Home News Mt. Gox Payouts: Date, Details of Creditor Payments by Bankrupt Exchange

Mt. Gox Payouts: Date, Details of Creditor Payments by Bankrupt Exchange

Teuta Franjkovic
Last Updated June 26, 2023 10:33 AM
Key Takeaways
  • Mt. Gox repayment registrations closed and investors are waiting for what will happen next
  • Investors are vigilant for any indication that Bitcoin sales may occur
  • Some creditors decided to go for the option of an early payout in BTC for 90% instead of waiting longer

On April 7, Nobuaki Kobayashi, Mt. Gox’s rehabilitation trustee, stated that the deadline for creditors to submit their repayment information—clarification of payee and payments type—has passed.

Here’s What Happens Next

Up to October 31, 2023, “base repayment, intermediate repayment, and early lump-sum repayments” will be made, the statement said . This last date, though, “might be extended with the permission of the Tokyo District Court,” it added.

Additionally, the email stated that the trustee would make the “necessary preparations” to complete the reimbursements, including verifying the repayment options and communicating the information with banks, fund transfer companies, cryptocurrency exchanges, and any other custodians engaged in the payback.

This is why it is anticipated that it will take some time before the repayment is started, the note stated.

The exchange’s initial downfall occurred in 2014 when it was forced to close due to a cyberattack that resulted in the loss of 850,000 Bitcoin.

Despite the FTX disaster in November 2022, the loss of Mt. Gox still ranks as one of the biggest crypto heist ever.

Repayment of cash to those who were impacted has been continuously delayed. A compensation plan was finally authorized by a Japanese court in 2018.

The Mt. Gox trustee named Bitstamp and BitGo as two of the designated cryptocurrency exchanges to help with the reimbursement processes to creditors.

The whole procedure for people impacted to register to reclaim their digital assets through the Mt.Gox exchange has been made public by Bitstamp,  who later admitted that processing payments could take up to three months . For the purpose of receiving the pertinent assets in accordance with the payback procedures under the rehabilitation plan, a creditor of Mt. Gox may select their chosen cryptocurrency exchange and register as a user.

Almost ten years after an attack forced the platform to close, creditors of Mt. Gox were offered the choice of receiving payments in Bitcoin, cash, or Bitcoin Cash. Depending on the decisions made by the authorized users, the process could make the frozen crypto assets liquid again.

Mt. Gox’s Largest Creditors Choose Payout Strategy That Prevents BTC Sell-Off

According to reports in February this year, the two largest creditors of Mt. Gox have chosen to have their bankruptcy claim paid out mostly in Bitcoin .

As a result, the defunct New Zealand-based cryptocurrency exchange Bitcoinica and MtGox Investment Funds (MGIF), which collectively make up about a fifth of all Mt. Gox claims, will be paid 90% of their collectible funds, which is equal to about 21% of the amount they had locked on the platform in 2014 when it was hacked.

By choosing the first alternative, they may allay long-standing concerns among Bitcoin owners that a wave of concurrent liquidations linked to Mt. Gox bankruptcy recoveries could lower the price of Bitcoin.

The trustee in charge of the bankruptcy estate would probably have been forced to sell off a sizable percentage of Mt. Gox’s recovered Bitcoin holdings in order to satisfy all the currency requests had these two creditors chosen to accept the payout in fiat.

After Mt. Gox was breached in 2014, creditors have been waiting almost ten years to receive some of their money back. Hackers made off with 850,000 BTC, which at the time was worth $460 million. Following the breach, Mt. Gox had roughly 142,000 bitcoins (BTC), 143,000 bitcoin cash (BCH), and 69 billion yen (JPY).

MGIF Intends to Keep Returned Bitcoin

However, on March 9, the Mt. Gox Investment Fund announced  it intends to keep the assets owed to it in September.

The fund sued Mt. Gox, which filed for bankruptcy in 2014. The article also stated that this year, rather than waiting for all legal matters to be completed, the company decided to pay up early.

According to the unidentified source, the fund would receive 90% of the collectible items. This will be divided roughly 70% into Bitcoin and 30% into cash. However, there were no specifics regarding how much Bitcoin was involved.

The Timeline

Launched in 2010 by programmer and businessman Jed McCaleb, Mt. Gox was a small community of enthusiasts and developers and Bitcoin was still in diapers. However, Mt.Gox quickly became one of the first exchanges to allow users to purchase and sell Bitcoin for fiat currencies, and has soon gained a lot of support from early adopters and dealers.

McCaleb sold Mt. Gox in 2011 to French software engineer Mark Karpeles, who later relocated the business’s headquarters to Tokyo and started to grow its operations by opening up new markets and integrating support for more cryptocurrencies.

Mt. Gox abruptly stopped all withdrawals from its site in February 2014, citing technical problems and security difficulties. When the business’ website went down, suspicions started to spread that the exchange had been hacked. A few days later, Karpeles acknowledged at a press conference in Tokyo that Mt. Gox had been hacked and that thieves had taken 850,000 Bitcoin, which at the time was worth $450 million.

The assets of Mt. Gox were seized by Japanese authorities when the company filed for bankruptcy protection there in March 2014. Karpeles was eventually detained and accused of fraud and theft.

An agreement to provide payments for the Mt. Gox hack victims was authorized by a Japanese court in 2018 after several years of legal disputes and investigations.

The remaining Bitcoin needed to be converted into cash as the first action in the plan. The trustee raised more than $400 million by selling approximately 35,000 Bitcoin and 34,000 Bitcoin Cash on several cryptocurrency platforms.

The trustee announced the implementation of a new system to enable creditors to submit claims for the remaining cash in March 2020. Creditors had to provide evidence of their claim, including records of transactions, bank statements, and identification documents.

What Have We Learned?

The idea of openness and accountability is a key lesson from the Mt. Gox disaster. Many detractors claimed that the exchange’s opaqueness and operational secrecy contributed to the hack’s severity. Reputable cryptocurrency exchanges are currently comparatively more transparent, with some providing audits and reports on a regular basis to reassure investors and clients.

The necessity for greater risk management and financial controls was another lesson to be learned from the Mt. Gox catastrophe. Many exchanges in the early days of Bitcoin were run by entrepreneurs and tech enthusiasts with little to no background in finance or risk management.

Last but not least, the Mt. Gox breach made it clear that the Bitcoin market needs better regulation and monitoring. Since the collapse, regulators from all over the world have suggested new laws and guidelines to safeguard traders and investors, including more stringent Know Your Customer and Anti-Money Laundering standards. While some might consider these rules to be overly restrictive, others think they are essential to stop fraud and protect customers.