When we last left the story, MtGox had just made the surprising discovery of 200,000 ‘forgotten’ bitcoins, police were investigating the exchange and a judge had taken the unusual step of allowing frustrated victims to carry out their own forensic examination of the blockchain in an attempt to establish what really happened to the missing coins.
Since then, new developments have hit the headlines every few days:
29 March: a report surfaced claiming that CEO Mark Karpeles was warned two years ago by current and former employees that customers’ funds were being used to cover operating costs – essentially meaning that the exchange had been running a fractional reserve system since 2012. Since MtGox was not subject to financial regulation, it is unclear how this would be viewed under Japanese law.
The same report alleged that Karpeles had claimed large amounts of money for unnecessary expenses, including ‘[space] in a Tokyo high-rise that also housed offices for Hulu and Google, high-tech gadgets such as a robot and a 3-D printer and a souped-up, racing version of the Honda Civic imported from Britain.’ Karpeles has denied that the exchange was spending more than it was earning.
2 April: Karpeles was ordered to appear at the US Bankruptcy Court for the Northern District of Texas on April 17, to explain why the exchange required bankruptcy protection. He refuses, stating that he will not travel to the US until his lawyers are ‘up to speed’ on the implications.
10 April: a group of investors offered to buy the bankrupt exchange for the sum of 1 bitcoin (currently around $500). The low price reflects the lack of transparency that surrounds the last two years of MtGox’s existence, and the uncertainty of what it is really worth. The group plans to set aside half of any transaction fees charged to pay back former customers and other creditors who have lost money.
16 April: MtGox posts a statement on its website saying that its application for ‘civil rehabilitation’ had been refused by the Tokyo District Court. This means there is little prospect for the exchange to be relaunched under a new brand to help pay back its former customers, and its assets will instead be liquidated. Customers are expected to see little or no compensation.
Following action from his lawyers to delay the subpoena to appear in the US, after the Tokyo Court hearing the US Bankruptcy Judge set the next new date for his hearing for April 24.
Effectively surrendering control of the exchange and allowing its liquidation, rather than pursuing civil rehabilitation proceedings, was viewed as an attempt to avoid personal liability at MtGox’s creditors’ expense by the investment group behind the buyout offer.
Whatever the future holds for the remains of MtGox, the last month’s news does not bode well for customers who lost bitcoins and fiat funds when the exchange imploded in February this year.