MT Gox Creditors Call for Transparency and Trustee Resignation

Journalist:
Andrew Quentson @Aquentson
November 24, 2014

The MT Gox saga is quickly becoming a distant memory, but as a second creditors meeting nears, voices are being raised and calls for resignations are starting to be made as creditors begin to lose patience. At the heart of the mystery is the alleged disappearance of – initially – 850,000 bitcoins.

In an intriguing twists of events, only 10 days after declaring bankruptcy, MT Gox mysteriously found 200,000 bitcoins in an old format wallet, still leaving a huge black whole of hundreds of millions of dollars in unaccounted bitcoins to the tune of 650,000. Even more mysteriously, approximately forty million dollars had somehow vanished from Mt Gox’s bank accounts.

Although numerous explanations have been provided in regards to the alleged disappearance of the bitcoins, there has been no explanation whatever in regards to the “disappearance” of the fiat dollars. As creditors prepare to take an expensive flight to Japan for a second creditors meeting where they are to be provided with an update on the investigation in regards to the disappearance of bitcoins and fiat, in forums as well as other public places a question is being raised louder and louder. Where are the public addresses of the alleged cold wallets?

Also read: Mt Gox Delay in Investigation

To Publish or Not to Publish

As we all know, bitcoin operates on a public ledger where all transactions can be seen. Although it is possible to obfuscate transactions, the public addresses would provide some crucial information. Chief amongst which, the existence of the 650,000 bitcoins, the timing and amount of their moves, and the addresses where they were transferred.

In an interview with PCWorld, Mark Karpeles, the CEO of MT Gox, stated as follows:

“The cold wallets were implemented in 2011… auditing their contents was risky since it involved scanning the QR code for a wallet and checking whether its private key matched the public key on the Internet.”

The above quote seems to suggest that an audit of the MT Gox’s addresses has not been carried out. Therefore, MT Gox does not know how many bitcoins they hold or indeed how many they lost, if any. Moreover, although MT Gox’s cold wallet setup is not known, it is usually the case that a paper wallet contains a QR code as well as a public and private address. Often, therefore, it is not necessary to match the two in order to check the balance as the public address on its own is sufficient. A fact that Mark Karpeles, who was an early adopter of bitcoin and was in charge of the biggest bitcoin exchange for three years, would be very familiar with.

It may well be the case that the journalist, who may not be familiar with bitcoin, lost some meaning in parenthesizing. We respectfully asked, therefore, for a copy of the transcript to be provided or to be published. Unfortunately, we were informed that they did not have a transcript. We can not, therefore, verify the veracity of the above quote.

No Evidence of Disappearance

However, the case still remains, nine months after declaring bankruptcy, that no evidence has been provided of the alleged disappearance of any amount of bitcoins, leading many to now ask for MT Gox’s cold wallet public addresses to be published so that it can at least be verified that a disappearance did happen.

Calls for the Trustee to Resign

This ongoing lack of transparency has led some creditors to go as far as ask for MT Gox’s trustee, Nobuaki Kobayashi, to resign for being in breach of “his fiduciary duties.” The creditors charge the trustee with failing to appoint a bitcoin expert to aid in his investigation of the disappearance of the bitcoins, amongst other alleged failings.

There seems to be some basis for this allegation. The trustee stated in a leaflet distributed at the First Creditors Meeting held in July 2014 that he had appointed Netagent Limited to hold and secure the remaining 200,000 bitcoins and Fujitsu Limited to safeguard the data and secure the servers. Deloitte, a well known accounting firm, and Rex Accounting are appointed to investigate the disappearance of bitcoins. All well known companies, but it is not clear whether their expertise transcends to bitcoin and it is very curious that an investigation on an alleged disappearance of bitcoins contains no company that specializes in bitcoins or any qualified cryptocurrency expert.

It is doubtful however whether another professional who necessarily must be specialized in law has any more or less knowledge of bitcoin to make such resignation worthwhile. However, the trustee and the appointed companies are well qualified to investigate the alleged disappearance of approximately forty million dollars, but have nonetheless provided no explanation.

Where Did the Fiat Go?

Roger Ver, dubbed the Bitcoin Jesus, stated in an email to CCN: “I saw with my own eyes that MTGOX had about $100M on deposit in the bank… on July 17th 2013.” Not more than seven months later, MT Gox’s balance sheets, discounting illiquid fiat such as the dwolla account seized in May 2013, showed an actual bank balance of $7 million. That is an astounding disappearance of $93 million in a mere seven months, and officially, by MT Gox’s own admission, $40 million have somehow disappeared.

Despite nine months of investigation, the trustee has provided no information whatever on what happened to this $40 million. While he may be due some slight leeway in regards to the bitcoins, there appears to be no justification for failing to provide any explanation on what happened to the fiat held in bank accounts, a process which should be very smooth considering the transparency that the banking system provides when duly authorized.

Will this Mystery Ever Be Solved?

Some answers may be provided at the second creditors meeting to be held on the 26th of November at Tokyo’s District Court, but drawing from the experience of attending the first creditors’ meeting, most creditors seem to expect none. Some even suggest that it is better to forget the MT Gox mystery and move on, but until some basic questions are answered, it is difficult to see how one of the most mysterious and perplexing event of our generation can simply be forgot. Creditors therefore continue to ask: Where are the cold wallet public addresses and where did the fiat go?

What do you think? Are you a Mt Gox Creditor? Comment below!

Images from Shutterstock.

Last modified (UTC): November 25, 2014 17:35

Tags: mt gox
Andrew Quentson @Aquentson

Feel free to contact me at andrewquentson@gmail.com with any information you may have.