The Largest Creditors of MT.gox Decided to Receive Compensation for Losses in Bitcoin

The Largest Creditors of MT.gox Decided to Receive Compensation for Losses in Bitcoin

The two largest creditors of Mt.Gox, a cryptocurrency exchange that collapsed due to a hack in 2014, have decided to receive most of their losses in bitcoin, CoinDesk reported, citing people familiar with the matter.

The Mt.Gox website appeared in 2006. It was a fantasy game developed by Jed McCaleb, who later co-founded Ripple and Stellar and is one of the richest in the crypto industry. At the end of 2009, he changed direction and created one of the first bitcoin exchanges, keeping the name of the site. A few years later, Mt.Gox became one of the largest crypto exchanges, at its peak it accounted for 70% of bitcoin transactions.

At the beginning of 2014, users began to experience problems with withdrawals, and on February 7 of the same year, the platform completely stopped withdrawals. She announced the loss of 850 thousand bitcoins (about $460 million at that time). In April 2014, the exchange declared itself bankrupt. The bankruptcy proceedings are still ongoing.

The exchange has repeatedly stated its desire to start paying out affected investors and resume operations. In October 2021, Mt.Gox asset manager Nobuyaki Kobayashi approved a compensation plan, which was accepted by former site users.

Under the Kobayashi plan, creditors can receive an early lump sum payment of 90% of the claim by September 30. Another option involves waiting for the end of the bankruptcy process in the hope of receiving a larger amount.

The New Zealand crypto exchange Bitcoinica, which ceased operations in 2012, and the investment fund MtGox Investment Funds (MGIF), whose claims amount to about 20% of all claims to Mt.Gox, chose the first option. They will receive 90% of their funds blocked on the exchange in 2014.

If these two lenders had opted to receive payments in fiat currencies, Kobayashi would likely have been forced to sell off a significant amount of bitcoin in order to satisfy all the lenders’ requests for fiat currency refunds. As of July 2022, the manager of the exchange had approximately 142,000 BTC at his disposal.

The agreement by the two largest creditors to receive payouts in bitcoin came as a relief to those who were worried that a spate of simultaneous liquidations linked to the Mt.Gox bankruptcy could lower the price of bitcoin, the article says. The publication states that the rise in the rate of the first cryptocurrency above $25,000 on the night of February 17 occurred after the publication of this news.

Mt.Gox’s bankruptcy litigation could take another five to nine years, according to the publication, with creditors having no guarantee that the recovery received thereafter will be greater than or equal to 90%. The choice of the option of compensation by the exchange clients is possible until March 10 of this year.

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