Mt Gox Abandons Hope, Prepares For Liquidation

EnterpriseFinancial MarketsOpen SourceSoftwareWorkspace

CEO of the bitcoin exchange Mark Karpeles has been replaced by court-appointed provisional administrator

Mt Gox, once the most popular bitcoin exchange in the world, has abandoned attempts to save its business and is entering liquidation.

The company behind Mt Gox previously applied for bankruptcy protection in Tokyo, and CEO Mark Karpeles said it would continue operations while trying to pay all outstanding debts. The latest statement from Karpeles, however, clearly states that he is throwing in the towel since “at this time, there are no prospects for the restart of the business”.

The statement adds that the Japanese court has dismissed the application for commencement of a civil rehabilitation, and has instead appointed a Provisional Administrator to replace Karpeles and supervise the liquidation process.

In March, Mt Gox admitted that as a result of a hacker attack, the exchange lost at least 750,000 BTC deposited by its customers, along with 100,000 of its own bitcoins – worth around $433 million on the market today. The company later discovered 200,000 BTC in an “old-format” bitcoin wallet, but that didn’t help save it.

Karpeles is fired

Mt Gox was established in 2010 as Magic: The Gathering Online Exchange – a platform for trading collectible game cards, but its focus soon shifted to a more lucrative business – transactions in digital currency.

FC-Bitcoin-Frontview-SingleCoinBy 2013, it had become the largest Bitcoin exchange in the world, processing as many as two thirds of all BTC transactions. On 7 February, Mt Gox temporarily stopped all withdrawals, while it was investigating “unusual activity” in its systems. Two weeks later, the website suddenly went offline, amidst rumours of insolvency.

These rumours were confirmed by Karpeles on 28 February, shocking more than 120,000 Mt Gox users who had their money stored with the platform and temporarily destabilising the bitcoin market.

The Tokyo-based exchange subsequently filed for bankruptcy protection, and opened up a customer support phone line. Karpeles said at the time that Mt Gox was hoping to continue operating the business under the supervision of the Japanese court in order to maximise repayments to creditors.

According to the statement, this plan has now been cancelled due to its complexity. Liquidation of the exchange means its creditors might get less of their money than if it would remain operational. The situation could be saved if Mt Gox finds a buyer with enough cash – a highly unlikely prospect, considering the extent its debts.

“The dismissal of the application for commencement of a civil rehabilitation procedure will create great inconvenience and concerns to our creditors for which we apologize,” said Karpeles.

Liquidation also means that Karpeles has lost his post as the CEO, replaced by a court-appointed trustee Nobuaki Kobayashi. The plan still needs to be approved by the court, and the decision is expected in the next two weeks.

“I will strive to fairly and equitably administer the company’s assets, both domestically and internationally, by attempting to utilize certain foreign procedures, including a Chapter 15 filing in the United States of America,” said Kobayashi.

Despite its important role in pioneering bitcoin transactions, Mt Gox was frequently criticised for its crude approach to software development and lax accounting practices. The way Karpeles misinformed the bitcoin community after he discovered the theft didn’t win him any friends either.

Earlier this week, the former CEO refused to travel to Texas, where he is a person of interest in the aforementioned Chapter 15 bankruptcy case. Mt Gox is also accused of negligence and fraud in a class-action lawsuit in Chicago.

What do you know about Bitcoin? Take our quiz!

Read also :
Click to read the authors bio  Click to hide the authors bio