Bankrupt Mt. Gox may soon be able to pay its creditors | Hacker News Reader

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

qz.com

104 pointsNitishshah70080 comments

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?

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)

> 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.

It's like baseball cards and comic books. If everyone held on their btc, they wouldn't be worth as much as they are. You may as well grumble that your lotto ticket didn't end up worth a million dollars

Since when is it beneficial for multi million (billion?) companies to act in the interest of their customers? This isn't communism.

You confuse "communism" with the rule of law, which capitalist societies follow

> the rule of law, which capitalist societies follow

I'm not so sure about that... money makes the rules, and people are easy to buy. You can't tell me there is no shady stuff going on behind the scenes. I strongly believe that the majority of rich people are doing shady things to gain more money. Of course I have no evidence, but human behavior is predictable and it's obvious what's going on.

Capitalism seems alright in theory. The problem is people and their selfishness.

And no, I'm not for communism. Again, nice in theory but won't work if run by people. I don't think I'll ever experience a truly "fair" society in my life.

I don't know but, on the flip side, would it be logical/fair to do the same if bitcoin was currently priced at $3?

According to Japanese law the value is denominated in Yen at the time of bankruptcy. Therefore any payoff is to be in Yen. No source on hand for it right now though.

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.

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 :|

> 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.

>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/

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 ?

Could you crash the market a bit, buy a lot of BTC, and then wait for it to recover again? I wonder if that would be a zero-sum game or if you could gain from such a cycle. E.g. I'm not sure if the price adjustment is instantaneous, or follows with a lag (in which case you could certainly make money).

Also, it might be very hard to move large amounts anonymously onto an exchange, and if you did that (even assuming they couldn't trace the BTC to your nefarious origin, or they are clean), I'm sure you are violating some market manipulation law somewhere.

>and then wait for it to recover again

If you demonstrated you could do this once - why would it ever recover ? Who would invest in it again ? Especially with so many altcoins.

They could use something like https://cumberlandmining.com/ and not affect the markets

Shouldn't we be able to see on the blockchain if these coins have been spent again? That would be interesting to see.

Also, I would not know what to do with 650k hot bitcoin. I think nobody is currently tracking "taint" and would refuse tainted BTC. But I would have trouble liquidating much less. It seems even the anonymous "guy in the park" wants to see documentation nowadays. Governments have really stepped up their anti-laundering game.

Pretty sure BTC owners are only a small part of the shady people who got rich by any means.

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.

More than getting nothing? The only reason this is even a possibility is the appreciation.

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.

>>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

[3] http://blogs.lawyers.com/attorney/bankruptcy/recovering-thro...

[4] http://scholarship.law.cornell.edu/facpub/1/

After paying back creditors what they are owed, or after paying back a discounted amount?

"what they are owed" == fixed rate of $440/BTC.

He showed up on Reddit saying he's finding ways to return the excess back to creditors in case price stays over 100% claims at the time of distribution.

https://www.reddit.com/user/MagicalTux/

I prefer getting 1/10th than getting nothing, but the only fair outcome would be getting exactly what I lost.

> The only reason this is even a possibility is the appreciation.

Sure, but the only reason we're even having this discussion is that MtGox fucked up. That isn't my fault.

On the other hand, would it have been fair if the value of Bitcoin cratered and then they paid everyone out in the new, lower value?

If that were to happen, this hack would be a blessing for many, many people who definitely would not have held on to their bitcoins until this current all-time high price. Not commenting on what is right here, I just thought it's kind of interesting.

If you get 1/10th of what you are owed, you will end up far better off than most creditors in bankruptcy cases.

MtGox fucked up

Yes they did but to be fair to them they were never a bank or any sort of financial institution. They were "Magic the Gathering Online Exchange". They had wacky side projects like rewriting SSH in PHP. Why did anyone entrust them with real assets?

MagicalTux (Mark Karpeles) actually bought the mtgox.com domain off of the previous owner, IIRC. Under his ownership it was never about MTG.

> I prefer getting 1/10th than getting nothing, but the only fair outcome would be getting exactly what I lost.

Bankruptcy means that the outcome of “all creditors getting what they were owed” is off the table. What is at issue is their fair disposition of what is left which is known to be inadequate to the ideal.

> Sure, but the only reason we're even having this discussion is that MtGox fucked up. That isn't my fault.

The only reason it would matter to you is that you entrusted something to MtGox. That, arguably, is your responsibility.

Are you blaming the victim?

I mean, if you're buying and selling bitcoin, especially if you're doing it in the MTGOX era, you made an explicit choice to choose a currency that did not have governmental insurance for depositors, or other regulatory controls.

It was really something to watch people learn in real time why various regulations exist.

Mtgox fucked up exactly as much as you did. If you didn't like your chances at mtgox, you could have tried maintaining your btc yourself. You can't just undo all your bad bets but keep your good ones.

Karpeles may or may not be criminally liable for his actions, so maybe not "exactly as much."

You lost a certain amount of value at that time. You could have had that value in any storage format. It isn't like Bitcoin was a rare irreplaceable work of art: it was a thing you could have bought more of using other dollars, and so the tort against you should be measured in the common unit of value and not exactly what you owned.

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.

That would assume it always gets back.

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.

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.

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.

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.

There's no (or rather, very slow) movement because it's a legal proceeding, not just a technological and economic challenge.

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.

Maybe they could just transfer the bitcoin directly to the creditors.

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).

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?

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.

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.

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?

1% seems like a lot. Could you liquidate 1% of US dollars all at once? Or gold or... anything else really?

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.

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.

> 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.

Yes, and it was repealed in the 1990s. That's why we had the 2008 crash. The basic idea of Glass-Stegall was that stock market crashes wouldn't affect banks. This worked well for half a century. Then came "deregulation". With the coming repeal of Sarbanes-Oxley, expect a big crash in a few years.

Not much would happen, trading over the past 24 hrs was almost $2 billion. See here: http://coinmarketcap.com/

That mistake was made in the famous "flash crash" of 2010. Trading volume appeared to be high, but it was the same money going round and round in HFT transactions which were a net wash. When someone did a real sell for cash, prices crashed.

What are you talking about? You know trades go back and forth... Those are not some new coins that didn't already exist on the exchanges that just gets withdrawn from the exchanges on one go... Exchanges don't even have such amount of fiat to handle.

Geez. Look at real exchanges... Not the price times the coins in circulation...

If you'd dump all that even across all major exchanges that support JPY, guess what, you will easily empty their order books followed by every other exchanges exploding into mass confusion with crazy arbitrage literally killing the market.

Has to be some off the book trade or auction when FBI sold a large sum.

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.

I'm not sure everybody wants to get 200000 BTC sold on the market (even the account holders). It would be crazy

Well, you know, half a loaf is better than none.

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

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.

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.

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?

It's a well known subject in Accounting : Depreciation [1]

[1] https://en.wikipedia.org/wiki/Depreciation

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.

> Which is in a real currency.

It's not about being a real currency or not. It's about what is the legal currency of that particular nation. Notice how they are not pegging the amount to the Australian dollar?

The distinction is academic since Bitcoins are not legal tender anywhere.

Well of course it's going to be in the currency of the legal system doing the fining.

If it was in the U.K. it would be GBP...

Because when debt hits the legal system, as is the case with bankruptcies, it gets converted to the currency in which the legal system works.

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

Glass–Steagal

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

You can pay for sex changes with bitcoin now? Woot!

Call 1-600-DOCTORB, the B is for bargain.

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

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