Mt. Gox Trustee Will Consider Returning Bitcoin Unconverted
online.wsj.com
online.wsj.com
By TAKASHI MOCHIZUKI CONNECT Updated July 23, 2014 10:32 a.m. ET TOKYO—An official responsible for the assets of Mt. Gox told creditors he would consider returning the bitcoin that remains with the defunct exchange without converting it into regular currencies, people who attended a closed meeting with creditors said.
Some of those who had deposits with what was once the world's largest bitcoin exchange welcomed the possibility of keeping the virtual currency unconverted, avoiding a potential drop in its value. But they also expressed their frustration with a bankruptcy process they say is taking place with little transparency.
Mark Karpelès, the chief executive of the defunct exchange was also present, despite saying he had concerns about his safety.
Mt. Gox filed for bankruptcy protection in February, saying it had lost 850,000 bitcoin, worth half a billion dollars, in hacking attacks. Only about a quarter of the missing electronic currency deposited with the exchange has been recovered.
The bankruptcy highlighted concerns over the regulation and security of bitcoin.
Some of the defunct exchange's 127,000 creditors have been worried that the recovered bitcoin might be converted into dollars, euro or yen before being distributed to creditors at the end of the bankruptcy process. Many creditors would prefer to keep their share of the remaining money in bitcoin, since a large-scale conversion into conventional currencies would deflate its value.
"The court-appointed trustee asked how many of us want to have the bitcoin returned as bitcoin, and about 70% of us raised our hands and gave a round of applause," said Yoshimitsu Homma, a Mt. Gox creditor. "He said the option would be considered, though he added it wouldn't be easy due to legal requirements."
About 100 creditors attended the meeting, gaining their first opportunity to talk with Nobuaki Kobayashi, the trustee who has remained largely silent while carrying out his duties. Mr. Kobayashi has made announcements via the Mt. Gox website, but his critics say his handling of the case lacks transparency, leaving creditors dissatisfied with his work.
Mr. Kobayashi has repeatedly declined to comment on any aspect of the bankruptcy process.
Mr. Kobayashi used the first 30 minutes of the meeting to explain the bankruptcy process and how he was seeking a sponsor to take over the operation of the business while continuing efforts to find more of the lost bitcoin, the people at the meeting said. The trustee spent the subsequent 90 minutes answering questions, though the people said Mr. Kobayashi didn't provide any new details.
"I wasn't expecting much, but I'm totally disappointed with the meeting," said Kolin Burges, a creditor who staged a sit-down protest outside the Mt. Gox office building for several weeks starting in February.
Creditors had asked the Tokyo bankruptcy court to allow the proceedings to be recorded and posted online, as many creditors aren't based in Japan and can't make it to the series of meetings to be held at the court. But those requests weren't approved.
No photography or recordings are permitted in the court building.
Another focal point during the meeting was the whereabouts of the lost bitcoin and the police investigation into the matter. Mr. Kobayashi declined to comment on that, saying he didn't want to disrupt the investigation.
Mr. Karpelès briefly apologized during the meeting, in response to a request by a creditor, but said nothing else.
"I am really sorry for what happened and will do my best to make the outcome of the bankruptcy as best as possible," Mr. Karpelès told The Wall Street Journal after the meeting. He said he had been worried about attending the meeting because of recent death threats he received. "I really hope everyone recovers what they lost and that the culprit is caught," he said.
The next meeting, including an update on the bankruptcy process, will be held in November.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com