Bitcoin prices yo-yoed after one of the world's biggest Bitcoin exchanges, Japan's Mt Gox, said it had suspended withdrawals because of a software flaw that would allow people trading the virtual currency to defraud exchanges.The price of Bitcoin tumbled as much as 16 per cent on Monday after the Tokyo-based company posted a statement saying the suspension was due to a "bug" in the bitcoin software that was "not limited to Mt Gox and affects all transactions where bitcoins are being sent to a third party".The explanation was rejected, however, by the Bitcoin Foundation, which promotes the virtual currency, and by some of its core developers, and it prompted a backlash against Mt Gox in the Bitcoin community.Mt Gox said the defect, known as "transaction malleability", made it possible for users of the network to alter transaction details and make it appear as if a transfer of bitcoins to a Bitcoin wallet had not taken place.They would then be able to contact the exchange or wallet service and claim the transaction had not gone through.It suspended withdrawals after noticing "unusual activity" and finding transactions that needed "to be examined more closely". Bitcoin transactions to a Mt Gox address and withdrawals in conventional currencies are not affected."Contrary to Mt Gox's statement, Bitcoin is not at fault," said Gavin Adresen, chief scientist for the Bitcoin Foundation. The problems result from Mt Gox's "unpreparedness" to deal with transaction malleability, even though it was a phenomenon known to Bitcoin's open source developers since 2011."Any company dealing with Bitcoin transactions should responsibly prepare for this possibility," Mr Andresen said, by using additional methods to monitor transactions.The rebuke came despite the fact that Mt Gox founder Mark Karpeles is a board member of the Bitcoin Foundation.Open source developers also criticised Mt Gox. Gregory Maxwell, who has advised the company, said: "I believe they are honest folks who work insanely hard with the good of Bitcoin on their mind. But they're also human. They've had a bunch of embarrassing problems with apparently simple fixes languishing for months, costing them a lot of goodwill."Coindesk said it would no longer include Mt Gox when calculating its Bitcoin price index, which averages prices across different exchanges. The price of Bitcoin on Mt Gox was $605 at 4.30pm London time, but $677 on the more active BitStamp exchange, where it had recovered most of its early loss.Mt Gox said it would resume withdrawals to outside wallets once the flaw had been addressed. Michael Keferl, a spokesman for the exchange, did not immediately respond to a message seeking comment.Mt Gox has for some weeks faced complaints from customers experiencing delays in withdrawing dollars from their accounts with the exchange, before the latest problem prevented withdrawals in Bitcoin.The exchange has suffered financially from US regulators' increased scrutiny of the digital currency. Accounts it held in the US were frozen on the grounds that it had failed to register as a money transmitter and it is engaged in legal battles with CoinLab, a former partner it blames for the omisson.The Mt Gox statement offered a technical explanation of the risk to exchanges from the software bug: "An individual could request bitcoins from an exchange or wallet service, alter the resulting transaction's hash before inclusion in the blockchain, then contact the issuing service while claiming the transaction did not proceed. If the alteration fails, the user can simply send the bitcoins back and try again until successful."