- MtGox customers are to start receiving their bitcoins after a ten-year wait
- The distribution process has been scheduled to begin in early July 2024, according to a recent notice
- Bitcoin’s price has continued to drop following the news, which many consider a ‘black swan’ event
Beleagured MtGox customers will finally start to get their hands on some of the coins they lost more than ten years ago after the trustee declared readiness to start distributing repayments in Bitcoin and Bitcoin Cash. The process is scheduled to begin in early July 2024, as confirmed by a recent press release, following a torturous wait for those who lost a combined 850,000 bitcoins over two and a half years’ worth of hacks. Bitcoin continued to drop on the news, which has been felt by many to be a kind of ‘black swan’ event that has overshadowed the crypto space for years.
The $475 Million Disaster
The collapse of MtGox in February 2014 severely shook the Bitcoin world and left tens of thousands of customers facing potentially ruinous losses, with $475 million worth of bitcoins lost between 2011 and 2014. Following the disaster, Mt. Gox declared bankruptcy, and a lengthy legal and financial examination ensued, leading to the formulation of a Rehabilitation Plan aimed at compensating the creditors of the defunct exchange.
Following years of delays and complications, creditors yesterday received the news they had been waiting for since February 2014 through a notice published on the MtGox website:
The Rehabilitation Trustee has been preparing to make repayments in Bitcoin and Bitcoin Cash under the Rehabilitation Plan. Now that these preparations are in place, the Rehabilitation Trustee will commence the repayments in Bitcoin and Bitcoin Cash in due course to the cryptocurrency exchanges with which the Rehabilitation Trustee has completed the exchange and confirmation of the required information for implementing the repayments.
The notice added that repayments will be made from the beginning of July 2024, with trustee
Nobuaki Kobayashi outlining why the process has taken so long:
We have taken time to ensure safe and reliable repayment to creditors, including technical remedies for safe repayments, compliance with financial regulations in each country, and discussion of repayment arrangements with the cryptocurrency exchanges.
The funds will be distributed to exchanges to be handed out to creditors, with the whole process taken in stages to ensure accuracy. However, it is no surprise that Bitcoin dropped to $58,000 overnight, given that the prospect of 140,000 bitcoins suddenly coming back onto the market has been spooking some elements of the Bitcoin fraternity ever since the possibility of MtGox creditors getting their coins back became feasible.
Coinlab Behind Delay
One of the core delays, and the reason why creditors are getting less than a quarter of the bitcoins they held on MtGox, is down to a company called Coinlab. Coinlab had a contract to take MtGox into America but the deal broke down when Coinlab (in MtGox’s view) did not get the requisite licenses from the US government.
When MtGox collapsed, Coinlab claimed it was owed a staggering $16 billion based on lost earnings over the years since the deal fell apart, but its claim was rejected by Kobayashi. In March 2019, Coinlab took the matter to the Tokyo District Court, where the debate centered on whether Coinlab was properly licensed to act on Mt. Gox’s behalf in 2013.
The court sided with Kobayashi, reducing Coinlab’s claim to $4 million, but Coinlab, backed by investors like Tim Draper, pursued a lawsuit. The company reduced its claim to $440 million, but many believed this was a litmus test for a bigger lawsuit if it were to win.
Kobayashi was compelled to ringfence the funds sought by Coinlab, affecting the distribution of Mt. Gox assets: approved claims totaled 860,000 BTC/BCH and ¥8.8 billion ($55 million), while unapproved claims, largely allocated to Coinlab, amounted to 130,000 BTC/BCH and ¥50 billion ($314 million).
Deal Was Approved in 2021
By 2020, Coinlab was brought to the negotiating table by Fortress, which aimed to facilitate a deal allowing partial payouts to creditors. This led to a draft rehabilitation plan in March 2020, proposing repayments in BTC, BCH, and cash.
In December 2020, Kobayashi submitted the draft plan, offering creditors an early lump sum payment of 21% of their claims, avoiding prolonged litigation. This proposal, despite some reservations about the low return, was seen as the best option compared to potential bankruptcy, or continuing to hold throughout the Coinlab lawsuit.
The Tokyo District Court approved the plan on February 22, 2021, with creditors being given the chance to approve it that October, which they did. This was the most important step in the process, with everything else from that point being administrative. Cash payouts began at the end of last year, and last month all the bitcoins under the trustee’s control were consolidated, with many feeling this was a precursor to payouts. This has proved correct.
While some seem fearful of a massive Bitcoin selloff, Many believe that recipients will largely choose to hold rather than cash out, given that Bitcoin is, theoretically at least, still in a bull market and many of these buyers were early adopters who have waited an age to get their hands back on their coins again.
