When Mt. Gox had $450 million (850,000 Bitcoin) in cryptocurrency stolen from them in 2014, this was the first time many people had even heard of cryptocurrency. It was still a relative unknown in the investing world, and was mostly relegated to the corners of the Internet where libertarians and techno-anarchists dwelt.
Since then, a lot has changed in the industry, but Mt. Gox still hasn’t settled with its creditors. In April 2014, they filed for liquidation based on the claim that 850,000 Bitcoin had been stolen from them.
Claims On Limited Assets
There are two main parties who were hurt during these proceedings: investors and users. Investors lost the value of their investment, which is a risk they take when involved with early-stage investing, but the users lost funds that were by all rights theirs. This has caused significant acrimony in the proceedings and now the glimmer of hope in the settlement may cause that to re-emerge.
Investors were counting on civil rehabilitation proceedings in order for them to be repaid based on their original crypto holdings as opposed to the fiat value of the coins. This reflects the opportunity cost of what those coins would be worth in present day money rather than letting the increase in the price of Bitcoin limit Mt. Gox’s liabilities.
Claims related to the civil rehabilitation were able to be filed until March 15th of this year, and now the rehabilitation trustee, Nobuaki Kobayashi, has announced that claims had been approved or disproved at this point. Users were able to file through an online filing system, supplementary online system, or an offline method, and creditors will still have the chance to file any additional claims.
Claims will be settled in cash or crypto, with the current holdings of Mt. Gox amounting to $630 million in cash and approximately 142,000 BTC and BCH (a total of $593 million in today’s prices). The big question will be how the mismatch in liabilities and assets will be handled once payments begin.
According to court documents, about $3.2 billion of claims have been approved, and there is no clarity as of yet how this will be handled. A final rehabilitation should be put forward by the end of April, and this will likely answer some of these questions further.
Asset Disposition Previously Being Poorly Handled
The big worry in regards to managing the settlement of claims is that payments could begin to depress the price of Bitcoin all over again. There is a twisted irony to the idea that the Mt. Gox collapse caused a huge drop in the price of Bitcoin in 2014 and now when the claims are finally being settled, it could happen all over again.
This already occurred in December 2017 when the trustees sold off $400 million of BTC and BCH and caused a price depression. There are other records showing that Mt. Gox sold off several million of crypto in 2018 as well. As much as the crypto world complains about the effect this can have on the market price of Bitcoin, it is a fairly common problem when it comes to assets with low market capitalizations.
200,000 Bitcoin were “found” in a forgotten wallet later on, which raised suspicions about the theft of the Bitcoin, but it has since been confirmed that the cryptocurrency was stolen from a “hot” wallet. The former CEO of Mt. Gox, Mark Karpeles, was cleared of any embezzlement or breach of trust charges, but found guilty of wrongfully making electronic records connected to Mt. Gox’s books.
Overall, this has been a general mess for the cryptocurrency world, and there will be a sigh of relief when it is settled and done.