Outrage at Bitcoin Exchange Mt. Gox Expenses as Creditors Prepare to Fly to Japan

By
July 6, 2014

Mt. Gox creditors were outraged to learn from newly released court documents that Mt. Gox, once the largest bitcoin exchange and now in liquidation, paid, in May 2014, Tibanne, the parent company of Mt. Gox, $200,000 for services rendered. More shockingly, out of approximately $30 million Mt. Gox claimed on the 28th of February 2014 it still holds, only $7 million remain.

It is not known what happened to these creditor’s funds of $20 million while Mt. Gox was under the supervision of the Liquidator and the Japanese Court. If they have been spent, this translates to incredible expenses of $4 million per month. Some of these expenses, Mt. Gox creditors argue, have been unnecessary and wasteful.

Currently, Mt. Gox creditors are receiving a fancy, double sealed, postcard, which merely re-iterates what is a very old announcement and readily available on the Mt. Gox website. There are suggestions that this redundant action alone has cost $100,000. Considering that there is yet no claim form and claims are to be filed by 28 November 2014, to be investigated by 25th of February 2015, and remaining funds returned to creditors at an unspecified date, at this rate of expenditure, Mt. Gox creditors are likely to receive little of the remaining $7 million and 200,000 bitcoins.

 

The Mysterious $200,000 Payment

Tibanne is solely owned by Mark Karepels, the CEO and 88% shareholder of Mt. Gox, and is currently in litigation in US courts facing claims of fraud and gross negligence by Mt. Gox creditors. A proposed settlement in that case does not affect the continuing claim against Tibanne and Mark Karpeles, but there have been no recent developments.

Much of the document is redacted with no explanation for the redaction, which many consider to be a highly unusual practice in regards to civil court documents as they are meant to be fully disclosed to interested parties. The Mt. Gox Liquidator, Nobuaki Kobayashi, has not responded to numerous requests for comments. While Mark Karpeles seemed to be unaware of the court document or the payment in two tweeter replies asking for comments.

From the document, it can be ascertained that Tibanne had to hire a company to perform certain services for Mt. Gox. It is not known what services were rendered, when, by who or why. Due to a contractual clause, however, Tibanne and by proxy Mt. Gox, still remained liable to pay for the service despite no longer needing the services. Sources suggest that the Liquidator was able to negotiate this payment of $200,000 for the month of March as settlement and thus terminate the contract without further liability.

 

A Wall of Silence

The trustee, Nobuaki Kobayashi, has communicated little with the creditors, with some more prominent creditors complaining that he was uncooperative and secretive. This continues a practice of complete silence in regards to anything related to Mt. Gox. Exactly five months after Mt. Gox unilaterally decided to stop all withdrawals from the exchange, while continuing to allow deposits and trading, no evidence of theft has been presented either from a break in, transaction malleability, inflated accounts, or in any other way.

Sources suggest that this level of uncertainty of what exactly happened transpires right up at the top of Mt. Gox. Mark Karpeles gave Mt. Gox creditors some hope with a statement he made on the 25th of February 2014 that the coins were only “temporarily unavailable.” He has not publicly retracted that statement, nor, sources suggest, in private. This has led to a proliferation of theories, chief amongst them that the government seized the 650,000 bitcoins in order to investigate Silk Road vendors, but it may just as well be the case that he is referring to strong suspicions in regards to who the individual hackers may be and is perhaps expressing hope that an alleged ongoing police investigation on the claimed hack may recover the coins. We are unable to confirm however what exactly Mark Karpeles meant as he has not clarified his statement. Sources further suggest that it is not possible at this current point in time to deny or confirm the seized coins theory, leaving creditors in limbo.

The Creditor Meeting

Creditors might finally receive some answers on the 23rd of July 2014 when a creditor meeting is to be held at Tokyo District Court Place for Creditors’ Meeting Number 1 at 1.30 pm. The purpose of the meeting, according to the postcard titled Notice of Commencement of Bankruptcy Proceedings, is to report on the status of the property. As we learned today, the fiat remaining assets of Mt. Gox now amount to only $7 million. The bitcoin assets remain 200,000, although they recently moved for unexplained reasons on the 12th of June 2014. Some suggest that they moved because the Liquidator wished to ensure that the coins were outside of Mark Karepeles’ control. Sources however suggest that the 200,000 bitcoins were handed over to the liquidator in March 2014 via a proxy pursuant to a court order.

Hopefully clearer answers can be received on the 23rd of July from the Liquidator and Mark Karpeles, who is likely to attend. It is not clear how many of the creditors will make the expensive trip to Japan, but this is likely to be one of the last chances for full answers. The process then moves to decisive filing of claims and assessments, with little room for changing the overall course, especially in regards to that billion dollars question.

 

Just What Exactly Happened to the Coins?

No one knows or is willing to say publicly, not the public prosecutor or the police investigator, not the blockchain detectives, nor those in control of Mt. Gox now and in the past. Sources suggest that no public comments from players in the Mt. Gox saga are forthcoming because they don’t know what exactly happened and have just as little concrete information as everyone else or are unwilling to comment either in private or public, due to potential legal complications. No information was forthcoming in regards to the alleged police investigation.

This puzzling mystery, therefore, continues to befuddle. That might change on the 23rd of July when finally the creditors face, for the first time, the individuals responsible for withholding their assets for the past five months. The layout of the meeting is not clear, but it is probable that the many angry creditors who will attend will have the chance to ask questions and learn of the state of the assets as well as the process to be followed to recover a portion of the ever dwindling remaining funds.

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