A group of large creditors in the Mt. Gox debacle have ramped up legal moves to remove the company from bankruptcy, and distribute its remaining bitcoins among claimants. Bitcoin’s massive 2017 price surge has changed circumstances entirely, they say.
A Completely Changed Environment for Gox and Its Creditors
[Update Dec 14th 17:25] An earlier version of this article stated Mt Gox’s recovered BTC holdings were 620,000 BTC or $10+ billion USD EST. That figure is actually 202,000 BTC or $3.3 billion — remaining from a total 850,000 BTC lost.
Bankruptcy trustee Nobuaki Kobayashi and his office have already assessed and approved creditors’ claims according to their BTC, JPY and USD balances at the time Gox shut down in early 2014.
But here’s the problem: under Japanese law, the value of a bankrupt company’s non-cash assets are assessed (and frozen) at the time of bankruptcy filing.
So creditors, who were never likely to receive more than 20 percent of their original balances anyway, will receive the double insult of getting their diminished bitcoin holdings handed back at $450 (¥50,000) each.
The plaintiffs argue that bitcoin and its chaotic price moves put the case in unique and unprecedented legal territory, which demands a fresh look. They are moving to move Mt. Gox out of bankruptcy and into civil rehabilitation.
Bitsonline has spoken to people associated with the new lawsuit, who confirmed the action but wished not to be named at this stage. More details on this case and related issues, they said, are coming soon.
Unusually for a bankrupt company, Mt. Gox now has about $3.3 billion USD (yes, billion) in asset value. That’s (in theory) more than enough to pay all its liabilities, and possibly even make a massive profit for CEO Mark Karpeles — himself a significant creditor.
Long-Time Complaints Over BTC Value Assessment
The rising bitcoin price issue in the Gox bankruptcy isn’t new — the legal action represents an official move to address what has become a groundswell among Mt. Gox creditors.
There have long been grumblings about the 2014 valuation and calls for Kobayashi’s office to pay creditors in BTC instead of fiat — whatever the current value. These calls continued even when the bitcoin price slumped below the assessed rate from 2014-2015
One counter-argument is that many Mt. Gox bitcoin holders would have sold their BTC for far below the current market value anyway — it’s been a few years of slim pickings. But it’s also impossible to prove, and the current BTC value is very real, so why not make everyone happy?
On a surface level and without considering the legal implications, Gox could distribute the bitcoin as bitcoin to creditors’ wallets, and holders could decide what to do with them. That avoids an unlikely situation in which Gox tries to sell all its roughly 202,000 BTC at once — which would crash the price anyway.
That could require a change to Japanese law and process, which has moved at a methodical pace since 2014.
The Mt Gox Villains Register
To many, Karpeles is the main villain in the Gox affair. Others have been more sympathetic, saying he was also the victim of others’ actions beyond his control.
Karpeles is currently on trial in Tokyo on fraud and embezzlement charges related to Mt. Gox’s business, but separate to the BTC theft. He already previously spent a whole year in prison waiting for the charges to be formalized, before being released on bail.
The identity of the hacker who stole an initial 850,000 BTC from Gox’s “cold” wallets remains unknown — or at least unproven. Analysts and some U.S. federal agencies have pointed the finger at Russian national Alexander Vinnik, whom they also allege held an influential position in the unregulated BTC-e crypto exchange.
Kobayashi also confirmed at a hearing in 2016 that lawsuits filed against Mt. Gox by Coinlab and its CEO Peter Vessenes, were delaying payouts to claimants. Coinlab has one active $75 million suit against Gox which would need to be settled before any other funds can be distributed.
Ironically, this delay could actually be a plus for some creditors, if it delays claims long enough for the BTC price to rise even higher. Several planets would need to align for that to come true, though.
What should the Japanese courts decide? Tell us your opinions and reasons in the comments, and please share this article on Twitter.
Images via Jon Southurst, GoxDox