Mt Gox Bankruptcy

Ben McLannahan, writing in today’s Financial Times, is reporting that Mt Gox creditors in Tokyo have demanded payments to them  be paid in the form of bitcoins rather than cash. Mt Gox was once the largest online exchange but went offline in February of this year and revealed, or more accurately claimed that it had ‘lost’ 750,000 of its clients bitcoins as well as 100,000 of its own. Gox later claimed to have ‘discovered’ 200,000 lying around in an old digital file. In March of this year I wrote that $113 Million of bitcoins may be moving through the blockchain, and many of Mt Gox’s creditors appear to be somewhat doubtful that their bitcoins were, in fact, ever lost.

Daniel Kelman, a US Layer, resident in Taiwan, today informed the notified trustee to the Mt Gox bankruptcy, Nobuaki Kobayashi, of his intention to form a ‘rebel group’ of creditors seeking to receive their payments in the form of bitcoins.

At the first gathering of creditors at a Tokyo District Court on Wednesday, Daniel Kelman, a New York-qualified lawyer now resident in Taiwan, notified trustee Nobuaki Kobayashi of his plans to form a rebel group. McLannahan explains that under Japanese law, a committee representing more than half of creditors has the power to “participate” in proceedings, so long as it satisfies certain conditions and is recognized by the court as representing the interests of creditors as a whole. Kelman explained that it was their view that any large scale sale of bitcoins for cash could lead to a depressed market for Bitcoin, and that is not in the interest of the creditors.

“As pretty much every creditor was an early adopter, we’d all like to see Bitcoin distributed as Bitcoin. As a form of payment it is overwhelmingly superior to cash.”


In Japan, all settlements in bankruptcy proceedings have always been in cash and any settlement approved for payment in a cryptocurrency would be a first, a landmark. The added complexity facing the court is that almost all of the Mt Gox 127,000 creditors are non-Japanese. Sunlot Holdings, a US-based group, has placed before the court a counter-proposal, that they should revive the online exchange. John Betts, the Sunlot CEO, stated that Sunlot has: “stayed the course as the longest standing serious offer,”

According to Mr Kelman, Mr Kobayashi stated on Wednesday, that he would “consider” paying claims in Bitcoin and this drew a spontaneous round of applause from dozens of creditors in the meeting, a meeting incidentally that was closed to the press. Mr Kelman said he aimed to assemble his committee by the next creditors’ meeting in November, adding that he was “very close” to the magic 50 per cent representation.

It should be pointed out however that Kelman also has another interest in arranging payments in bitcoins. He has declared his intention to launch a new Tokyo based exchange in partnership with Chinese ATM producer BitOcean and Atlas ATS, an exchange technology provider. Under the proposal he submitted to the court, his proposed new venture – BitOcean Japan – would distribute the 200,000 ‘Found’ Mt Gox coins, on a pro-rata basis to creditors, while giving them a 49 per cent equity stake in his new Tokyo exchange.