few pennies. So what we would like to do in the long term is move to fully multi-sig solution so that even if Kraken (best bitcoin exchange) is hacked somehow that we don't have the ability to lose the coins because we've only got 1 of 3 keys or 1 of some number of keys and we don't have the ability to spend ourselves.
Trace Mayer: Yeah. And part of this, I mean, it's more complicated than just having multi-sig implemented with what's currently out there. I mean, I know at Armory we're working on some very serious enterprise-level solutions that we can really, kind of, provide what Bitstamp or a Kraken (best bitcoin exchange) would need in that regard. So, but the actual software, and it hasn't really been built yet if somebody wants to accomplish that, and it's difficult stuff to build, too. It's difficult software to build. I mean, the security is a major issue. We saw when Gox failed, you know, they blamed it on transaction malleability.
Jesse Powell: Uh-huh.
Trace Mayer: And around the same time, Gox halted because of this transaction malleability. Bitstamp halted trading. Some of the other exchanges halted trading. And I thought it was funny like Kraken (best bitcoin exchange) sent out a tweet, Kraken (best bitcoin exchange) halts nothing because planning carry on. And Kraken (best bitcoin exchange) didn't halt trading. Like, I mean, why is that these other exchanges halted? Like, why don't you guys halt?
Jesse Powell: I mean, transaction malleability had been known. It was well-documented and we had just planned around it. I think some of the credit are those -- I don't remember if it was Gavin or Jeff or who it was, but it described transactional malleability as sort of a feature, not a bug. It was known you could work around it and --
Trace Mayer: Or work with it?
Jesse Powell: Yeah, or work with it. I mean, we just plan for it. And so this is one of the risks in supporting coins that you haven't fully vetted or you don't fully understand a protocol. This is why Kraken (best bitcoin exchange) is not very quick to add new coins. And it's just that you can overlook something like that. You budge your implementation somehow, you missed a detail and you're affected by something like transaction malleability.
Trace Mayer: Yes. I'm not really like Cryptsy or these other alt coin exchanges. It's just like throw anything on there, like, in fact --
Jesse Powell: Yeah.
Trace Mayer: -- when you guys want to add a Namecoin, which has been around a long time --
Jesse Powell: Uh-huh.
Trace Mayer: -- which merged mine with the Bitcoin.
Jesse Powell: Yeah.
Trace Mayer: Like, tell us about what happened when you went to add Namecoin to Kraken (best bitcoin exchange).
Jesse Powell: Yes. So, I mean, even though Namecoin had been around for years at the point we added it. We still did our usual diligence on it. And we wanted to understand the protocol.
Trace Mayer: And when you say diligence, I mean, you're digging into the actual code of the protocol?
Jesse Powell: Yeah. That's just one piece of it. We obviously wanted to understand the protocol very well. But we also want to understand the development team like whether this coin is going to be around in six months or whether it's a pump and dump or you know what, whether there's some real value here to the coin. We obviously don't want to waste our development time on something that's going to be bad for our users to invest in or it's going to be just abandoned shortly after. As part of that comprehensive diligence process, we took a hard look at the protocol and discovered this critical flaw in the protocol. And that was that the enforcement of ownership of these the doped domains was not actually enforced the protocol of what was only being enforced on the client. So we all certainly reported that to the Namecoin dev team and worked with them to come up with a fix for it.
Trace Mayer: Yeah. I mean, there's actually several examples where you've done critical service to Namecoin in this instance. What about, like, the whole auditing of reserve. Kraken (best bitcoin exchange) was the first exchange to audit, like, produce what could be considered like a cryptographic proof of ownership or proof of reserves or proof of control. Like, can you describe that a little bit?
Jesse Powell: Yes. So after Gox went down, there was this huge public outcry for exchanges to show proof of reserves. And as far as I'm aware we're the first exchange to do it. This process wasn't invented by us, but I think Greg Maxwell was, to my knowledge, the guy that came up with this process which is sort of cryptographic proof using the Markle tree proved to every user that their balance was included in this total balance.
Trace Mayer: Total balance.
Jesse Powell: So the way that we did it, two ways that it could have been done. One have been to publish the total balance and publish the entire tree for everyone. We chose not to go that route because we felt that publishing the total balance was another sort of security compromise. We didn't want to show hackers how much money there was there.
Trace Mayer: Incentivize them to come and try and get it.
Jesse Powell: Exactly.
Trace Mayer: And it's also a trade secret, you know?
Jesse Powell: Also a trade secret, right.
Trace Mayer: You don't want your competitors to know that information either.
Jesse Powell: Exactly, yes. So we felt that that was giving away a lot and we thought that we could find somebody trusted within the community to just sign off on that and to oversee the process. And so we got Stefan Thomas, who's one of the old school bitcointers who developed that we use coins.com site and the BitcoinJS. And he's now the CTO of Ripple. So we had him. He's in San Francisco now. So we hadn't come by the office and do the audit for us. So everything checked out and I think that that went off really well with the community. It was a good first, a first run at it. We found some things that we could do better next time and given in light of recent events it's probably about time to do it again. We wanted to do it much more frequently than we had. But it's a bit of a production finding somebody kind of qualified to actually sign off on it.
Trace Mayer: Yeah. And personally, I'd love to see within a 24/7 type audit happening, but you really do have to weigh the cost and the benefit from it and things like that. I mean, I guess, we could raise fees to the auditing on a 24/7 bases. But --
Jesse Powell: Yeah.
Trace Mayer: You know.
Jesse Powell: We can do that internally. And we can reconcile our own books internally, and that's not a problem. But to do --
Trace Mayer: Yeah. But we're talking about getting like a third party, that it's like trusted a bit, has other things to do and earns a lot of money, or --
Jesse Powell: Right. Yeah. So to have a third party to do it on a daily basis would be quite expensive. So the alternative, I guess, would be to publish the balance every time we do it and have it to be automated completely. But again, like you said, it's revealing a lot of information we don't necessarily want to reveal. But that only solves, kind of, half of the problem and that it solves having to trust the exchange. They're telling you the truth about that they have your money. It doesn't solve a problem of them getting hacked. It doesn't make them unhackable. So --
Trace Mayer: Yeah. Because you could publish the results and two minutes later you got hacked, and poof.
Jesse Powell: Exactly.
Trace Mayer: And it's gone.
Jesse Powell: Yeah, exactly. You know, there are also some other flaws with the process like we could have borrowed the coins while we did the audit and then give them back to whoever lent them to. So it's not totally foolproof but at least you know that we had access to the coins at some point? So, yeah, I think that the greatest solution is just the multi-sig setup where the technology is not quite there yet to make it very easy on the consumer to do this. But there are some companies working on this. Bitgo's working on it and CryptoCorp is working on it. To be this sort of third party signatory, who can have 1 of 3 keys, and so the exchange would have a key, those guys would have a key and then the user would have a key, and we would have a relationship with a third party that allows us to collect the bitcoin when we need it. But if there's sort of like a burst of bitcoin pool, their velocity triggers would go off and they would stop us from taking too much money.
Trace Mayer: I was talking with Brian Donegan from the Isle of Man government and we actually did a podcast interview with him. Perhaps, having trust companies or law firms or other escrow agents, people that are licensed-bonded insured, things like that to actually be some of these additional signers. And it doesn't necessarily even have to be a Bitcoin specific company that does it. It could be the insurance company. There are lots of potential solutions. But like you said the tech just isn't built yet. I mean, like, we have a lot of work to do over at Armory to build this foundational infrastructure in the wallet for this to be able to actually be implemented on a large enterprise and global scale.
Jesse Powell: Yeah.
Trace Mayer: You know, switching gears. What about this cryptocurrency bank, this Fidor, relationship that you've got. Can you describe that a little bit because I think that's just a critical piece of what's going on here?
Jesse Powell: Had a relationship with Fidor for a bit over a year now. And things are going really well. We've been really tight with them. We've kind of figured out what the risk model looks like and what -- you know what the problems are running an exchange or doing payments for bitcoin-related transactions. And sort of what sorts of problems are the banks going to have with it and the regulators are going to have with it. Having all that behind us and having been able to kind of build out our infrastructure and our processes, Fidor's feeling comfortable now to try to open up their bank to other companies and others the bitcoin user base as a whole since banking has been such a huge problem for even individuals in the space, but even more so businesses. So rather than try to fit this project under the Fidor brand, they're interested in creating a cryptocurrency bank. So a separate bank under a separate brand that will have the mission of banking bitcoin companies and bitcoin users. So we just had a sort of a workshop brainstorming session in Berlin a couple weeks ago that went really well. We had a lot of participants from the bitcoin business community there. We got a lot of good ideas, kind of, got to understand the needs of other bitcoin businesses and what features they'd like to see and how the bank could be most helpful to them.
Trace Mayer: And being such a good trailblazer, you know, but it's really -- we've had a lot of our trailblazers that either completely abused their position, like, Mt. Gox and Karpeles and MyBitcoin.com and Bitcoin, Intersango. I mean, it just goes on, on and on. So it's good to see like a trailblazer actually doing it the right way.
Jesse Powell: Thanks.
Trace Mayer: And a bank, saying, "Hey, look," you know, and it's actually been a good experience. We're going to work with other bitcoin companies. I think that's great. We had the Mt. Gox bankruptcy over in Japan, like, international news.
Jesse Powell: Yeah.
Trace Mayer: And yet Kraken (best bitcoin exchange)'s going to be opening in Japan. Like, can you describe a little bit about, like, how has this happened?
Jesse Powell: Yes. So we're already open. The Japanese government surprisingly has been very open and supportive of bitcoin. And we found out that it was actually a Japanese politician Fukuda who was tasked with like figuring out what happened to Gox. And that was how he found out about bitcoin when he was researching it to understand the Gox's case, he just came enamored by it and thought it was such a great thing that he wanted Japan to have a bigger role in what was going on.
Trace Mayer: Great to make lemonade.
Jesse Powell: Yeah. I mean, he was able to see past the whole Gox scenario and understand that Gox was not bitcoin and that bitcoin was this bigger thing and Gox was just one company and so Japan has put this moratorium on their equivalent of the money transmission rules there and sort of open season for bitcoin companies in Japan right now. We made our way into Japan and we've translated to site. We've got some Japanese support staff. The market there is still very small. I think probably many people have been trading there who are still feeling burnt by Gox. But I think it's going to come around. Japan obviously is a huge player in the global economy, huge financial market. So we're confident that that was a market that can grow for bitcoin.
Trace Mayer: Yeah. I mean, that's just great. Not only did you trailblazed in all these places, but even in the destruction of the Mt. Gox have left, like, you've come and been approved by the Tokyo government, by the Tokyo Bankruptcy Court by the Tokyo Bankruptcy Trustee to handle the receivership of hundreds of thousands of Bitcoin. This is really quite a bit that's been accomplished, why do you think they chose Kraken (best bitcoin exchange) and not Bitfinex or Bitstamp or OKCoin, like, 796.com. I mean, how many Kraken (best bitcoin exchange) competitors can I list, right?
Jesse Powell: Yeah.
Trace Mayer: BTC China, I mean. Why they choose Kraken (best bitcoin exchange) and not all these other potential player? Jesse Powell: I think in large part it was due to our conservative approach to the business, the whole. Many of the guys you named have trailblazers, I would say, have also been corner-cutters. They've, kind of, done things the fast and easy way to gain market share to achieve revenue. We've always taken the cautious approach. There are plenty of guys out there doing it that way. And I'm glad that some guys are doing it that way because in many places they're doing it illegally. But somebody does need to serve that market. And I'm glad the United States, for example, is a very tough market to service legally. So I'm glad that some people are able to service it illegally. It's not a risk that we're going to take.
Trace Mayer: Yes. So at Kraken (best bitcoin exchange), I mean, you service what, five states --
Jesse Powell: Right.
Trace Mayer: -- in the U.S? Well, that's it?
Jesse Powell: Yes. So just five states and those are the states where we are able to service users legally and a lot of people don't understand that it doesn't matter where your business is located. If you're taking a user in California or New York, you need to have a license in California and New York, even if your company is based in Japan --
Trace Mayer: Or Slovenia?
Jesse Powell: -- or Slovenia, yeah. Or --
Trace Mayer: Like Bitstamp?
Jesse Powell: Yeah. So these guys --
Biggest fears for traders
Trace Mayer: And, I mean, what happens? Like, what could potentially happen here? And, like, what about systemic risk? You know, one of the biggest fears for traders?
Jesse Powell: Yes. Like I said, the counterparty risk is a huge thing for traders, for guys that have been operating illegally, sure, they've gained the market share by doing that. But I think they've exposed themselves to huge risk that the United States government is going to come after them at some point.
Trace Mayer: Or one of the state governments?
Jesse Powell: . Yeah. Or one of the states. And so --
Trace Mayer: I mean, what can happen there? Like, what difference does that make?
Jesse Powell: Well. The penalties are pretty extreme in the United States. It's something like 5,000 dollars a day per user that you're servicing illegally plus five years in prison, plus like your investors are potentially on the hook as well for --
Trace Mayer: Yes.
Jesse Powell: -- the crime of operating an unlicensed money transmission business.
Trace Mayer: So, I mean, we're talking about when you're dealing with this Mt. Gox bankruptcy, they seized five million dollars in the Wells Fargo account in the U.S.
Jesse Powell: Yeah.
Trace Mayer: And like the Chapter 15 bankruptcy, like, are those funds which could be customer funds? Like, are they going to get rolled into the bankruptcy? I mean, like, that's what we're talking about here. It's like one of these illegal operating exchanges could be accruing these contingent liabilities that may eventually manifest themselves in terms of fine. Yeah, guess where the funds are going to come to pay this fine, guess where they're going to seize it from. Yeah, it's going to customer accounts that are going to get seized, like, what happened with Gox potentially.
Jesse Powell: Yeah. Potentially, yeah. And then the customers will probably have to fight for getting their funds back and say no, those funds did not belong to the exchange; it belong to the users. And so we need those funds back and probably going to be a nightmare for everybody involved with that.
Trace Mayer: Yeah. And so Kraken (best bitcoin exchange) you just don't take that market share, you don't take those customers.
Jesse Powell: Yes. So, what you mean --
Trace Mayer: I mean, it's a handicap. But it's --
Jesse Powell: It's a huge handicap.
Trace Mayer: But it's a long-term strategy.
Jesse Powell: Yeah.
Trace Mayer: Very conservative strategy.
Jesse Powell: Right. And we feel that for the customers, clients that are able to use our exchange that we're able to service legally we would be doing them a disservice by, on top of that, offering our service illegally to another set of users that creates a risk for these guys that we are servicing legally.
New Mexico and the Kraken, the best bitcoin exchange
Trace Mayer: Now, like, where there's a will there's a way, though, right? Like, there's five states that you can take full boarded customers from?
Jesse Powell: Right.
Trace Mayer: What are the five states again?
Jesse Powell: They are Alabama, South Carolina, Montana, New Mexico and Massachusetts.
Trace Mayer: Okay. One of the blogs that I operate, howtovanish.com, we actually write a lot about New Mexico.
Jesse Powell: Uh-huh.
Trace Mayer: And, I mean, you do a lot of work with the institutions or entities, right?
Jesse Powell: Yeah.
Trace Mayer: So, like, corporations and LLCs can have accounts at Kraken (best bitcoin exchange).
Jesse Powell: Uh-huh.
Trace Mayer: So, like, New Mexico is actually one of the ones I talk about on this HowToVanish, like, if you go to howtovanish.com/nm, like, New Mexico, NM LLC, it will forward to the article or whatever. Like, New Mexico, you can get an LLC for $50.
Jesse Powell: Yeah.
Trace Mayer: And it's a perpetual registration good for like 99 years. Like, if somebody really, really wanted a Kraken (best bitcoin exchange) account, like, super bad and they were willing to go get a New Mexico LLC and have a registered agent in New Mexico because they've been open their Kraken (best bitcoin exchange) account with this New Mexico LLC?
Jesse Powell: Yeah. There would be nothing preventing us from servicing a New Mexico entity. So they would be able to trade through that entity in New Mexico more than anyone of the other four states who were able to service, or in any entity abroad.
Trace Mayer: Yes. So they could have a Hong Kong entity or something that they could also trade through. But New Mexico LLC with registration and that could be a potentially pretty cheap way to be able to avail oneself legally compliant manner with Kraken (best bitcoin exchange).
Jesse Powell: Yeah.
Trace Mayer: You know, where there's a will, there's a way?
Jesse Powell: Yes.
Trace Mayer: So, like, what are some other things that might be actionable for the audience to do? One thing I've noticed with Kraken (best bitcoin exchange), there's a lot of, you could say security features, that are like the Easter eggs.
Jesse Powell: Uh-huh.
Trace Mayer: Can we talk about some of these? Like, because a lot of people don't know what they don't know and they don't know that they don't know it.
Jesse Powell: Yeah.
PGP E-mail and Bitcoin Security
Trace Mayer: So, like, what are some of the security features that are there for the very security conscious that a person just might not be aware of?
Jesse Powell: Yes. Some of the stuff you need to take for, kind of, advanced settings. PGP encrypted e-mail is available. So all of the automatic updates that you get from the exchange, from password reset e-mails to trade notifications to funding address changes. You can have all these e-mails encrypted when we go out to you.
Trace Mayer: Now what could be an advantage of that?
Jesse Powell: Well, let's say somebody manages to compromise your e-mail account. They make an attempt to reset your password. Well, if you have two-factor on there, they probably wouldn't be able to do it. But if you -- let's say, you didn't have two-factor on your account, they tried to reset your password by sending a recovery e-mail to your e-mail account. If your e-mail was encrypted, they wouldn't be able to decrypt that e-mail to see how to recover the account. So they would also have to compromise your machine or your --
Trace Mayer: Or your private key --
Jesse Powell: -- private key. Yeah.
Trace Mayer: -- for your GPG.
Jesse Powell: Right.
Trace Mayer: And, like, trade notifications, like, if they compromise your e-mail account and they see that you, like, withdrew a thousand bitcoins from Coinbase.
Jesse Powell: Uh-huh.
Trace Mayer: And it comes from Coinbase like this open e-mail and, man, they know you're sitting on some cash and they know the address you're sitting in right.
Jesse Powell: Now they know to dig a little deeper or just like sit on your account for a while and try not to let you know that they --
Trace Mayer: That they're there.
Jesse Powell: -- are there and wait for you to expose those coins to them. Yeah, so --
Trace Mayer: Yeah. So, I mean, that's just like a kind of PGP you're just sending up this additional barrier for anyone who's, like, fortunate enough to, like, hack your e-mail.
Jesse Powell: Yeah. Or who happens to work at the e-mail provider that just likes to snoop around.
Trace Mayer: You know, Coinbase or Kraken (best bitcoin exchange) could even have malicious customer service employees or something.
Jesse Powell: Sure.
Trace Mayer: You know what I mean? Like, this helps protect against so many different potential security vulnerabilities.
Jesse Powell: Yeah. So I would highly recommend anybody using Exchange or -- to just use PGP for e-mail, period, for everything for all e-mail. I'm going to try to use it as much as possible for everything. And it's not too hard to do, I think. G-mail actually just released some sort of plugin. I haven't tried it myself yet. But it's some chrome plugin for doing a PGP e-mail through the G-mail web client. For using just a desktop client, we can use Enigmail works with Thunderbird.
Trace Mayer: Yeah.
Jesse Powell: And there's also, I think, GPG tools comes with some sort of plugin for Outlook or for mail.
Trace Mayer: And there's also a Mailvelope which is a chrome plugin.
Jesse Powell: Yeah.
Trace Mayer: Also, that's fairly easy to use. GPGs has been very clumsy. It'd be great if there were like a Bitmessage integration because then we wouldn't even have meta data.
Jesse Powell: Yeah. That's right here.
Trace Mayer: That's like, no one would know you even had a Kraken (best bitcoin exchange) account by going through your e-mail.
Jesse Powell: Right.
Trace Mayer: Because you're getting that Bitmessage. But --
Jesse Powell: That --
Trace Mayer: -- that's a lot more developer time to probably get it implemented.
Jesse Powell: Right. That would be cool.
Trace Mayer: So it makes it hard. It makes it hard for someone to fish for Kraken (best bitcoin exchange) accounts.
Jesse Powell: Right. So, yeah, obviously if you have PGP e-mail on your Kraken (best bitcoin exchange) account, you know if you get an e-mail that's not encrypted that it's obviously not from us. That would weed out a lot of fishing times there.
Trace Mayer: Yeah. So we got PGP e-mail, you talked about two-factor authentication.
Jesse Powell: Two-factor, yes. The two-factor allows you to use a second device to login, like, something separate from your main machine. So you can use what's called Google authenticator too, like on your phone, to generate a second one-time use password that you use when logging in. So that even if somebody were able to compromise your username and password, they wouldn't ever get this one-time use code unless they somehow also acquired your cell phone. So it's just a second device. So you need to compromise both to actually compromise an account. So that's huge and everybody should have that on their account both for logging in and for making withdrawals.
Trace Mayer: What about the master lock?
Jesse Powell: Yes. So the master lock --
Trace Mayer: Like, may you can explain that a little bit.
Jesse Powell: Yeah. That's a feature that isn't used enough. It's little hard to find, but it's in the settings and it basically allows you to lock down your account. So let's say you're going out of town or you think you're going to be using it from a computer that you don't trust entirely, you can completely lock down the whole set of features on your account and you can set a timer on it so that it will unlock after X --
Trace Mayer: X days.
Jesse Powell: -- number of days. Yeah. So if you wanted to be totally sure that nobody's going to get into your account while you're off the grid on safari for two weeks, then it could --
Trace Mayer: Which you just finished.
Jesse Powell: Which I just did, yeah. Actually, I managed to go off the grid for a week on safari, which was totally awesome.
Trace Mayer: Seen any big game?
Jesse Powell: Yeah. We saw --
Trace Mayer: Saw Mark Karpeles somewhere?
Jesse Powell: Did not catch Mark on the safari. You have to take the Japanese safari for that one.
Trace Mayer: We need him over the fireplace, you know.
Jesse Powell: A trophy.
Trace Mayer: Yeah, it's all fun and games until somebody loses 700,000 bitcoins.
Jesse Powell: Yeah. It's just insanity. It's just hard to believe that that happened. Actually, we don't know for sure that that happened because we don't know if we can trust the database that we've got.
Trace Mayer: It could be a million bitcoins that are lost?
Jesse Powell: It could be a million --
Trace Mayer: It could be a million worth of thousand, I mean, it's ---
Jesse Powell: Exactly, yes. So we don't know.
Trace Mayer: Yeah, it's crazy.
Jesse Powell: I suspect that not all the claims would be approved. I'm sure Mark has a claim of his own for his own.
Trace Mayer: 200,000, I think.
Jesse Powell: I think he's got a balance on Mt. Gox on his own personal account. He will probably make a claim. Whether that claim will be approved or not is yet to be seen, but I think there may be several users on the exchange if Gox is actually hacked and there may be some inflated balances that don't get paid out or that maybe some guys who had money from their Silk Road activity that have just decided the experiment --
Trace Mayer: They don't want it?
Jesse Powell: -- to let it go than to risk going to prison.
Trace Mayer: What's going to happen? Like, let's say that there are 650,000 of customer balances but only 325,000 bitcoin. I mean, what happens?
Jesse Powell: Yes, so --
Trace Mayer: What happens in that case?
Jesse Powell: It's all going to go pro rata to the guys you have the claims. So you just --
Trace Mayer: If you claim you're going to get more?
Jesse Powell: Yeah. So people that claim will get back more, if there are people that don't submit their claims or whose claims are rejected.
Trace Mayer: And like, how is this claims process going to work, like, everybody's going to come create a Kraken (best bitcoin exchange) account? Like, ask you to verify? Like, how does this work?
Jesse Powell: Yeah. So we're still working through that process with the bankruptcy trustee. But I think the fastest way for people to do it will be, and we hope this is what ends up happening, through a Kraken (best bitcoin exchange). If you have a Kraken (best bitcoin exchange) account, you'll be able to just click the link to submit your Gox claim. You put in your Gox credentials; you'll see the last-known balance that you had. You'll see I agree to this or not, if you agree your claim is submitted. If you don't agree, then it tells what you think you had. I think we're going to be asking for some substantiating information, if you happen to have records of any transactions to or from Gox, like, on the block chain that you can show us, provide the transaction ID's.
Trace Mayer: Or maybe wire transfer?
Jesse Powell: Yeah.
Trace Mayer: Instructions or --
Jesse Powell: Right. So that kind of stuff would be helpful in the event that there's any sort of --
Trace Mayer: Trading account history.
Jesse Powell: -- dispute the trustee's going to look at all the claims and decide which ones to pay out, or which ones need more information. Sometime, probably around September, payouts will be made.
Trace Mayer: Now we're dealing with what, a hundred -- Gox had over a million accounts, right?
Jesse Powell: Yeah. Over a million accounts --
Trace Mayer: I mean, like, how many claims are we talking about here?
Jesse Powell: I think there are something like 127,000 funded accounts left. So that's potentially how many claims there are.
Trace Mayer: Like, people better get their Kraken (best bitcoin exchange) account created? I mean, you guys are going to have a lot of work to do, like, getting these all AML-KYC verified and, like, all this work.
Jesse Powell: Yeah. It is going to be a lot of work to do, so.
Trace Mayer: Better get your accounts set up quick.
Jesse Powell: Yeah. Definitely having an account already and having the -- being at tier 3 with your documents already submitted will make things a lot easier. The more people who have done that in advance, you know, the faster the process can go. But if people don't, absolutely don't want to do that, then there will be another alternative method for people to submit their claim and there will be another way for people to receive their payouts, so.
Trace Mayer: The carrier pigeons? Or --
Jesse Powell: Yeah. Probably, yeah.
Trace Mayer: -- across the Pacific?
Jesse Powell: A check by mail after a lot of fees are taken out for --
Trace Mayer: Mailing and postage and --
Jesse Powell: Yeah. Payment. Ten lawyers to, like, put a stamp on the envelope.
Trace Mayer: Sign off on it.
Jesse Powell: Yeah. So our goal is to try to get everyone paid back as much bitcoin as possible. Because that's obviously --
Trace Mayer: And as quickly as possible?
Jesse Powell: Yeah.
Trace Mayer: Yeah.
Jesse Powell: The most efficient way to get the money back to people, I'm sure. Guys with balances of like 10 dollars, if you're like in Australia, by the time you pay your 50-dollar-wire fee to get it from Japan to Australia, you got nothing left, so.
Trace Mayer: Man, it's time to go to sleep. You had a flight to catch in like 3 hours.
Jesse Powell: Yeah, absolutely.
Trace Mayer: So thanks so much for taking the time to give us this update, especially at this critical time as Bitstamp a lost like 19,000 bitcoins. And --
Jesse Powell: Yeah. I hope to --
Trace Mayer: -- it's nice to that, like, there's an exchange out there where people can -- the Tokyo Bankruptcy Court, that's handling this Mt. Gox failure, like, has confidence and faith and trust in how you run in the shop there.
Jesse Powell: Yeah. I mean, it's nice to see position in our strategy, kind of, pay off. Because it's not very clear in the short term that taking the very conservative approach is the right way to go for the business. But in the long run, I think guys like Fidor Bank and the Japanese Bankruptcy Trustee really appreciate the approach that we've taken to compliance and to --
Trace Mayer: Security.
Jesse Powell: -- security and all that stuff. And so while it means more friction for the users right now, I think, for the users we do service. It makes for a better experience, reduces the counterparty risk, and obviously opens us up for opportunities like helping Fidor at the Cryptocurrency Bank, helping the Mt. Gox liquidation.
Trace Mayer: Well, an ounce of prevention is worth a pound of cure.
Jesse Powell: Totally.
Trace Mayer: So we've had the legendary Jesse Powell, CEO of Kraken (best bitcoin exchange). Thanks so much.
Jesse Powell: Thanks, Trace.