Mark Karpeles Will End Up Taking $859M from Mt. Gox Bankruptcy | Hacker News Reader

Mark Karpeles Will End Up Taking $859M from Mt. Gox Bankruptcy

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67 pointskajb69 comments

The longer I look at it, the more Bitcoin looks like a scheme to enrich criminals and enable rogue states to do business. Does it help the world economy that a large handful of people who go into bitcoin early now are controlling millions of dollars that they would have otherwise never, ever seen?

And what of Bitcoins benefits? Anonymous? Not for normal people on coinbase/etc. Fast? Nope. Convenient for shopping? Not unless you are on overstock.com or buying magic mushrooms on silk road. Politically viable? China isn't having it.

Can someone tell me what Bitcoin is good for again?

I wish I could find the link, and Googling is cluttered:

[0] There was an IMF (or World bank?) paper from the 70s, a .txt was online somewhere

It described "a possible future of digital currency" .. and described Bitcoin with a lot of accuracy.

[1] An analysis theorizing Bitcoin was first mined on networked computers running the same hardware config - something about how the randomness repeated and the rate of new hashes being found & the distribution of those hashes among the early addresses.

Again, sorry I don't have a link, I naively assumed I could just search for this stuff in the future without saving a copy.. it was a Wordpress style blog though.

This is the most dangerous thing about the IMF stating that blockchain was the future of finance... they forgot that everyone immediately assumes Bitcoin when you say blockchain. They were specifically not referencing Bitcoin by name for a reason.

"She pointed to distributed ledger technology like blockchain that can help make the banking system more inclusive." https://www.cnbc.com/2017/10/13/bitcoin-get-serious-about-di...

She is basically saying that banks need to come together and decide on a decentralized ledger system.

I don't think the 2 of you are talking about the same thing. Parent was talking about a more generalized paper from the 70s, not a statement from a current IMF head.

Yes, the paper I was referring to didn't say "blockchain". It was a theory on how digital money could work, with features like transacting across national boundaries

> who go into bitcoin early should be controlling millions of dollars that they would have otherwise never, ever seen?

OK i don't know the moral significance of that in itself. Should the people of oil rich regions not have made the money they made? It's not answerable i think.

The moral status of bitcoin rests on the support it receives by its community. Given that most of its value is currently in speculation, i would wager the average morals of the community are not aligned with what we 're used to.

Except people look the other way for oil exporters because we can run our cars on it. I can't do anything with all this spent electricity (that has also been converted into heat energy and released into our atmosphere, yay).

Maybe BTC is good at accelerating global warming.

This seems to be important, from the comments:

>Paul Wasensteiner • an hour ago

>Joseph you need to correct this bullshit instantly. Mtgox creditors DID NOT "requested Karpeles and Mt. Gox to process refunds in Japanese yen rather than bitcoin". This is totally and utterly false! We submitted our claims for what we had on our accounts at the time that Mtgox closed in whatever currency we had (i.e. if our account had bitcoin in it, we submitted a claim for bitcoin), and most of us also requested to be paid out in bitcoin.

>Update this article immediately!

They’ll be paid in btc however they will not get the same amount. They will get btc equivalent to their btc’s worth in 2013.

The size of their claim is the same.

Btc or usd will only affect the payment method.

We didn't request for our claims to be converted to Yen. The Japanese court representative assigned to the bankruptcy determined the Bitcoin had to be assigned a yen value. He proposed a value that seemed reasonable at the time so most creditors agreed.

Almost all creditors I know, including myself, would prefer to claim Bitcoin instead of Yen but it was simply not allowed by the court. Back then it seemed not really important as the valuation was reasonable and we didn't suspect the process would take so long.

When it became clear that the process would take so long that the Bitcoin value would exceed the claims, people organized a legal defense to have the claims reevaluated, but it would be a very exceptional situation and it is unclear to me what the repercussions of such a precedent would be in Japanese law.

I hope that at least Mark would be convicted and the Japanese state would take from him whatever profits remain from the bankruptcy.

That's cool, I didn't need the $50,000 in bitcoin he fucked me out of anyways.

TBF when he fucked you out of it it was only worth $700 or so (based on another commenter's claim that it increased 70-fold in the intervening time). Most similarly situated people could have re-upped that amount of bitcoin back then, but if you chose not to, it's not like Karpeles forced that choice on you. IMO, being mad about the $50k current value of bitcoin that you lost is overstating the harm he did you significantly.

I understand this point as well, but imagine you got into earlier and tied up your existing capital in that $700. You wouldn't have been able to capture the next 70x.

If someone had only $700 of capital and could not rebalance their investment mix, I feel for them. But I really doubt that's most people.

You also wouldn't be taking the financial risk that led to the 70x (albeit that is forced on you if $700 is all you had), but nevertheless if you take no risk, you reap no rewards, seems fair.

Hypothetical problem... Let's imagine a universe in which milk is a rare commodity, and milkshakes are worth their weight in gold. In this world, right now in 2017, 1 milkshake trades for $100 USD. You have a milkshake, and I have a milkshake. So we each hold the equivalent of $100. I drink your milkshake, effectively stealing $100 from you.

Fast forward to the year 2020. Milkshakes are now worth $1,000,000 USD. Have I deprived you of $100, or have I deprived you of $1,000,000? (Note that we can't seem to use retroactive NPV analysis in 2017, since in 2017 we had no way of accurately predicting how milkshakes would be priced in 2020.)

On the one hand, I appear to have imposed a severe opportunity cost on you. On the other hand, I haven't taken the world's only milkshake from you. So what I've literally stolen from you in 2017 is the present value of the milkshake, $100.

IANAL, and I will confess that I have no idea how a court of law would evaluate this case. But in economic terms, it certainly feels as though I've deprived you of more than $100. So what have I actually taken from you?

[EDIT: This post was meant to pose a question. It was not meant as a frank disagreement with the parent post per se. I've cleaned up the wording a bit to try to make it clearer.]

Sure, but the appropriate amount, in my mind would have been $100 plus prevailing interest, not some in-kind distribution. Suppose there is only one milkshake in the world and it got destroyed, how would you ever repay the claim except by converting to currency value?

Sure, but the appropriate amount, in my mind would have been $100 plus prevailing interest

Bankruptcy laws determine that. Maybe x% a year? Creditors took them to court and at that moment the court takes over. You should have bought more bitcoins at $400 if you believed in it.

So essentially we set damages at t0 currency value of the milkshake, plus interest over N years. Seems reasonable.

If milkshakes were illiquid, and could only be bought and sold every N years, that would seem to peg damages to asset value instead of currency value. Or am I wrong?

You stole $100 from me. If the value of milkshakes went down to 0 in 2020, would you say you deprived me of nothing?

This is basically like the people talking about the guy who spent thousands of bitcoins on pizza as if he lost shitloads of money by buying that pizza. Of course he didn't.

In the scenario I've presented, I think you're correct. This is because milkshakes are liquid (both literally and figuratively), and because they are replaceable.

If we add the condition that milkshakes are not replaceable, does that change the outcome? I'll stfu now if this is derailing things.

It does not. Again, suppose BTC had gone to $2. Would you then say that they only stole $2?

I think you're right, but I do like pishpash's solution of converting to currency value at the time of theft and then applying some sort of interest calculation. This divorces the damages of the theft from the hypothetical asset value of milkshakes over time.

Assumptions: milkshakes are fungible (I can buy a functionally equivalent milkshake), I have the wealth to acquire a replacement milkshake without significantly shifting the balance of my assets.

Under those assumptions, you have deprived me of the exchange value of my milkshake at the time it becomes known to me that you have misappropriated it. This is my moral judgment, not a legal opinion.

[Edit: I did not take your response as a frank disagreement, and anyway, even if it were, there's nothing wrong about disagreeing with me. I'm not an ethicist, just an opinionated rando.]

I'm inclined to agree under that assumption. [Edit: same!]

It would also be unfair to assume people would have continued to invest in bitcoin. That's an investment decision, and should not be part of the claim. Imagine if bitcoin had gone to 1/70 instead of 70x, would you still want to be paid back in bitcoins or currency value?

Isn't this the choice you made at filling time when you specified you wanted to be repaid in BTC?

Mt Gox was insolvent before it was sold to Karpeles.

Follow the US' indictment of BTC-E founder for parallel details.

tl;dr BTC-E had hacked basically every exchange for those fairly worthless internet points and giggles, and was selling them for cheaper on its exchange in a massive and ongoing laundering/mixing scheme that could only benefit the founders and people with accounts in Bulgaria, Romania and Russia

Here's what I don't understand: I specifically requested to be repaid in BTC at the time, you could state this on the claims form. I even opened an account on Kraken for this? So why would I not get the full amount in bitcoin?

I'm assuming because the lawyers managing the bankruptcy process tried recovering a certain amount of money in Yen, with the books being handled in Yen. Normal people deal with currency, not Bitcoin. Especially in 2013.

In bankruptcy proceedings, most assets are sold off and the remaining cash is distributed to shareholders and the likes. You're being paid out your Yen amount (just like any other person who had a claim) but converted into Bitcoin (at todays prices, since the Bitcoins are gone / have been liquidated).

It's not just and it won't happen. I requested my bitcoins back in the paperwork. If I understand correctly, they're holding 80% of those bitcoins. Give them back.

Because the law does not work that way. Japan values property in yen, and the law states that you must be paid back the value of what you lost at the time you lost it.

This is true in most countries -- in the United States, if the state for any reason seizes your coins without legal reason, and has time to auction them off before you can prove they had no legal reason to take them, you will be paid back in dollar for the value of the coins on the day they were taken. The state does not owe you the potential increase in value between that day and today.

Where it gets interesting is what would happen if the reverse was true. Let's say your coin gets taken without legal reason in an illegal search today, with the price at $100. Two weeks from now, they get auctioned off after the price collapsed to $80. Four months from now, when your lawyer proves to the court that your coins were legally acquired and there was no basis to the seizure, the price is at $1. What does the government owe you?

It would have to be $100 as well. I think that is how it works already.

Mtgox owes me bitcoins. My claim on mtgox was fully validated. They have recovered like 80% of those bitcoins. I explicitly requested in the Japanese legal paperwork to be paid back in bitcoins.

So, now, please give me back my fucking bitcoins.

Instead, an incompetent piece of shit, the guy who caused this mess will now supposedly walk away with the majority of those bitcoins.

It's not just and it won't happen. We'll sue him to the end of the universe and back until he pays up. There are other forms of litigation besides Japanese bankruptcy law. And there is funding too. The entire sum I will supposedly get back now, plus a huge bitcoin-denominated bonus will be fully committed to this purpose.

This begs the question: if I go bankrupt, can I take whatever remaining funds I have to Vegas and gamble it until I come out ahead or lose it all?

The US government was required to sell the Bitcoin they seized from Silk Road. Should individuals/companies in bankruptcy?

I see often the question here: What would have happened if BTC went down to 2$?

The thing is:

If it goes down, he pays nothing.

If it goes up, he pays up to ~400$ per BTC. That's a hell of a call option in my eyes.

In order to avoid that, the responsible should have sold everything in the beginning or he should have set the claims to be in BTC upfront.

But you cannot keep speculating with other people's money for 5 years and keep the profits in case A or pay nothing in case B.

Now since case A happened, these profits are a consequence on the risk taken with other people's money, so it's also the profits of other people.

> However, after a strange turn of events, it turned out that creditors of Mt. Gox, or former bitcoin traders on the Mt. Gox exchange, requested an equivalent amount of bitcoin to be paid out in Japanese yen at the beginning of Mt. Gox liquidation proceedings. In simpler terms, creditors requested Karpeles and Mt. Gox to process refunds in Japanese yen rather than bitcoin, which has risen substantially in value since then.

Anyone has insights why did they do that? If they were owed 1 BTC, they then were supposed to be paid 1 BTC, why opt for Yen instead?

My assumption is it was because the last rally of 1k USD had come down to 400 by the time this came around and people felt they were owed equivalent value in fiat.

I guess it shows how much confidence the creditors had in bitcoin at the time.

Probably seemed like a safer option if there was no legal precedent for returning cryptocurrency. Also, prices could have dropped just as easily as they went up.

Because they only recovered a fraction of the bitcoin lost, so there wasn't enough bitcoin to be distributed. They wanted the equivalent price in cash, which seemed like a more obtainable goal but still at the time was greater than what could be met by selling the 200K bitcoin they recovered. Who knows, maybe they thought they could get it from insurance or something like that. Of course, now that the 200k bitcoin are worth more than the 800k lost were at the time of the hack, they want more money.

I have the form right here in front of me. I requested to be paid in bitcoin.

Yes, you requested to be paid out in btc. That doesn't affect the size of the claim.

> Over the past three years, from 2014 to 2017, the price of bitcoin has increased exponentially, from around $400 to $7,000, by 17-fold.

This nonsensical sentence made me want to stop reading, esp. after the site requested notification privileges and popped a newsletter modal. Cryptocoin news sites do at least as much to undermine cryptocoin credibility as the billion-dollar scam that they're reporting on.

This seems like an unjust outcome. Shouldn't there be enough latitude for bankruptcy judges that they can respond to unusual situations such as the value of the assets rising to the point that everybody is earning money on the bankruptcy? Should Karpeles really be made a near-billionaire because he presided over the theft of hundreds of millions of dollars of other people's money?

At the same time, what if the value of BTC plummeted to $1?

Shouldn't they release the method they used to determine which reimbursement currency "won"? From what I understand, creditors were asked in a form which currency they prefer (yen or bitcoin).

People in the comments say the requested a Bitcoin reimbursement, but is it even possible for them to know what choice others made?

So, what would have happened if bitcoin had crashed to $0? Creditors would have received nothing because there would have been no value left to distribute? Instead he got a free "heads I win, tails you lose" exposure to bitcoin prices?

That is not my problem. He denied us the opportunity to cash out, or hold. If it had dropped to 0, I would expect a cash payment.

And would he have had the cash to pay you?

Well no. What he owes was based on the price of Bitcoin at the time not today. he owes the same amount in yen regardless of the price of Bitcoin.

Right, but he wouldn't have had any money to pay that amount in yen if the price had crashed, no?

I suspect he may end up using a chunk of that on litigation defense.

I'm sure he's trembling with only $500 Mil (assuming taxes) in his account. Once the bankruptcy court decides, isn't it over for creditors?

Yen vs BTC...maybe the bankruptcy court made that decision? BTC wasn't as popular back than so quite a few may have happy to get back, anything...yen or pesos.

Looked at another way, does this mean that all parties involved in Bitcoin will be made 100% whole (in Yen) as of the day of the Bankruptcy?

wow. considering the kind of people lurking in early cryptocurrencies i won't be surprised if he ends up assassinated fairly soon.

If it happens it would be the first assassination by keyboard ever.

There's evidence that it's happened a couple of times, at least, in Bitcoin's history.

Did they use an IBM Model M or Model F as the weapon?

I think it depends on whether the attacker was more skilled at 1HB or 1HS. The Model F is 1HS, obviously, because F#.

Lovely. I suppose one way out of bankruptcy is for your assets to increase in value 70-fold.

He should get nothing until after all his victims are made whole— in bitcoin, not USD.

"creditors requested Karpeles and Mt. Gox to process refunds in Japanese yen rather than bitcoin"

The people he owed money to asked for it to be this way when proceedings began.

Whoops!

If they had asked to be made whole in BTC instead of yen and BTC had tanked properly (becoming essentially worthless), he could have paid the reparations from his savings account. This could have gone both ways, but it feels asymmetric because you can't go more broke than bankruptcy.

I don't recall having requested Yen at any time. There was a form to be filled out and I clearly stated that I prefer to be paid in Bitcoin. But I guess I am not big enough a fish to have a say there.

Same here. I specifically requested to be paid in bitcoin. I had bitcoins on MtGox and I wanted the bitcoins back from the day they were stolen. They have been found and my claim is accepted. Now give them back.

What do you think the lawyers want to be paid in?

What's the amount of lawyer claims in percent in this case?

Does or should this enable them to override the wishes of the creditors?

No I checked the "I/We would prefer to receive distributions in Bitcoin" on their form. I made a claim on bitcoins, I wanted the bitcoins back from day 1 of the theft.

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