Table of Contents
After almost 10 years of waiting, Mt. Gox creditors might soon be seeing a sliver of their funds being returned to them. However, one caveat in the exchange's latest announcement has dampened the excitement.
You'd be forgiven for forgetting the in forgetting the intricacies of the Mt. Gox scandal, after all, it was almost a decade ago. But fret not, Blockhead has your back.
Back in 2014, Bitcoin was behaving as erratically as it is today, experiencing a 58% decline over the year... From $754.97 to $312.72. Ah, those were the days.
Mt .Gox, which derived its name from "Magic: The Gathering Online EXchange" as it began as a trading platform for the collectible card game, was responsible for over 70% of Bitcoin transactions at that time. In 2014, the platform suffered a hack in which it lost 850,000 BTC. At the time, its value was $450 million; it's now worth shy of $32 billion.
The Tokyo-based exchange filed for bankruptcy protection in Japan soon after, leaving 24,000 creditors in the dark.
In an e-mail circulated on 21 November to creditors, the defunct exchange said its rehabilitation trustee, Nobuaki Kobayashi, is “making efforts to commence repayments in cash within the 2023 calendar year.”
Kobayashi emphasised, "the specific timing of repayment to individual rehabilitation creditors is undetermined, and therefore, it will not be possible to provide advance notice to each rehabilitation creditor regarding the specific timing of their repayment."
Whilst Mt Gox plans to repay creditors "shortly," these repayments could flow into 2024, creditors were advised. Specifically, Mt Gox will make the reimbursements through the sale of its remaining assets, which include 142,000 BTC, 143,000 BCH, and 69 billion yen.
Cash vs. Bitcoin
Mt. Gox reimbursing creditors has been an increasingly contentious point, especially as time elapses and Bitcoin's value surges. Markets fear that if Mt. Gox releases its Bitcoin to creditors, those who held BTC at triple figures in 2014 will be inclined to realise their gains upon receiving their BTC at today's value.
You can't blame them either. Who wouldn't realise a gain of over 5,000%? But if all creditors acted in this way, the market would suffer an unprecedented sell-off, leading to an unprecedented crash.
Fortunately (or unfortunately depending on whether you're a creditor) Mt. Gox's latest announcement specifically mentions cash reimbursements only, with no mentions of Bitcoin.
This has left market participants scratching their heads with mixed reactions all around.
On Reddit, some described the news as "cautiously promising" whilst more sceptical creditors took a "believe it when I see it" stance.
More interestingly, an upvoted comment read "The email is about cash payments! And I don't think most creditors are excited about the cash part of it." In response, more positive Redditor stated, "I think most creditors understand that one follows the other, and a cash payment after 10 years is progress."
Similar criticism is seen on X with one tweeter writing "cash refunds? ouuuuuch. Sorry to all that were involved with #MtGox - this is not an acceptable outcome."
"How I read this 'US keeping Bitcoin, giving creditors printed fiat.'" Said another.
Mt. Gox's cash-focused announcement is unlikely to make any waves in the market, at least in the way we would expect if Bitcoin were to be returned to the masses.
That said, if Mt. Gox proceeds with its reimbursement plans this year or the start of next year, it could be regarded as a promising sign of more to come.
Earlier this year, the largest Mt. Gox creditor - Mt. Gox Investment Fund - said they are intending to hold on to its Bitcoin instead of selling.
The fund opted for an early payout of 90% of what can be collected over waiting for the resolution of litigation surrounding the collapsed exchange. 70% of the payout will be in Bitcoin and $30 in cash.
After all, it could be considered counterintuitive for large creditors to tank the market by realising their gains. Either way, the market will likely brace itself for impact if Mt. Gox fulfils its cash reimbursement promise as it will signal the exchange isn't bluffing. Trust in Mt. Gox isn't exactly high.
Mt. Gox's reimbursements, be it cash or otherwise, could also be seen as good news for FTX creditors. Yes, it's taken almost a decade for funds to be returned but those impacted by FTX could take comfort in knowing it's not game over completely in such circumstances.