Breakthrough for corporate creditors of Mt. Gox

September 14, 2018
Chris Wheal

Mt. Gox went under in February 2014

Defunct bitcoin exchange Mt. Gox has opened up its online rehabilitation claim filing system to corporate creditors who held cryptocurrency funds on the platform when it went bankrupt four and a half years ago.

At the start of 2014, Tokyo-based Mt. Gox was the world’s largest bitcoin exchange and handled over 70% of all bitcoin (BTC) transactions worldwide. However, by the end of February it was bankrupt after losing around 850,000 bitcoins – around 6% of all those in existence at the time and valued at around €460m (or more than €3bn based on October 2017 prices). A further €27m went missing from Mt. Gox’s bank accounts.

Insolvent as a result of the theft, Mt. Gox entered bankruptcy, although its chief executive Mark Karpeles – who served time for embezzling funds from the exchange — later recovered around 200,000 BTC worth of company funds. The remaining 650,000 BTC were never recovered.

New process

The new rehabilitation process was invoked by a group of Mt Gox customers unhappy with the previous bankruptcy case. The group managed was able to move the case from a bankruptcy proceeding to a civil rehabilitation, potentially producing far better results for customers who lost funds.

Nobuaki Kobayashi, rehabilitation trustee for the defunct exchange, announced that corporate customers can now submit claims to the Mt Gox Civil Rehabilitation Refund. These must be received no later than October 22 to be eligible for compensation. The news follows the claim process that started three weeks ago for non-corporate customers.

On September 12, Kobayashi wrote on the Mt. Gox website: “We are pleased to announce that we have released an online rehabilitation claim filing system (the “System”) for corporate users who filed their proofs of bankruptcy claim by using the Mt Gox online bankruptcy filing system (in the bankruptcy proceedings) which allows corporate users to file their proofs of claim by online methods in connection with the civil rehabilitation proceedings.”

As with individual creditors, who began filing claims on August 23, corporate creditors must submit a claim even if they previously did so during the exchange operator’s bankruptcy proceedings.

Compensation details

Prior to the exchange’s exit from bankruptcy, Kobayashi was criticised within cryptocurrency circles for opting to cover the exchange’s outstanding liabilities by liquidating its cryptocurrency assets in large batches on spot trading markets, rather than through the over-the-counter (OTC) channels typically used by large-scale traders.

Following the company’s entry into civil rehabilitation, Kobayashi pledged that there would be no more surprise sell-offs.

Mt. Gox’s creditors, moreover, have petitioned to receive their repayments directly in cryptocurrency, specifically in BTC and bitcoin cash (BCH). Although not guaranteed, this has become possible, pending court approval, as the exchange will compensate creditors through civil rehabilitation rather than bankruptcy. Compensation is expected to be paid in late 2019.

According to the Mt. Gox Cold Wallet Monitor, bitcoin wallets held by the defunct exchange hold 137,891 BTC and BCH, collectively worth nearly $1bn at the current exchange rate.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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