Moving Toward Closure: Mt Gox Saga Sees Civil Rehabilitation Granted
The latest development in the long, winding fallout of the 2014 Mt. Gox bitcoin exchange collapse is the biggest yet for affected creditors, as their petition to move their case to “civil rehabilitation” was finally granted by the Tokyo District Court on June 22nd, 2018. The legal shift will make it considerably easier for victims to be made whole in bitcoin, not strictly Japanese yen, which is significant since the cryptocurrency’s value has surged more than 1,700 percent since the end of 2014.
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From Bankruptcy to Civil Rehabilitation — a Major Distinction
Hitherto, the Mt. Gox bankruptcy proceedings have felt like nothing short of a mess for the exchange’s creditors. Due to the nature of Japan’s reigning bankruptcy laws, victims were seemingly set to be paid back in Japanese yen the equivalent of what their bitcoin holdings on the exchange were worth in 2014 — a far cry from the price heights BTC reached and has held in 2017 and beyond.
This reality naturally enraged many creditors, as the Mt. Gox trustee at one point had over 200,000 bitcoins to clear into yen. Since the BTC price has appreciated greatly over the past year, that means the trustee wouldn’t get anywhere close to clearing out that vast trove of bitcoins before the creditors had been paid back what they were owed in yen, leaving a vast sum of BTC left over. Worse yet for the victims, Japanese bankruptcy law would dispense the remaining crypto to Mt. Gox’s shareholders, a sum estimated to be over 160,000 bitcoin and bitcoin cash (BCH). This means Mark Karpelès, the CEO and majority shareholder of Mt. Gox who’s widely blamed for failing to prevent the exchange’s collapse, would receive a gargantuan windfall of crypto.
The one possible out to avoid this bankruptcy conundrum? Civil rehabilitation — and that’s exactly what the Mt. Gox creditors have just been granted.
That’s the news out of Tokyo this morning, where the Tokyo District Court has agreed to accept the petition to shift the court proceedings in question into civil rehabilitation. It was never a foregone conclusion that such a shift was to happen. In the very least, then, affected creditors can breathe a sigh of relief in knowing a great deal more flexibility has now been granted toward their long-awaited financial remediation. Waiting years for a relatively paltry sum of yen may now be off the table for victims.
One sobering thought: given that Mt. Gox lost roughly 850,000 BTC and only “recovered” about 220,000 BTC, creditors obviously won’t be getting all their former wallet contents back. Past estimates suggested they could recover around 20 percent of their balance — which, at today’s prices, is still far higher in USD or JPY value than their entire holdings in 2014.
In addition to staying the Mt. Gox bankruptcy proceedings, the Tokyo District Court has re-appointed the case’s bankruptcy trustee, attorney Nobuaki Kobayashi, to the position of civil rehabilitation trustee.
That means he’ll be managing all aspects of the remediation process, per Kobayashi:
“The power and authority to administer and dispose of MTGOX’s assets is still vested exclusively in me, and I will implement the civil rehabilitation proceedings, including the administration of MTGOX’s assets and the investigation of claims, subject to the Tokyo District Court’s supervision.”
He also laid out the schedule, though subject to change, that creditors will need to be mindful of going forward:
“(1) Meeting for reporting the status of property and submission deadline for a report under Article 125 of the Civil Rehabilitation Act:
September 26, 2018
(2) Deadline for Filing proof of rehabilitation claims:
October 22, 2018
(3) Submission deadline for inventory of assets and balance sheets:
October 27, 2018
(4) Submission deadline for statement of approval or disapproval:
January 24, 2019
(5) Period to examine Proofs of rehabilitation claims:
From January 31, 2019, to February 7, 2019
(6) Submission deadline for proposed rehabilitation plan:
February 14, 2019″
As detailed above, arguably the most important date for creditors will be October 22nd, 2018, upon which creditors will need to have re-filed proof of their claims. Kobayashi noted that creditors eventually would be able to vote on how the process should proceed, with their vote weight being based on the amount of BTC owed to them in remediation. That’s because, with the bankruptcy stayed, funds and forks don’t have to be automatically converted into yen, leaving room for discretion:
“The amount of voting rights of Bitcoin creditors for resolutions on the proposed rehabilitation plan is based on the valuation of Bitcoins as at the time of commencement of the civil rehabilitation proceedings.”
Comes on the Heels of Karpelès Going All-In on Rehabilitation
In Reddit Ask Me Anythings (AMAs) back in April of this year, Karpelès bared his soul and answers to the cryptoverse. He said he didn’t want forgiveness or any money, but rather was “doing my best” to make civil rehabilitation a reality:
“I don’t want this. I don’t want this billion dollars. From day one I never expected to receive anything from this bankruptcy. The fact that today this is a possibility is an aberration and I believe it is my responsibility to make sure it doesn’t happen. One of the ways to do this would be civil rehabilitation, and as it seems most creditors agree with this, I am doing my best to help make it happen. I do not want to become instantly rich. I do not ask for forgiveness. I just want to see this end as soon as possible with everyone receiving their share of what they had on Mt. Gox so everyone, myself included, can get some closure.”
So it looks like the Mt. Gox proceedings may now have veered toward the best possible ending for everyone involved. We’ll have to wait and see. In the meantime, the creditors still await being made whole.
What’s your take? Do you think this was a much-needed development? Let us know where you stand in the comments below.
Images via Pixabay, CNBC