Mt. Gox Creditors Seek to Remove Exchange From Bankruptcy
A group of major creditors of Japanese cryptocurrency exchange Mt. Gox have filed a court petition urging that the disgraced and now-defunct exchange be removed from bankruptcy, in order to prevent its CEO Mark Karpeles from walking away with a billion dollar profit.
According to a report by Financial Times, the legal bid to move the exchange out of bankruptcy and into civil rehabilitation comes in the wake of Bitcoin’s recent price surge, after which the 202,185 Bitcoins held by the Mt. Gox trustee have risen to approximately $3 billion in value.
Mt. Gox was one of the world’s most popular Bitcoin exchanges before it was shut down in February 2014 following claims that its own Bitcoins and those belonging to customers had all disappeared from the exchange’s digital vaults. Initially labelled a hack, the case remains unresolved to this date. However, approximately 202,185 Bitcoins were later discovered in one digital wallet, which are now in a trustee’s custody.
Following its scandal-ridden collapse in 2014, and CEO Karpeles’ arrest on grounds of embezzlement, fraud, and data manipulation, Mt. Gox’s case went on trial in Japan earlier this year. Karpeles has repeatedly denied all allegations.
Outrage ensued last month among creditors after it was revealed Karpeles stood to walk away from the trial as a multibillionaire, owing to a technicality in Japanese bankruptcy law. Currently, if Mt. Gox maintains its bankrupt status, the assets in the trustee’s custody will be liquidated, and the payouts creditors receive will be in accordance with the exchange rate at the time the bankruptcy proceedings began in 2014 – roughly $440 per Bitcoin, which is nothing in comparison to the current price of over $17,000 per Bitcoin. Karpeles, by comparison, will stand to collect a massive profit after liabilities have been paid off.
The latest petition, filed by creditors this month, urges the court to change the exchange’s bankrupt status, now that its assets have grown bigger than its liabilities – the Bitcoins in the trustee’s custody are worth well over $3 billion, at Bitcoin’s current price.
If the current liquidation plan is pursued, the sale of the Bitcoins (at their current rate) would allow Mt. Gox to meet all liabilities and, in accordance with Japanese law, permit Karpeles to walk away with a fortune of over $2 billion.
The creditors’ most recent petition, however, requests the court to consider changing the exchange’s status from bankruptcy to civil rehabilitation. This would mean that Mt. Gox’s Bitcoins would not need to be sold – rather, they will be fully distributed among claimants on a pro-rata basis.
The petition is currently under the court’s consideration, and a decision has yet to be announced. FT reports that the entire case hinges, according to creditors, on a “battle of experts”, and it remains to be seen who will win out – the team behind the bankruptcy trustee, lobbying for the current liquidation plan on grounds of its stability, or the team hired by creditors, arguing for the quicker and more just solution of changing the exchange’s bankrupt status.