
Mt. Gox Bankruptcy Wasn't Really a Bust - rb808
https://www.bloomberg.com/view/articles/2017-11-14/bitcoin-bankruptcy-wasn-t-really-a-bust
======
modeless
Mark Karpeles is quite active on Reddit and has been very open about the whole
bankruptcy process. You can read all about it in his comments:
[http://reddit.com/u/magicaltux](http://reddit.com/u/magicaltux) and in the
subreddit
[http://reddit.com/r/mtgoxinsolvency](http://reddit.com/r/mtgoxinsolvency)

His preference would be for the bankruptcy trustee to directly distribute the
bitcoins to claimants, which would actually be a much faster and easier way to
distribute the money than the traditional banking system, and has the added
advantage that the bitcoins wouldn't need to be sold. However, the Japanese
bankruptcy process is extremely unlikely to allow this. Also the effect of
200k bitcoins suddenly being distributed to thousands of people around the
world might be to crash the bitcoin price, as some will sell immediately and
more will probably sell when the price declines.

He realizes that if he receives any money after the bankruptcy he will
immediately be tied up in even more lawsuits which will drag on for years if
not decades. He has said that in this scenario he would try to distribute the
money to claimants rather than keeping it in an attempt to avoid these
lawsuits, but it seems unlikely to work. He may be cursed to receive hundreds
of millions and have it tied up in lawsuits for the next decade, ultimately
ending up in personal bankruptcy again.

~~~
pakitan
He was active and quite helpful but after the last creditors' meeting (when it
was officially announced that any surplus will go to shareholders) he deleted
all his posts in the mtgoxinsolvency reddit. He claimed it was because of
abuse and death threats. I don't doubt that the threats played a part in his
decision but I also think that the deleting of his reddit history is an
attempt to get rid off of anything that might be used against him in future
lawsuits.

Also, he never went as far as claiming that he'd distribute anything he gets
to creditors. He's always been quite vague about it and never answered
directly when asked about it.

~~~
goialoq
What's that called when you actively delete information in order to hide it
from opposing counsel and law enforcement?

~~~
Fej
Destruction, or spoliation, of evidence.

------
avs733
>Someone will sue Mark Karpelès until he doesn't have a billion dollars' worth
of bitcoins any more. The bankruptcy estate might only owe the customers $500
per bitcoin, but they -- and regulators, etc. -- might have a case that
Karpelèsowes them the remainder, due to negligence or unjust enrichment or
general come-on-man

I...and perhaps I'm being to glib...find it highly amusing that the same
people making the argument of rejecting states and fiat currency and
regulation and structure are frustrated that their attempts to use those
structures requires them to adopt all the parts of it, not just the parts they
need to recoup their losses from a con man.

~~~
deadmetheny
This is exactly why I love Bitcoin threads like this so much, they always
contain a bunch of idiots who inevitably lose their Dunning-Krugerrands to
scammers and insolvent exchanges, of which all the regulations with fiat they
claim to hate so much are there to prevent in the first place.

~~~
unknown_apostle
So this bunch of idiots can't access the legal system or expect justice,
unless they fully accept the inevitability of currency debasement or the
revolving-door system between banks and government?

That's exactly why I love bitcoin threads like this. Because of the sour
grapes who stood by the sidelines over the past 8 years.

Btw, applying "plain" justice or bankruptcy to insolvent financial
institutions was exactly what they _didn 't_ do in 2008. Listen to the
recordings of Irish bankers how they would approach regulators. "If they say,
if they saw the enormity of it up front, they might decide, they might decide
they have a choice."

Instead of putting skin in the game of people like this, they socialized the
losses, suspended mark-to-market and papered it over with ridiculous amounts
of legislation that was written with the help of the same people who were
bailed out. Almost nobody went to jail. That's probably why we have blockchain
to begin with and why 10 years later we'll have to go through something
similar or worse.

[https://www.theguardian.com/business/2013/jun/24/anglo-
irish...](https://www.theguardian.com/business/2013/jun/24/anglo-irish-
bankers-taped-recordings)

~~~
deadmetheny
>this bunch of idiots can't access the legal system or expect justice

Sure they can, but they should also not be surprised when a lack of controls
on currency transfers result in their shit getting stolen, when part of the
'appeal' of Bitcoin to so many people is that there's no controls on it.

>sour grapes

Hahahahahahahahahahahahaha. Bitcoin is fucking stupid, a huge waste of
electricity and CPU power, and its ultimate destiny is to crash and burn. Some
people might make money off of that, good for them if they do I guess, but I
don't really care either way.

>'the banking system is corrupt and bad'

Agreed. People didn't go to jail that should have, and society suffered for
it. I don't agree that Bitcoin is the solution to those problems, though.

------
runeks
> After accounting for smaller amounts of nonbitcoin assets and liabilities,
> Mt. Gox has a surplus on paper of ¥111 billion, or $977 million, that could
> go to its shareholders, according to a calculation by The Wall Street
> Journal.

So the shareholders of an incompletely run company should have dibs on the
capital gains of assets they failed to secure properly? To me, this seems
neither fair nor societally beneficial.

If someone lends a company their property, after which the company loses it,
and the price of this property goes up, it just implies that the creditors
need more money to get back the property that belongs to them - regardless of
whether we’re talking about bitcoins, gold or lambs wool. Surely, the goal of
bankruptcy must be to make creditors whole, not enrich shareholders of the
company that failed to live up to its promises.

~~~
jstanley
Agreed. The only reason MtGox has that paper $1b is because they didn't allow
anyone to access their money. They lost a bunch of everyone's money, then kept
hold of what they had left and waited for the Bitcoin price to rise.

 _Surely_ they don't get to keep the extra. It wasn't even theirs in the first
place!

~~~
otoburb
If anybody wants the full sordid history from an investigative standpoint,
check out Kim Nilsson's great writeups[1][2] and presentation[3].

[1] [http://blog.wizsec.jp/2017/07/breaking-open-
mtgox-1.html](http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html)

[2] [http://blog.wizsec.jp/2017/07/comments-on-mark-karpeles-
tria...](http://blog.wizsec.jp/2017/07/comments-on-mark-karpeles-trial.html)

[3]
[https://www.youtube.com/watch?v=l70iRcSxqzo](https://www.youtube.com/watch?v=l70iRcSxqzo)

------
Overtonwindow
Another great piece by Matt Levine. I think legally the customers are only
entitled to what they invested, but at the same time, Mt. Gox should not get
that as it was profits from nefarious gains. So I think that money should go
to the government as a penalty. Make the customers whole, zero out Mt Gox debt
and obligations, and rest to the government.

~~~
panarky
I'm curious if the same bankruptcy principles apply outside of cryptocurrency
exchanges.

Let's say I owned 1000 shares of Google five years ago, and my broker went
bankrupt. At the time, Google was trading at $333 per share.

Today the court liquidates the broker's assets to distribute to creditors, and
Google is trading at $1050 a share now.

The court wouldn't use Google's five-year-old share price and let the broker
keep the rest. Instead, the court would distribute the actual proceeds of the
liquidation.

Why is it any different with Mt. Gox? Why wouldn't the court sell the bitcoin
at current market prices and distribute the proceeds among the creditors?

~~~
kens
Customer assets are separate from brokerage assets (due to rule 15c3-3), so if
a broker goes bankrupt, your stock shares are unaffected. If securities were
lost due to theft or fraud, the SIPC protects them up to $500,000. To (sort
of) answer your question, the SIPC guarantees the number of shares, not the
cash value.

[http://www.finra.org/investors/alerts/if-brokerage-firm-
clos...](http://www.finra.org/investors/alerts/if-brokerage-firm-closes-its-
doors)

------
chollida1
Well in addition to Mt. Gox being in bankruptcy proceedings right now, Mark
Karpelès is also going through a personal bankruptcy process as is his holding
company , Tibanne, which holds an 88% share of Mt. Gox.

I've got to imagine that he wants the Mt Gox situation handled ASAP so he can
get any funds from it to solve his own bankruptcy issues.

I'd imagine that this provides a pressure point for the Mt Gox stakeholders
where they might be willing to play ball and let the bankruptcy proceedings
work at a much faster pace in return for a much larger portion of the
remaining Mt Gox assets.

Having said that, according to the WSJ...

> "The customary period in which creditors may dispute the trustee’s decisions
> on claims has ended."

...so perhaps Mark Karples may decide to play hard ball and hope that the
creditors just want the coins sold and money disbursed before bitcoin has
another chance to collapse?

Lots of fun game theory to think about here.

~~~
otoburb
One of the sticking points holding up the bankruptcy process is the
outstanding CoinLabs lawsuit[1]. There's not much room for Karpeles to
maneuver due to the cascading bankruptcy proceedings against both MtGox and
Tibanne.

A small number of MtGox ex-customers cottoned on quickly to the possibility
that any excess surplus might accrue to the shareholders and filed claims
directly against Tibanne. The rest of the claimants have been left to organize
amongst themselves. One such effort recently organized is MtGoxLegal[2].

The current sentiment is to try to convince the Japense court trustee that the
principle of unjust enrichment[3] should apply, but nobody knows if this will
hold under Japanese bankruptcy law in this situation.

Fun times abound.

[1] [https://themerkle.com/mtgox-phoenix-rises/](https://themerkle.com/mtgox-
phoenix-rises/)

[2] [https://www.mtgoxlegal.com/](https://www.mtgoxlegal.com/)

[3]
[https://en.wikipedia.org/wiki/Unjust_enrichment](https://en.wikipedia.org/wiki/Unjust_enrichment)

------
theadamp
"Again, the main function of a bitcoin exchange is to get its bitcoins
stolen..."

Really?

~~~
random023987
> "Again, the main function of a bitcoin exchange is to get its bitcoins
> stolen..."

> Really?

Really. Is there any other reason to open a bitcoin exchange other than to
have fools give you eTuplips that you can abscond with at a whim?

I mean you might think that running an exchange helps further dreams of a
bankless future, but in the real world, most cryptocurrency exchanges went
poof, either to steal bitcoins or because they couldn't convince fools to part
with enough bitcoins to steal.

But the heady days of an exchange being hacked or closed by fraud every weeks
are over. If you want your bitcoins stolen, I recommend investing in ICOs.

------
antiffan
I recall that [https://bitcoinbuilder.com](https://bitcoinbuilder.com) allowed
people to purchase locked up GOX coins during this fiasco. This would be a
good time to check up on those accounts.

------
pegasuscollins
So what happens when Karpeles needs to sell all of those bitcoins to make the
creditors whole in yen? And also: when will this happen?

~~~
kencausey
If a creditor can be found who is willing to assign some value to the asset
and then provide a loan secured by said asset then at least in the short term
it is not a problem. I believe this is fairly common and is not likely to be
difficult to find. Of course any such deal would likely include a detailed
plan for the sale of at least as much of the asset as would be needed to repay
the loan.

~~~
otoburb
At the time "early" in the proceedings, there was an attempt[1] to go through
what is called Civil Rehabilitation[2] under Japanese restructuring and
insolvency law, but this was denied by the Tokyo District Court handling the
MtGox bankruptcy.

Fast forward now several years, perhaps this is another option on the table
for another creditor willing to try again.

[1] [http://www.reuters.com/article/us-bitcoin-mtgox/mt-gox-
set-t...](http://www.reuters.com/article/us-bitcoin-mtgox/mt-gox-set-to-
liquidate-as-court-denies-rehabilitation-idUSBREA3F09U20140416)

[2]
[https://content.next.westlaw.com/Document/I2030ee371cb611e38...](https://content.next.westlaw.com/Document/I2030ee371cb611e38578f7ccc38dcbee/View/FullText.html?contextData=\(sc.Default\)&transitionType=Default&firstPage=true&bhcp=1)

------
pmorici
In 2014 when MtGox went bankrupt it took the Bitcoin market price down with it
into a multi year bear market. One wonders if the sale of these $1.5 billion
in coins won't bring about a second Goxing so to speak if they spook the
market by selling off such a massive number of coins.

------
inDigiNeous
So, I had bitcoins stored at MtGox at the time all of them were stolen or
"disappeared". Can anybody tell me if there is some action I can take to claim
them back ? Do I have to take legal action ? Thank you!

~~~
joshschreuder
I think, and I could be wrong, that you have to have lodged a claim years ago
[1]

    
    
      Users, who are bankruptcy creditors, were eligible to make bankruptcy claims against MTGOX regarding Bitcoin or cash through this system until at 12 noon July 29, 2015 (Japan time).
    
      After 12 noon on July 29, 2015 (Japan time), the only things that a User will be able to do using the Online Method will be to (i) view bankruptcy claims that he or she has filed himself or herself and (ii) transfer his or her bankruptcy claims to another person. However, nearer the time of distribution, the bankruptcy trustee is planning to give Users an opportunity to use this system again to make changes to the details of their bankruptcy claims, other than increasing the amount of the bankruptcy claims that Users have filed (for example, changes in their addresses or company names). Users will not be able to file new bankruptcy claims or increase the amount of the bankruptcy claims that they have filed.
    

[1]
[https://claims.mtgox.com/assets/index.html#/](https://claims.mtgox.com/assets/index.html#/)

------
jcoffland
> Mt. Gox . . . suffered the fate of all bitcoin exchanges, and had its
> bitcoins stolen.

Wow. This is an embarrassing demonstration of the authors ignorance of the
current state of the cryptocurrency market.

It is appalling that former CEO Mark Karpeles may benefit from the exchange
collapse he caused through either incompetence or thievery. But it's hardly
different from the rewards paid out to those who caused the US economic melt
down in 2008.

~~~
wakamoleguy
Matt Levine has a history of ribbing on bitcoin exchanges. He doesn't really
lay it out in this post, though, so here is a quote from an earlier one[1]:

> The other reason not to trade bitcoin is that, as far as I can tell, the
> fate of any bitcoin exchange/wallet/bank/custodian is to be hacked. That is
> just how bitcoin works: You buy bitcoins on an exchange, and you store them
> at the exchange because it's a pain to keep your private key yourself, and
> then the exchange gets hacked and your bitcoins get stolen. ("There have
> been at least three dozen heists of cryptocurrency exchanges since 2011,"
> Reuters noted[2] last week.)

In general, his Money Stuff commentary tends to have a sort of sarcastic
reductionist vibe to it. Whether the ignorance is true or feigned for effect
really depends on the reader's perspective, I guess.

[1]
[https://www.bloomberg.com/view/articles/2017-10-03/bitcoin-t...](https://www.bloomberg.com/view/articles/2017-10-03/bitcoin-
traders-and-index-funds)

[2] [https://www.reuters.com/investigates/special-
report/bitcoin-...](https://www.reuters.com/investigates/special-
report/bitcoin-exchanges-risks/)

~~~
jcoffland
It sounds like TV commentators mocking the Internet in 1994.

~~~
dmitrygr
Or sane people mocking Juicero and Theranos here on HN a year or two ago.

~~~
jcoffland
The existence of mockers is proof of nothing.

