9 ms·

Bankrupt Mt. Gox may soon be able to pay its creditors

104 points by Nitishshah700 9y ago

Simulacra 9y ago
I think the obvious thing to do is sell the bitcoins, pay off the debt, make account holders whole again, and then figure out what to do. This seems like a no-brainer.
- advisedwang 9y ago
  Except that bitcoin doesn't have $400 million of liquidity. If you sold them you'd get way less than the current price suggests. I doubt many creditors would be willing to accept bitcoin directly.
  - Simulacra 9y ago
    So does that mean a gradual sell off? Disbursement and sale to lots of different entities? I'm just not clear why there would be any lack of movement on this.
    - flyingfences 9y ago
      There's no (or rather, very slow) movement because it's a legal proceeding, not just a technological and economic challenge.
  - sp332 9y ago
    The exchanges don't represent the whole market for bitcoins. In 2015, the US Marshals auctioned off tens of thousands of bitcoins seized from Silk Road accounts. The price on the exchanges went up for a few days around the auction, but recovered quickly afterward.
  - orblivion 9y ago
    Maybe they could just transfer the bitcoin directly to the creditors.
  - EmielMols 9y ago
    I imagine it would be easy enough to - at a discount - sell all the bitcoins to a (single) other party and have them sell the coins over time. Don't know if many entities would want to take such a position, but there are probably at least some. If mtgox were still operational, they would probably take a loan (in yen) with the btc as collateral, if they needed the amount of money on a short notice (and provided they really owned the bitcoin by that exchange).
    - patio11 9y ago
      they would probably take a loan (in yen) with the btc as collateral Do you have a suggestion as to who in Tokyo has 70 billion yen which they'd like to loan to a bankrupt entity owned by an accused embezzler whose main line of business was operating an international money laundering operation, with security being a hyper-volatile token with dubious liquidity?
      - Simulacra 9y ago
        You mean besides the banks that made the same type of investments and exchanges after the U.S. banking crisis? Not to mention hedge funds.
  - kentt 9y ago
    Are you assuming that mtgox would sell it as fast as possible and drive the markets down as much as possible? They've been in debt for years, surely taking a month to sell off the Bitcoin would not be unreasonable. Additionally large orders are not always done on the open market but are arranged privately. It is just as reasonable to assume they could sell them at a premium to an interested party who didn't want to drive up the market unnecessarily as the opposite which is the only one I ever see claimed. If anything, with the rising price, a premium seems more likely.
  - Animats 9y ago
    Bitcoin supposedly has a $45 billion market cap, and you can't liquidate 1% of that without crashing the price? If that's the case, the market cap is totally fake. What would happen to Bitcoin if the Mt. Gox trustee sold $4 million a day of Bitcoins for 100 days?
    - sp332 9y ago
      1% seems like a lot. Could you liquidate 1% of US dollars all at once? Or gold or... anything else really?
      - Animats 9y ago
        Liquidating 1% of a Fortune 500 company usually isn't that big a deal. Big funds do it routinely. Liquidating 0.1% in a day is nothing. The problem with the Bitcoin world is that the "exchanges" are so cash-weak. They're not just exchanges; they're exchanges, brokers, and depository companies all in one. In real finance, those functions are separated. The NYSE has no stake in any transaction.
        ryanmarsh 9y ago
        We enacted Glass–Steagal specifically for reasons like this correct? I can't believe I didn't see this sooner. I wonder if Coinbase will have to divest GDAX once regulation catches up.
        dmurray 9y ago
        > We enacted Glass–Steagal specifically for reasons like this correct? Not really. Glass-Steagall separated investment banks from commercial banks. There is approximately no one fulfilling the role of commercial bank in bitcoin - no one taking bitcoin deposits and using them to underwrite bitcoin mortgages. Generally exchanges, trading firms and brokers do not have to be separate in the US financial system. For example CME, the largest futures exchange, owns a small trading firm called GFX. IEX operates as both an exchange and a broker.
        9y ago
  - Obi_Juan_Kenobi 9y ago
    Those coins would be sold at auction, not dumped onto exchanges. The Silk Road coin auctions didn't affect the price too much. Parties buying large lots at auction probably aren't doing so to dump the coins on exchanges right away. Yes, it creates some selling pressure, but the larger significance is as an event. And events in Bitcoin that 'should' be bearish have a way of affecting price in unexpected ways. Busting the Silk Road started the November 2013 bubble, a 30,000 coin market sell finished off the subsequent bear market, etc.
- xiphias 9y ago
  I'm not sure everybody wants to get 200000 BTC sold on the market (even the account holders). It would be crazy
  - emodendroket 9y ago
    Well, you know, half a loaf is better than none.
ggambetta 9y ago
Bitcoins have appreciated 10x since MtGox crashed and took mine. Getting back the dollar value the bitcoins had back then would still piss me off.
- emodendroket 9y ago
  More than getting nothing? The only reason this is even a possibility is the appreciation.
  - ne0n 9y ago
    If MtGox only had enough funds to cover 15% of deposits, and they paid back each creditor 15% of their claim a year ago, the creditor could have bought Bitcoin with what was refunded and be in the same situation now. Instead, they seem to be dragging it out. I think most creditors would rather have something last year than nothing right now. Additionally, there's no upside for creditors if Bitcoin becomes $5,000.
    - otoburb 9y ago
      >>Additionally, there's no upside for creditors if Bitcoin becomes $5,000. It's funny you mention this, because from what I can understand of Japanese bankruptcy proceedings[1], any excess assets remaining after paying off creditors would probably be given to the MtGox shareholders, which primarily consists of Mark Karpeles[2] alone. I believe the term surfacing in other circles is "unjust enrichment"[3][4]. [1] I am not a lawyer. [2] https://en.wikipedia.org/wiki/Mark_Karpel%C3%A8s https://en.wikipedia.org/wiki/Mark_Karpel%C3%A8s [3] http://blogs.lawyers.com/attorney/bankruptcy/recovering-through-unjust-enrichment-aka-restitution-21643/ http://blogs.lawyers.com/attorney/bankruptcy/recovering-thro... [4] http://scholarship.law.cornell.edu/facpub/1/ http://scholarship.law.cornell.edu/facpub/1/
      - fjdlwlv 9y ago
        After paying back creditors what they are owed, or after paying back a discounted amount?
stereo 9y ago
How come the debt is in Yen and not in bitcoin?
- flyingfences 9y ago
  I'm sure that the creditors would love to be paid back the full XBT amount that they lost, but since it's a legal proceeding they essentially have to operate in the currency of the realm which, given that Mt. Gox was a Japanese company, is JPY.
- patio11 9y ago
  Because Mt. Gox is a corporation organized under the laws of Japan. Corporations in Japan can own many things of value, such as hotels, laser printers, intellectual property rights, Alpha Black lotuses, swiss francs, and promises to be paid in the future... but all of these things exist, on their books, with a yen value next to them. In the event of a bankruptcy or civil rehabilitation (民事再生, which is what Gox is going through IIRC), creditors generally get paid out in yen, not in cement mix, even if the company only happens to own cement mix.
  - literallycancer 9y ago
    Yen value at the time of purchase? Does it get updated at any time? Surely 20 years old construction machines aren't worth as much now?
    - vmarsy 9y ago
      It's a well known subject in Accounting : Depreciation [1] [1] https://en.wikipedia.org/wiki/Depreciation https://en.wikipedia.org/wiki/Depreciation
- abritinthebay 9y ago
  Because currency describes the value. It's like MtGox was an apple storage facility and lost all your apples - you wouldn't get apples back, you'd get the value of those apples. Which is in a real currency.
ChuckMcM 9y ago
Wow, I'm surprised they wouldn't be selling coin at a slow rate to convert into cash at this point. Basically sell coin until the price drops below what is needed to clear debts, then wait, when it comes up some more sell some more, then wait. Repeat.
- zulln 9y ago
  That would assume it always gets back.
  - ChuckMcM 9y ago
    Not exactly, as the trustee it would make sense to consider all possible ways of making the creditors whole. And one would put down in their notebook "We have x BTC, if it was selling at $Y/btc each BTC we sold would get us z% closer to returning all the cash obligations." And then each time it reached $y you start selling, if it never reaches you are no different than you were to begin with, if it reaches it only for a short time, perhaps you can pay back some cash. Now if you're creditors will take BTC and sign off on any future claims, then you are golden. You trade them BTC at market value against all future claims.
Abundnce10 9y ago
Doesn't it seem like they should sell the amount of Bitcoins needed to pay off any debt in fiat and then distribute the remaining coins to each user proportionally based on the amount they had on the exchange? Then you're not flooding the marking with 200k Bitcoins. Also, MtGox users are losing substantial value in this deal since the value of a Bitcoin is pegged at $483 and they're now worth well over $2,500. MtGox shouldn't become solvent once they pay all Bitcoins owed at a $483 price, they should return the remaining value to each user proportionally. Doesn't this seem like the most logical/fair approach?
- judofyr 9y ago
  Converting all the claims to a single currency is the only logical approach. Keeping the claims separated leads to a bunch of difficult questions: - Should the BTC creditors only get money from the remaining BTC pool? - Assets (servers, offices etc) will be sold for Yen, should this money only be used to pay the Yen creditors? - Expenses are being used from the Yen pool at the moment. Does this mean Yen creditors would get less money? And let's not kid ourself: No one thinks about the value of Bitcoin in terms of "amount of BTC". Everyone converts it to dollars using the current exchange rate. It's not like there's a society where "50 BTC = big house", and now that you'll only get back 10 BTC (or whatever the ratio is) you can't buy that house anymore. You could argue about at what rate/date you should convert the BTC claims to Yen, but the only reason people complain now is that the price happens to be higher. I personally think it would be more fair to lock the price to the exchange rate when MtGox stopped trading. (Disclaimer: I have a 16k USD claim in MtGox)
  - brianpgordon 9y ago
    > 50 BTC = big house You're killing me. I'm pretty sure that back when BTC was worth in the single digits of USD I had that many BTC in my account. I must have sold them for a pittance. It's so painful to just read the above words. A lot of people must feel this way because ICOs seem to be attracting a strangely large amount of capital. I guess psychologically nobody wants to miss the next big thing.
    - 9y ago
bitJericho 9y ago
If anyone's looking for a new exchange, I'd suggest my own exchange http://bitcoinsexchange.itmustbetrue.com http://bitcoinsexchange.itmustbetrue.com
- anothercomment 9y ago
  You can pay for sex changes with bitcoin now? Woot!
  - bitJericho 9y ago
    Call 1-600-DOCTORB, the B is for bargain.
  - deleted 9y ago
    [deleted]
- corobo 9y ago
  What's the deal with the sunglasses guy on the homepage. I was going to just glance and leave but that's really caught my attention. Going by a reverse image search it looks like a semi-stock photo so it's probably not anyone involved but also the positioning is just so.. odd
ryanmarsh 9y ago
Selling that many coins could drop the price considerably, no?
ryanmarsh 9y ago
Glass–Steagal
delegate 9y ago
This appreciation in price has made a lot of shady people fabulously rich. While MtGox still has 200k BTC, the thief(s) went away with 650k BTC - now worth almost $2B - richer then most hot shot unicorn startup founders worshiped these days. If they ever get caught, they should be awarded some kind of prize - biggest and cleanest heist in the history of humanity. I mean, this is a proverbial "for $2 billion, would you create an anonymous transaction in the block chain?". (!?!) Then there are the drug dealers, the drug market admins who stole coins and all the other hacks, extortions, pump-and-dumps, etc. These shady people are now rich and are probably thinking about investing their money - into companies, politics, etc. They are joining all the other nouveaux riche from all over the world who made their money from corruption, arms trades and everything in between. Interesting times ahead indeed.
- rubber_duck 9y ago
  This is assuming everyone who acquired BTC held on to them to this point, I very much doubt that's the true for any scenario you mentioned except the MtGox. Also 650k BTC - could you ever cash that out at anywhere close to current price :|
  - adventured 9y ago
    > Also 650k BTC - could you ever cash that out at anywhere close to current price Instead you might cash it out at several times greater than the present price in a few years. It would be easy to drip 10k BTC into the market and liquidate several hundred thousand coins over the next year.
    - rubber_duck 9y ago
      >drip 10k BTC into the market and liquidate several hundred thousand coins over the next year. Really ? You could put 10k BTC on sell side per day and the market wouldn't collapse in a week or two ? From what I can see on this exchange : https://www.bitstamp.net/market/tradeview/ https://www.bitstamp.net/market/tradeview/ You could push it below 2k$ with less than 10k BTC, I'm assuming there are bigger exchanges - I'm not following BTC close - is there an aggregate of exchange bids on big exchanges ?

104 points by Nitishshah700 9y ago

I think the obvious thing to do is sell the bitcoins, pay off the debt, make account holders whole again, and then figure out what to do. This seems like a no-brainer.

advisedwang 9y ago
Except that bitcoin doesn't have $400 million of liquidity. If you sold them you'd get way less than the current price suggests. I doubt many creditors would be willing to accept bitcoin directly.
- Simulacra 9y ago
  So does that mean a gradual sell off? Disbursement and sale to lots of different entities? I'm just not clear why there would be any lack of movement on this.
  - flyingfences 9y ago
    There's no (or rather, very slow) movement because it's a legal proceeding, not just a technological and economic challenge.
- sp332 9y ago
  The exchanges don't represent the whole market for bitcoins. In 2015, the US Marshals auctioned off tens of thousands of bitcoins seized from Silk Road accounts. The price on the exchanges went up for a few days around the auction, but recovered quickly afterward.
- orblivion 9y ago
  Maybe they could just transfer the bitcoin directly to the creditors.
- EmielMols 9y ago
  I imagine it would be easy enough to - at a discount - sell all the bitcoins to a (single) other party and have them sell the coins over time. Don't know if many entities would want to take such a position, but there are probably at least some. If mtgox were still operational, they would probably take a loan (in yen) with the btc as collateral, if they needed the amount of money on a short notice (and provided they really owned the bitcoin by that exchange).
  - patio11 9y ago
    they would probably take a loan (in yen) with the btc as collateral Do you have a suggestion as to who in Tokyo has 70 billion yen which they'd like to loan to a bankrupt entity owned by an accused embezzler whose main line of business was operating an international money laundering operation, with security being a hyper-volatile token with dubious liquidity?
    - Simulacra 9y ago
      You mean besides the banks that made the same type of investments and exchanges after the U.S. banking crisis? Not to mention hedge funds.
- kentt 9y ago
  Are you assuming that mtgox would sell it as fast as possible and drive the markets down as much as possible? They've been in debt for years, surely taking a month to sell off the Bitcoin would not be unreasonable. Additionally large orders are not always done on the open market but are arranged privately. It is just as reasonable to assume they could sell them at a premium to an interested party who didn't want to drive up the market unnecessarily as the opposite which is the only one I ever see claimed. If anything, with the rising price, a premium seems more likely.
- Animats 9y ago
  Bitcoin supposedly has a $45 billion market cap, and you can't liquidate 1% of that without crashing the price? If that's the case, the market cap is totally fake. What would happen to Bitcoin if the Mt. Gox trustee sold $4 million a day of Bitcoins for 100 days?
  - sp332 9y ago
    1% seems like a lot. Could you liquidate 1% of US dollars all at once? Or gold or... anything else really?
    - Animats 9y ago
      Liquidating 1% of a Fortune 500 company usually isn't that big a deal. Big funds do it routinely. Liquidating 0.1% in a day is nothing. The problem with the Bitcoin world is that the "exchanges" are so cash-weak. They're not just exchanges; they're exchanges, brokers, and depository companies all in one. In real finance, those functions are separated. The NYSE has no stake in any transaction.
      - ryanmarsh 9y ago
        We enacted Glass–Steagal specifically for reasons like this correct? I can't believe I didn't see this sooner. I wonder if Coinbase will have to divest GDAX once regulation catches up.
        dmurray 9y ago
        > We enacted Glass–Steagal specifically for reasons like this correct? Not really. Glass-Steagall separated investment banks from commercial banks. There is approximately no one fulfilling the role of commercial bank in bitcoin - no one taking bitcoin deposits and using them to underwrite bitcoin mortgages. Generally exchanges, trading firms and brokers do not have to be separate in the US financial system. For example CME, the largest futures exchange, owns a small trading firm called GFX. IEX operates as both an exchange and a broker.
        9y ago
- Obi_Juan_Kenobi 9y ago
  Those coins would be sold at auction, not dumped onto exchanges. The Silk Road coin auctions didn't affect the price too much. Parties buying large lots at auction probably aren't doing so to dump the coins on exchanges right away. Yes, it creates some selling pressure, but the larger significance is as an event. And events in Bitcoin that 'should' be bearish have a way of affecting price in unexpected ways. Busting the Silk Road started the November 2013 bubble, a 30,000 coin market sell finished off the subsequent bear market, etc.
xiphias 9y ago
I'm not sure everybody wants to get 200000 BTC sold on the market (even the account holders). It would be crazy
- emodendroket 9y ago
  Well, you know, half a loaf is better than none.

ggambetta 9y ago

Bitcoins have appreciated 10x since MtGox crashed and took mine. Getting back the dollar value the bitcoins had back then would still piss me off.

emodendroket 9y ago
More than getting nothing? The only reason this is even a possibility is the appreciation.
- ne0n 9y ago
  If MtGox only had enough funds to cover 15% of deposits, and they paid back each creditor 15% of their claim a year ago, the creditor could have bought Bitcoin with what was refunded and be in the same situation now. Instead, they seem to be dragging it out. I think most creditors would rather have something last year than nothing right now. Additionally, there's no upside for creditors if Bitcoin becomes $5,000.
  - otoburb 9y ago
    >>Additionally, there's no upside for creditors if Bitcoin becomes $5,000. It's funny you mention this, because from what I can understand of Japanese bankruptcy proceedings[1], any excess assets remaining after paying off creditors would probably be given to the MtGox shareholders, which primarily consists of Mark Karpeles[2] alone. I believe the term surfacing in other circles is "unjust enrichment"[3][4]. [1] I am not a lawyer. [2] https://en.wikipedia.org/wiki/Mark_Karpel%C3%A8s https://en.wikipedia.org/wiki/Mark_Karpel%C3%A8s [3] http://blogs.lawyers.com/attorney/bankruptcy/recovering-through-unjust-enrichment-aka-restitution-21643/ http://blogs.lawyers.com/attorney/bankruptcy/recovering-thro... [4] http://scholarship.law.cornell.edu/facpub/1/ http://scholarship.law.cornell.edu/facpub/1/
    - fjdlwlv 9y ago
      After paying back creditors what they are owed, or after paying back a discounted amount?

stereo 9y ago

How come the debt is in Yen and not in bitcoin?

flyingfences 9y ago
I'm sure that the creditors would love to be paid back the full XBT amount that they lost, but since it's a legal proceeding they essentially have to operate in the currency of the realm which, given that Mt. Gox was a Japanese company, is JPY.
patio11 9y ago
Because Mt. Gox is a corporation organized under the laws of Japan. Corporations in Japan can own many things of value, such as hotels, laser printers, intellectual property rights, Alpha Black lotuses, swiss francs, and promises to be paid in the future... but all of these things exist, on their books, with a yen value next to them. In the event of a bankruptcy or civil rehabilitation (民事再生, which is what Gox is going through IIRC), creditors generally get paid out in yen, not in cement mix, even if the company only happens to own cement mix.
- literallycancer 9y ago
  Yen value at the time of purchase? Does it get updated at any time? Surely 20 years old construction machines aren't worth as much now?
  - vmarsy 9y ago
    It's a well known subject in Accounting : Depreciation [1] [1] https://en.wikipedia.org/wiki/Depreciation https://en.wikipedia.org/wiki/Depreciation
abritinthebay 9y ago
Because currency describes the value. It's like MtGox was an apple storage facility and lost all your apples - you wouldn't get apples back, you'd get the value of those apples. Which is in a real currency.

ChuckMcM 9y ago

Wow, I'm surprised they wouldn't be selling coin at a slow rate to convert into cash at this point. Basically sell coin until the price drops below what is needed to clear debts, then wait, when it comes up some more sell some more, then wait. Repeat.

zulln 9y ago
That would assume it always gets back.
- ChuckMcM 9y ago
  Not exactly, as the trustee it would make sense to consider all possible ways of making the creditors whole. And one would put down in their notebook "We have x BTC, if it was selling at $Y/btc each BTC we sold would get us z% closer to returning all the cash obligations." And then each time it reached $y you start selling, if it never reaches you are no different than you were to begin with, if it reaches it only for a short time, perhaps you can pay back some cash. Now if you're creditors will take BTC and sign off on any future claims, then you are golden. You trade them BTC at market value against all future claims.

Abundnce10 9y ago

Doesn't it seem like they should sell the amount of Bitcoins needed to pay off any debt in fiat and then distribute the remaining coins to each user proportionally based on the amount they had on the exchange? Then you're not flooding the marking with 200k Bitcoins. Also, MtGox users are losing substantial value in this deal since the value of a Bitcoin is pegged at $483 and they're now worth well over $2,500. MtGox shouldn't become solvent once they pay all Bitcoins owed at a $483 price, they should return the remaining value to each user proportionally. Doesn't this seem like the most logical/fair approach?

judofyr 9y ago
Converting all the claims to a single currency is the only logical approach. Keeping the claims separated leads to a bunch of difficult questions: - Should the BTC creditors only get money from the remaining BTC pool? - Assets (servers, offices etc) will be sold for Yen, should this money only be used to pay the Yen creditors? - Expenses are being used from the Yen pool at the moment. Does this mean Yen creditors would get less money? And let's not kid ourself: No one thinks about the value of Bitcoin in terms of "amount of BTC". Everyone converts it to dollars using the current exchange rate. It's not like there's a society where "50 BTC = big house", and now that you'll only get back 10 BTC (or whatever the ratio is) you can't buy that house anymore. You could argue about at what rate/date you should convert the BTC claims to Yen, but the only reason people complain now is that the price happens to be higher. I personally think it would be more fair to lock the price to the exchange rate when MtGox stopped trading. (Disclaimer: I have a 16k USD claim in MtGox)
- brianpgordon 9y ago
  > 50 BTC = big house You're killing me. I'm pretty sure that back when BTC was worth in the single digits of USD I had that many BTC in my account. I must have sold them for a pittance. It's so painful to just read the above words. A lot of people must feel this way because ICOs seem to be attracting a strangely large amount of capital. I guess psychologically nobody wants to miss the next big thing.
  - 9y ago

bitJericho 9y ago

If anyone's looking for a new exchange, I'd suggest my own exchange http://bitcoinsexchange.itmustbetrue.com http://bitcoinsexchange.itmustbetrue.com

anothercomment 9y ago
You can pay for sex changes with bitcoin now? Woot!
- bitJericho 9y ago
  Call 1-600-DOCTORB, the B is for bargain.
- deleted 9y ago
  [deleted]
corobo 9y ago
What's the deal with the sunglasses guy on the homepage. I was going to just glance and leave but that's really caught my attention. Going by a reverse image search it looks like a semi-stock photo so it's probably not anyone involved but also the positioning is just so.. odd

ryanmarsh 9y ago

Selling that many coins could drop the price considerably, no?

ryanmarsh 9y ago

Glass–Steagal

delegate 9y ago

This appreciation in price has made a lot of shady people fabulously rich. While MtGox still has 200k BTC, the thief(s) went away with 650k BTC - now worth almost $2B - richer then most hot shot unicorn startup founders worshiped these days. If they ever get caught, they should be awarded some kind of prize - biggest and cleanest heist in the history of humanity. I mean, this is a proverbial "for $2 billion, would you create an anonymous transaction in the block chain?". (!?!) Then there are the drug dealers, the drug market admins who stole coins and all the other hacks, extortions, pump-and-dumps, etc. These shady people are now rich and are probably thinking about investing their money - into companies, politics, etc. They are joining all the other nouveaux riche from all over the world who made their money from corruption, arms trades and everything in between. Interesting times ahead indeed.

rubber_duck 9y ago
This is assuming everyone who acquired BTC held on to them to this point, I very much doubt that's the true for any scenario you mentioned except the MtGox. Also 650k BTC - could you ever cash that out at anywhere close to current price :|
- adventured 9y ago
  > Also 650k BTC - could you ever cash that out at anywhere close to current price Instead you might cash it out at several times greater than the present price in a few years. It would be easy to drip 10k BTC into the market and liquidate several hundred thousand coins over the next year.
  - rubber_duck 9y ago
    >drip 10k BTC into the market and liquidate several hundred thousand coins over the next year. Really ? You could put 10k BTC on sell side per day and the market wouldn't collapse in a week or two ? From what I can see on this exchange : https://www.bitstamp.net/market/tradeview/ https://www.bitstamp.net/market/tradeview/ You could push it below 2k$ with less than 10k BTC, I'm assuming there are bigger exchanges - I'm not following BTC close - is there an aggregate of exchange bids on big exchanges ?