BACKGROUND
Mt. Gox was a bitcoin exchange based in Tokyo, Japan. Within 4 years of launching it was handling over 70% of all bitcoin transactions worldwide, was the largest bitcoin intermediary and became the world’s leading bitcoin exchange. However, in April 2014, the company began liquidation proceedings. Mt. Gox announced that approximately 850,000 bitcoins belonging to customers and the company were missing, and likely stolen, the value of which was more than $450 million. Many questions remain unanswered. 507 Capital has been involved with the case since 2016 and we want to work with creditors to help them understand the facts of the case and what it means to sell their claim.
CURRENT STATUS & PROCESS
- In 2018 the bankruptcy case of MtGox was changed to Civil Rehabilitation. Civil Rehabilitation is a new legal
proceeding which requires the refiling of all customer accounts (and other creditor claims). - Claims were accepted/rejected as of March 2019
- All proceedings will be based in Tokyo, Japan.
CREDITOR MEETINGS
In insolvency proceedings, creditors have certain rights for information from the bankrupt estate. One of the most basic rights is the right to attend creditor meetings where you will be given updates on the administration of the estate, estimated recoveries per claim, and a timeline for the reorganization.
COINLAB
The current largest issue surrounding the estate is the multi-billion dollar claim filed by CoinLab for damages arising from their breach of contract. Although we think it is likely that CoinLab will be entitled to some contractual damages, we believe their claim amount is drastically over inflated. Therefore we anticipate serious and prolonged litigation. The process of litigating, rejecting, and appealing claim amounts can take periods exceeding several years.
LATEST CASE UPDATE
Following the last creditor meeting, the three most important updates on the case are:
- Customer account claims have been accepted/rejected. If you filed a claim you should have received a confirmation email from the trustee’s office informing you of the result of your claim.
- CoinLab litigation is ongoing. We expect the claim to be rejected and significantly reduced, but we also expect this decision to appealed.
- The trustee is considering additional options for exchanges to deliver BTC at the end of the Civil Rehabilitation proceedings.
EVERYTHING YOU SHOULD KNOW IF YOU HAVE A CLAIM
1. WHY SELL (AND WHY NOT) TO SELL YOUR CLAIM
There are multiple reasons to sell your claim. The overarching reason is because you need to monetize this asset for cash to spend somewhere else.
Here are some reasons why people have sold their claim in the past:
- MtGox has been huge headache and administrative time drain.
- They desired to reinvest their funds directly in BTC to leverage movement in price.
- They desired to purchase a different asset, such as a home or put their child in private school.
- They want to invest funds directly in their own business or start up.
One of the biggest misconceptions is that if you are a believer in Bitcoin you shouldn’t sell your claim. In reality, selling your claim for cash now and investing directly in Bitcoin will produce a greater exposure to Bitcoin long term, rather than indirectly holding Bitcoin through a MtGox claim. This is especially true if and when the trustee sells additional coins from the estate.
Selling a claim does not make sense for everyone, though. If you do not need cash or have a better investment opportunity, then keeping your claim is probably the best option.
2. HOW TO SELL YOUR CLAIM
Selling your claim is a fairly straight forward process consisting of two steps.
- The first step is signing a claims sale agreement.
- The second consists of a claims transfer with the trustee.
We’re happy to discuss this process further with parties interested in selling their claim. Please email [email protected]
3. HOW LONG IS THE PROCESS? WHAT NEXT?
The process of selling a claim takes approximately two weeks. Paperwork by the seller can be accomplished on day one. Most of the selling process consists of waiting for the Civil Rehabilitation trustee to review the documentation. This can take 10-15 business days. If you would like to sell your claim, begin by reaching out with your name and claim number to [email protected]. We will need verification of acceptance by the trustee, which is available in your online MtGox, or, in your acceptance email from the trustee if you filed offline.
MISC / ADDITIONAL Q’S YOU MAY HAVE
- Do we get any of the surplus?
Under Civil Rehabilitation customers will get pro-rata shares of the holdings of their original accounts. This means that BTC will be returned to the original owners of BTC which were held in the customer accounts. You will not receive all of your BTC (A claim holder who had 10 BTC in his or her account when MtGox shut down will not receive 10BTC), but you will receive a pro-rata share of what BTC is available.
- Is it really the case that surplus would go to the shareholders as 3/4 of all assets were lost during their responsibility (the court and the trustee were not clear about this)
This is the case under Japanese bankruptcy law, but not the case under Japanese Civil Rehabilitation law. Under the Civil Rehabilitation proceedings customers should receive their full cash claims and should receive a pro-rata share of the Bitcoin.
- And what about Bitcoinica? what is the relation with MTGOX?
Bitcoinica was a New Zealand based cryptocurrency exchange similar to MtGox. Because MtGox was such a dominant exchange at the time it went bankrupt, Bitcoinica held some of their customer coins on MtGox in an account. So, Bitcoinica is a large MtGox creditor. Bitcoinica itself is bankrupt itself in New Zealand, so the claim is actually owned by the Bitcoinica liquidating estate.
4. WHAT ARE THE TAX IMPLICATIONS OF SELLING MY CLAIM?
For general questions regarding MtGox claim and general crypto taxes, please feel free to email [email protected] for general information.
Have another question? Email us at [email protected] and we’ll add it to the FAQ!
