Can Repayment To Mt. Gox Creditors Lead To Another Bitcoin（BTC）Crash?

[TL; DR]

Mt. Gox is an acronym for “Magic: The Gathering Online Exchange.”

Mt. Gox was launched in 2010 and became the leading cryptocurrency platform between 2010 and 2014.

Between 2010 and 2014, the Tokyo-based crypto platform accounted for about 70% of bitcoin transactions.

At the peak of its popularity in 2014, Mt Gox was hacked, and a substantial amount of bitcoin was stolen.

Mt Gox was severely hit and eventually filed for bankruptcy. Since then, the investors whose investments were stolen have enmeshed Mt.Gox in a legal battle.

Since the case was brought to the Tokyo District court in 2014, an agreement was eventually brokered in November 2021.

The criminal activity that led to Mt Gox shutting down is estimated to be about 850,000 units of bitcoin with a value price of $500 million.

As of July 2022, the digital assets are now worth about $3 billion.

Nobuaki Kobayashi, the appointed trustee by the Tokyo District Court, said Mt Gox is ready to make repayments, and the plans kick-started in November 2021.

The bone of contention among industry players is whether the creditors will keep their recovered bitcoin in their wallets as investment or sell them and go away with their cash.

Mt Gox plans to start repaying the debt to its creditors by July 2022.


Keywords: bitcoin, Mt Gox, creditors, cryptocurrency, exchange, repayment, debt.


[Full Article]

The cryptocurrency is currently in a declining phase. Taking the lion's share in the price decline is bitcoin, the foremost crypto token. Experts assert that a deteriorating macroeconomic environment is the immediate cause of the continuous fall in the price of bitcoin from about $45,000 in November 2021 to less than $20,000 in July 2022.

While bitcoin and other digital assets are looking forward to a steady increase in price value, another “black swan” might hit the crypto ecosystem. The “black swan” is the decision of liquidators to begin distributing assets of Mt Gox to the customers that were affected by the shut down of operation in 2014.

Not to worry, this article will examine the issues surrounding the indefinite shutdown of Mt Gox trading activities eight years ago and the happenings surrounding the refunds.

Let's begin!



The Mt Gox Exchange Platform

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Image: Finbold

Mt Gox is an acronym for “Magic: The Gathering Online Exchange.” The bitcoin exchange was launched in 2010 by Tibanne Limited. In 2021, the crypto exchange site was transferred to Mark Karpeles, making Karpeles the largest shareholder and CEO.

Mt Gox is one of the prominent cryptocurrency exchanges that operated between 2010 and 2014. The Tokyo-based crypto platform was responsible for about 70% of bitcoin transactions between 2010 to 2014.

In 2014, Mt Gox was hacked, and a substantial amount of its bitcoin holdings was stolen. Shortly after the attack, Mt Gox filed for bankruptcy. Since then, it had become a subject of controversy and legal battles until November 2021, when the Tokyo District court brokered an agreement between Mt Gox and its creditors.


Mt Gox Plans To Repay Its Defunct Customers

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Image: crypto news

In February 2014, Tokyo-based Mt Gox, one of the largest cryptocurrency exchange platforms, suspended all trading and exchange activities. Before stopping its activities, Mt Gox shed about 850,000 bitcoin (BTC), valued at about $500 million.

Fast forward to eight years later, news has it that Mt Gox is planning on repaying the “debt” to its patrons whose investments went down the drain during the close down in 2014. According to experts, bitcoin's total worth has risen from $500 million in 2014 to about $3 billion in 2022.

However, some of the Bitcoins have been recuperated, and the Mt Gox trustee has successfully gained access to about 141 686 Bitcoins (some accounts have it that about 200,000 Bitcoins were recovered). The recovered assets included Bitcoins, cash, and other bitcoin cash coins.

In what seemed to be a legal tussle, the Tokyo District Court eventually ordered Mt Gox to repay its defunct customers. Nobuaki Kobayashi, the appointed trustee handling MtGox’s bankruptcy, says, “Mt Gox is ready for repayments by the approved rehabilitation plan of which confirmation order of the Tokyo District Court.” The plan and repayment module were approved in November 2021.

According to Mt Gox trustees, they have “asked the creditors online as well as suggest just how they would certainly get their repayment.” On July 6, when the Mt Gox Trustee announced that they would finally start paying back the creditors of the inoperative crypto exchange platform, speculation and reaction continued to trail the announcement.

One of the issues arising from the plan to pay back the creditors is whether they will hold the Bitcoins in their wallet or market them immediately after they get hold of it in their wallet. Aaron Brown, a foremost crypto capitalist, told Bloomberg that “some Mt Gox creditors will certainly obtain bitcoin while some will market them.”

Should this amount of bitcoin (even though not too substantial) be released into the bitcoin trading ecosystem, will it not press down the cost of BTC and lead to another bitcoin crash? Experts have divergent answers to this question. Albeit, I will personally consider it insignificant to crash bitcoin.

According to the rehabilitation plan, Mt Gox trustees have recovered 141,686 BTC tokens and have plans to distribute them among customers. The recovered 141,686 bitcoin tokens represent just 0.7% of BTC's entire circulating supply, making a total of about $3.16 billion to be injected into the token's available supply. Such an amount, coupled with the fact that its 24 hours trading volume is in the low double-digit area, is tough to affect talk less of crashing the price of bitcoin.

Similarly, Brad Mills from the Magic Internet Money Podcast surveyed whether the creditor will hold or sell the recovered asset. The survey result showed that about 54% of the respondents would not sell the BTC they get from MtGox, while 16% will sell 10 to 25% of the recovered BTC.


Conclusion

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Mt Gox experienced several security breaches between 2013 and 2014 while it was at its peak. The top crypto exchange platform made it susceptible to a series of attacks.

In 2014, the attack became successful and signaled the beginning of the end for Mt. Gox. As of November 2021, after eight years of legal tussle, Mt Gox has enjoined the defunct customers (now creditors) to register their claims. In July 2022, Mt Gox is set to start repaying the debt to its customers.







Author: Valentine. A, Gate.io Researcher

This article represents only the researcher's views and does not constitute investment suggestions.

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