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Another great piece by Matt Levine. I think legally the customers are only entitled to what they invested, but at the same time, Mt. Gox should not get that as

Another great piece by Matt Levine. I think legally the customers are only entitled to what they invested, but at the same time, Mt. Gox should not get that as it was profits from nefarious gains. So I think that money should go to the government as a penalty. Make the customers whole, zero out Mt Gox debt and obligations, and rest to the government.

panarky 9y ago
I'm curious if the same bankruptcy principles apply outside of cryptocurrency exchanges. Let's say I owned 1000 shares of Google five years ago, and my broker went bankrupt. At the time, Google was trading at $333 per share. Today the court liquidates the broker's assets to distribute to creditors, and Google is trading at $1050 a share now. The court wouldn't use Google's five-year-old share price and let the broker keep the rest. Instead, the court would distribute the actual proceeds of the liquidation. Why is it any different with Mt. Gox? Why wouldn't the court sell the bitcoin at current market prices and distribute the proceeds among the creditors?
- umanwizard 9y ago
  > Naturally, the court wouldn't use Google's five-year-old share price, they'd use the actual proceeds upon liquidation. Do you have a citation? I'm not an expert on Japanese bankruptcy law so it's not obvious to me.
- avs733 9y ago
  That is also the underlying problem, they DON'T have enough bitcoin to do exactly that... More importantly (note: IANAL), the bitcoins converted, by law, to a specific valuation on a set date when the assets are frozen. Per the court, years ago, the amount owed to each creditor was set in the court's working currency (i.e., the Yen) and the court doesn't deal in Bitcoins. In your example, during the bankruptcy process, they would set a date of valuation and you would be entitled to the value of the shares on the date when the bankruptcy was set. Future lost profits are not the purview of the bankruptcy court.
- kens 9y ago
  Customer assets are separate from brokerage assets (due to rule 15c3-3), so if a broker goes bankrupt, your stock shares are unaffected. If securities were lost due to theft or fraud, the SIPC protects them up to $500,000. To (sort of) answer your question, the SIPC guarantees the number of shares, not the cash value. http://www.finra.org/investors/alerts/if-brokerage-firm-closes-its-doors http://www.finra.org/investors/alerts/if-brokerage-firm-clos...
conanbatt 9y ago
Why does the government get anything at all, what did those guys do.

panarky 9y ago

I'm curious if the same bankruptcy principles apply outside of cryptocurrency exchanges. Let's say I owned 1000 shares of Google five years ago, and my broker went bankrupt. At the time, Google was trading at $333 per share. Today the court liquidates the broker's assets to distribute to creditors, and Google is trading at $1050 a share now. The court wouldn't use Google's five-year-old share price and let the broker keep the rest. Instead, the court would distribute the actual proceeds of the liquidation. Why is it any different with Mt. Gox? Why wouldn't the court sell the bitcoin at current market prices and distribute the proceeds among the creditors?

umanwizard 9y ago
> Naturally, the court wouldn't use Google's five-year-old share price, they'd use the actual proceeds upon liquidation. Do you have a citation? I'm not an expert on Japanese bankruptcy law so it's not obvious to me.
avs733 9y ago
That is also the underlying problem, they DON'T have enough bitcoin to do exactly that... More importantly (note: IANAL), the bitcoins converted, by law, to a specific valuation on a set date when the assets are frozen. Per the court, years ago, the amount owed to each creditor was set in the court's working currency (i.e., the Yen) and the court doesn't deal in Bitcoins. In your example, during the bankruptcy process, they would set a date of valuation and you would be entitled to the value of the shares on the date when the bankruptcy was set. Future lost profits are not the purview of the bankruptcy court.
kens 9y ago
Customer assets are separate from brokerage assets (due to rule 15c3-3), so if a broker goes bankrupt, your stock shares are unaffected. If securities were lost due to theft or fraud, the SIPC protects them up to $500,000. To (sort of) answer your question, the SIPC guarantees the number of shares, not the cash value. http://www.finra.org/investors/alerts/if-brokerage-firm-closes-its-doors http://www.finra.org/investors/alerts/if-brokerage-firm-clos...

conanbatt 9y ago

Why does the government get anything at all, what did those guys do.