• J McGlynn and M Bacina

Restless creditors offered 90% of remaining Bitcoin tied up in Mt. Gox bankruptcy

Updated: Jan 25


Another step forward in the longstanding Mt Gox saga has been taken, with creditors of the bankrupt cryptocurrency exchange finally being given the chance to reclaim their digital assets (bitcoin) before legal claims are settled.


As we have written about before, Mt. Gox was once the world’s biggest Bitcoin exchange, until it was forced to close in 2014 after a mystery hack caused BTC850,000 belonging to thousands of customers to vanish. Over time, some of the missing bitcoins have been found and Alexander Vinnik, a Russian bitcoin exchange operator, has been charged in connection with the hack. But, as Mt Gox continues to be the subject of multiple lawsuits, the process of reimbursing those who held their digital currency in the exchange prior to the hack has been progressing slowly.


The deal creditors have been waiting for


This present opportunity for creditors has arisen out of an agreement between Nobuaki Kobayashi, the trustee to the Mt. Gox bankruptcy, and MGIFLP, a unit of Fortress Investment Group LLC, which subject to creditor acceptance, will allow creditors to claim up to 90% of the remaining Bitcoin tied up in the 2014 bankruptcy (which is not anywhere near the amount which was in the exchange pre-hack).


According to Fortress, not all of the Bitcoin held by Mt. Gox when it went bankrupt is available for recovery. Rather, for each Bitcoin that was locked up in the bankruptcy that has a claim on it, the estate has only 0.23 coins to distribute, per CoinLab. At this stage, it is not clear how many Bitcoins are available to claim by the creditors. But according to Bloomberg, whether or not the deal satisfies the restless class of thousands will be determined by their answers to a simple up or down vote to be conducted in the near future.


According to CoinLab, who announced the deal last Friday, even if creditors accept the deal, they aren’t obligated to take the early payment and can wait for the lawsuits against the former exchange to be settled or heard. CoinLab has made $16 billion claim against Mt. Gox in the bankruptcy so would be expected to be protecting their own interests in this deal.


Creditors have been waiting or fighting for some form of return of the original digital currency held for the past seven years rather than being treated as if they were each a creditor for the value of their Bitcoin on the day of the appointment (when Bitcoin was worth a three figure sum per BTC). To date there has been no easy legal answer from the Japanese insolvency law on this point, so further deals for distribution of Bitcoin to former customers of Mt Gox would be likely welcomed.


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