The recent 400% increase in the price of Bitcoin has caused Mt Gox’s assets to significantly exceed its liabilities, sparking a new debate among creditors regarding the management of the defunct exchange’s bankruptcy.
A new legal action has recently been launched by a group of creditors pursuing what could be a vast sum of capital in Bitcoin from the collapsed Mt Gox Exchange. If successful, the action could potentially remove the company from bankruptcy and disburse more than $3 billion among Mt Gox depositors and prevent the former chief executive of the platform from capitalizing from the debacle.
The legal move is pushing through uncharted legal ground in Japan, and is driven the recent dramatic rise in the value of Bitcoin. The liquidation process of the Mt Gox platform began when the value of Bitcoin was nowhere near the current price of nearly $17,300 per coin.
Creditors that were involved in the launch of the Mt Gox trading platform have stated that the unforeseen Bitcoin value price surge since the collapse of the platform in 2014 has “fundamentally changed the financial mathematics” of the liquidation process and bankruptcy, as the assets of the company now dwarf its liabilities.
The former chairman of the Mt Gox exchange, Mark Karpelès is currently fighting embezzlement charges in Toky. Karpelès is in control of the company that owns more than 90% of Mt Gox and, at the current price of Bitcoin, would potentially receive his share of the surplus after Mt Gox meets all of its liabilities. This theoretical fortune is worth well in excess of $2 billion USD.
At least four major creditors have launched a petition that asks the court in charge of the Mt Gox bankruptcy to consider moving the exchange into a state of civil rehabilitation. A change into this status would mean that Mt Gox’s current assets would not be liquidated, but would instead be distributed among claimants on a pro-rata basis.
The petition is currently under consideration by the court, which is assessing the merits of the proposition. The creditors responsible for the legal action have stated that they believe the outcome of the movement is likely to hinge upon a “battle of experts”- parties working for the creditors, who claim their solution is far more expedient and just, and those working for the bankruptcy trustee, who posit that the current liquidation strategy is more stable.
Mt Gox is one of the most widely-known exchange disasters in the history of Bitcoin, and at the time of collapse was the world’s largest trading platform by volume. More than 850,000 Bitcoin owned by the platform itself and its customers disappeared without a trace from the company’s wallets. Speculation regarding the occurrence is still rampant in the cryptocurrency community today- many investigators assume the event to be a cyber-heist, but the case remains unsolved.
A relatively small stash of 202,185 Bitcoin was discovered in one of the exchanges wallets, and due to the subsequent surge in value, this stash has become the obsession of creditors determined to claw back the losses incurred as a result of Mt Gox’s collapse.
In the current terms of the Mt Gox liquidation plan, roughly 25,000 former creditors that filed claims will eventually receive a portion of the final payout in either fiat currency or Bitcoin. The exchange rate offered by the current plan delivers a payout of ¥50,000 per Bitcoin, which is the market rate set in accordance with Japanese law at the time Mt Gox bankruptcy proceedings began in 2014.
The creditors responsible for the new lawsuit claim that this exchange rate is the primary point of injustice in the current liquidation strategy. The trustee managing the Mt Gox bankruptcy has recognized a total of roughly ¥58bn worth of liabilities, or roughly ¥46bn at the 2014 Bitcoin market rate.
If the price of Bitcoin continues to remain stable, all of the liabilities of Mt Gox could potentially be paid off with just 29,000 BTC, which would leave more than 173,000 BTC left to be distributed among the shareholders of Mt Gox- primarily Karpelès himself.
Creditors have suggested that should such a sum be shifted to Karpelès, he would likely become the target of a massive number of civil lawsuits from Mt Gox customers. With some speculators proposing a 2018 Bitcoin price of $100,000, however, it’s clear that this legal outcome will set a precedent for future Bitcoin related bankruptcy events.