
Mt. Gox: Announcement of Commencement of Bankruptcy Proceedings [pdf] - sillysaurus3
https://www.mtgox.com/img/pdf/20140521_announce.pdf
======
sillysaurus3
The takeaway, if you had any bitcoin in Mt. Gox when it fell:

You won't receive any repayment until Feb 2015 at the earliest.

Important note: you must fill out a form claiming your debt in order to be
considered for repayment in Feb 2015, i.e. as an Mt. Gox debtee, you are
required to manually inform them (via their form) of how much money you're
owed, otherwise you'll receive nothing. The form can't be filled out yet,
because they haven't released it, but presumably they'll post it on mtgox.com
sometime in the upcoming months, so make a mental note to keep your eyes open
for it and fill it out whenever it's posted. If you haven't sent in the form
by Nov 2014 then it sounds like you're guaranteed to get nothing.

It also seems fairly likely that you won't recover much of your money. That's
just speculation on my part (and I would love to be wrong about it) but it
seems like it's time to make peace with the idea that you probably won't be
seeing >75% of your money ever again.

That said, Mt. Gox recently found 200,000 BTC that they had somehow lost track
of: [http://www.reuters.com/article/2014/03/21/us-bitcoin-
mtgox-w...](http://www.reuters.com/article/2014/03/21/us-bitcoin-mtgox-wallet-
idUSBREA2K05N20140321)

... so those 200,000 BTC may be distributed among creditors. Since Mt. Gox's
total bitcoin debt has been quoted at around 750,000 BTC, that would mean in
an ideal world you'll eventually receive 26.6% of however many bitcoins you
had at the time of Mt. Gox's shutdown.

But the world isn't ideal. It's unclear how such a repayment scheme would work
in practice. For example, how will Mt. Gox repay debtees who are owed
USD/EUR/AUD/etc, not bitcoin? E.g. let's say someone's Mt. Gox account balance
was 3.25 BTC and $3,132. How would Mt. Gox's 200,000 BTC be fairly distributed
in that situation? Would that $3,132 debt be converted into BTC debt? Or will
Mt. Gox sell some of that 200k BTC in order to get US dollars, which are then
repaid to that $3,132 debtee? And if all US/EUR/AUD/etc debts will be
converted into BTC debts for purposes of repayment, what prices will they use
for the actual conversion? (That is, how many BTC per how many dollars of
debt?) Will they use current bitcoin market value for the conversion (which is
currently $494/BTC) so that $3,132 would be equivalent to 6.34 BTC? Or will
they use the value of bitcoin when Mt. Gox shut down operations?

What if they decide the best way to proceed is by selling off all 200k BTC for
US/EUR/AUD/etc, which is then distributed among debtees? It's their decision;
it seems like that scenario isn't impossible. You can imagine how a firesale
of 200k bitcoins would completely annihilate BTC's market value. Of course,
it's unlikely that whoever is in charge of Mt. Gox's assets would be that
shortsighted, but given that bitcoin is completely new to most legal systems,
who knows?

The point here is that your money's fate is up to someone else. Your money
stopped being your money the moment you deposited it into Mt. Gox, or
Coinbase, or any other third party. And now that Mt. Gox has collapsed and
taken your money with it, it's probably best to accept that all of your money
is 100% gone and never coming back, because that way when Feb 2015 rolls
around you might be pleasantly surprised if Mt. Gox happens to repay you some
small percentage of your holdings. (A pleasant surprise is much nicer than a
sore disappointment, which is why I recommend pretending all your money is
gone. Worst case: all your money is gone. Best case: some of it comes back to
you via carrier pigeon. Actually, that would be the Awesome case.)

So let this be a lesson about the dangers of trusting a third party with your
money, unless that third party is insured by a government in the event of
disaster.

~~~
nwh
I remember seeing a comment somewhere on their site that payouts will be in
USD rather than BTC. Can't find it now, so I could be wrong.

~~~
sillysaurus3
Interesting. I wonder what will happen to Mt. Gox's 200k BTC? If it's true
that repayments will be in USD, then it logically follows that the 200k BTC
will be liquidated into USD, which will then be distributed evenly among
debtees.

Liquidating 200k BTC would be quite a sight to behold. For example, there are
only 18k BTC of orders on Bitstamp right now:
[http://bitcoincharts.com/markets/bitstampUSD_depth.html](http://bitcoincharts.com/markets/bitstampUSD_depth.html)

... meaning, selling 200k BTC would blow through the entire order book eleven
times over. I have no idea how the market would react to that. I'm sure
bitcoin would survive it, just like it's survived every other disaster, but it
will be quite the rollercoaster.

The reason I say the 200k BTC would be sold off if the repayments are all in
USD is because, if I remember correctly, Mt. Gox had almost no cash when it
shut down. Most of its cash had been seized by the US government long ago. So
if Mt. Gox are going to repay anything of significance, then it seems like
those 200k BTC will be sold off. What's the alternative? Those 200k BTC have
to wind up _somewhere_. I know nothing of Japan's legal system, but the
alternatives seem to be "either the government ends up keeping the coins, or
the coins are redistributed to Mt. Gox debtees, or the coins are all sold off
and the proceeds are distributed to Mt. Gox debtees."

Anyone have any theories about what will happen to the coins?

~~~
jebus989
I don't follow your logic. A forced sale of bitcoins to assuage creditors is
different to speculators losing confidence in the currency and trying to exit
their positions. The latter causes market volatility and price crashes.
Temporarily increased liquidity is not inherently disastrous.

~~~
sillysaurus3
Very true, and that's a solid theory. Unfortunately I've learned from
experience that the market rarely follows anyone's theory. The simplest
example: many moons ago, when people were trying to explain bitcoin's meteoric
rise in price, the general consensus was that the price was linked to (or at
least influenced by) Silk Road, because Silk Road was the only practical use
for bitcoin. Then Silk Road collapsed, but bitcoin's price hardly moved.
Theorycrafting is fraught with dangers like that.

I noticed from some brief experience with bitcoin trading that if people
suspect a huge downward plunge is happening presently, then people with a lot
of bitcoin will step in and start putting up "floors", i.e. a large buy order
about $50 to $100 lower than the current price. So they might offer to buy
1,000 coins for $75 less than the current price, because they expect it to
plunge.

However, when it actually does plunge, what happens is that the plunge eats
into their buy order to the tune of about 50 BTC, and then they cancel that
buy order and move it even lower. This makes sense because if there's downward
pressure, you stand to earn even more if you adjust your "floor" as far down
as possible in order to buy the cheapest coins.

So, if 200k coins are sold off all at once, it seems like most of the big
players in the market will set a "floor" of about $50/BTC, then sit back and
watch what happens. And since everyone else will be completely panicking at
that point, a significant number of people will probably hit "sell at current
market rate" in order to get out of their BTC position as quickly as possible.
(I've seen it happen; sometimes huge orders of 1,000+ BTC are sold at current
market rate, which plunges the price way down, and then the price ticks back
up as the market adjusts. But 200k BTC is two orders of magnitude higher; it
seems like that will smash the price all the way down to sub-$10.)

Hopefully whoever is in charge of Mt. Gox's assets will take a more nuanced
approach to selling off 200k BTC than "put them on Bitstamp and sell at
current market price."

------
sparkzilla
For a recap of the Mt Gox rise and fall check my timeline:
[http://newslines.org/mt-gox/](http://newslines.org/mt-gox/)

~~~
sparkzilla
Summary: The Bankruptcy Trustee sets April 24 as the date for the start of
bankruptcy proceedings, at Mt Gox offices in Shibuya, Tokyo. A creditors’
meeting for reporting on the status of the assets will be held on July 23 at
the Tokyo District Court. Creditors do not have to attend the meeting; the
proceedings will be posted to the Mt Gox website. Bankruptcy claims must be
submitted to the trustee before Nov 28, using a form provided by the trustee.
Claims will be assessed on Feb 25, 2015.

------
TazeTSchnitzel
Pages 4-6 are the English.

