Mt.Gox Releases Policy to Repay Creditors in BTC and BCH
Mt. Gox is a Japanese bitcoin exchange that suspended trading in 2014 and subsequently filed for bankruptcy protection. That same year, the company liquidated its assets as well. The main driver behind the company’s financial troubles is the disappearance of about 850,000 bitcoins valued at over $450 million. Although 200,000 coins have been found, it has done little to mitigate the impact.
In an attempt to keep its company in business, the platform released a Revised Basic Policy for Preparing a Rehabilitation Plan. As the platform makes clear, the plan is an outline and a “proposal as of this point in time.” The plan is directed toward creditors and requests that creditors reach out with their opinions on the article.
Mt. Gox Rehab Plan
Here are the plan’s main highlights:
A Simple Plan and Certain Implementation
First, the platform discusses its interest in keeping the plan simple and mentions that its implementation should have a high degree of certainty. The deadline for submitting the completed plan is February 14, 2019. The platform further states that:
“in order to ensure payment to creditors, we are of the opinion that the rehabilitation plan should contain a plan for implementation which is both highly certain and realistic, considering rehabilitation proceedings practices in Japan.”
Shareholders Receive No Distribution
Second, although creditors seem to receive payments under the plan, no such distributions will be made to shareholders. The platform states that because it cannot return all BTC deposited by creditors, “all assets of Mt. Gox should be distributed to creditors and not to shareholders.”
Creditors Will Receive BTC and BCH Instead of Cash
Third, the platform sees it appropriate to repay creditors that had deposited BTC with BTC and BCH and not cash. The reason, as the company identifies, is:
“because making payments to BTC creditors in BTC and BCH is the most simple and efficient way, minimizing transaction costs such as bank fees.” And “if payment is to be made in cash, it will be necessary to exchange a large amount of BTC and BCH for fiat currency, which may result in the decline of the price of BTC.”
The price of BTC and BCH also fluctuate rapidly, making it difficult to determine when selling is best. There have been some redline comments on this matter from Mt. Gox’s legal team. The redline states that it may be best to set exchanges so creditors have accounts or can open them easily. The redline also adds that when it comes to altcoins, the number of exchanges dealing with them should be limited and that it is unrealistic to repay BTC creditors in altcoin. Thus altcoin should be exchanged to cash and paid to creditors.
Full Payment Goes to Monetary Creditors
Fourth, monetary creditors are to receive full payment:
“of the amount which they are to be paid in the bankruptcy proceedings. Specifically, they will receive full repayment to the degree which has been approved in the bankruptcy proceedings.”
In this scenario, the amount paid to BTC creditors may decrease. In redline, the report also notes that:
“We think it desirable that cash be sent to the accounts of the exchanges, as chosen by the creditors.”
Creditors Will Receive First Payment Promptly after the Approval and confirmation of the Rehabilitation Plan – Either May or June 2019
Fifth, as the plan mentions, creditors have been waiting for payment for four years and as a result, they should receive payment as soon as possible.
Any Residual Assets or New Assets Found Will Prompt Additional Payments and Additional Investigation of Lost BTC Implemented
Sixth, the plan states that it is expected that certain assets will be reserved at Mt. Gox and will be distributed after disputed claims are resolved. As for additional payments, it is important to consider a scheme under:
“which additional payments should be made by fixing the amount of the non-fixed assets/debts by transferring them to third parties, instead of waiting for such amounts to be fixed.”
The platform is also implementing an investigation for the recovery of lost BTC at the expense of the platform.
Sponsors Will Not Be Selected in Principle When Advantageous to Creditors
Seventh, the platform does not require a sponsor to supplement its creditworthiness or to continue operations. The platform has already suspended its business. However, the platform also does not “intend to completely reject the option of finding a sponsor” and if selected, it would not be a sponsor who is advantageous to creditors and would not be an obstacle to early payment.
Introducing a System Allowing Creditors to Obtain Trading Records
Finally, the platform is looking to implement a system that allows creditors to obtain their trading records. The platform states:
“we are going to ask the trustee to take measures such as the introduction of systems which allow us to obtain their trading records.”
Again, keep in mind that this plan is a proposal – it is certainly subject to revision until its adoption.