Mt. Gox’s 2 Largest Creditors Pick Payout Option That Won’t Force Bitcoin Sell-Off: Sources

The early lump sum payment they picked is set to be paid out in September. The option to wait until all Mt. Gox litigations settle could net higher payouts but may take another five to nine years, sources said.

AccessTimeIconFeb 16, 2023 at 4:00 p.m. UTC
Updated May 9, 2023 at 4:08 a.m. UTC
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The two biggest creditors of Mt. Gox, the crypto exchange that failed due to a hack nine years ago, have elected to get their bankruptcy recovery paid out mostly in bitcoin (BTC), according to people familiar with the matter.

Defunct New Zealand-based crypto exchange Bitcoinica and MtGox Investment Funds (MGIF) – which together represent about a fifth of all Mt. Gox claims – will, as a result, get paid 90% of their collectable funds (which are calculated at approximately 21% of what they had locked on the platform at the time of the hack in 2014).

Their decision to pick the former option could soothe longstanding fears among bitcoin holders that a wave of simultaneous liquidations tied to Mt. Gox bankruptcy recoveries could drive down the price of bitcoin. Had these two creditors opted to take the payout in fiat, the trustee overseeing the bankruptcy estate would likely have been compelled to sell off a significant portion of Mt. Gox’s recovered bitcoin holdings to fulfill all the fiat requests.

The price of BTC jumped after CoinDesk reported this development, topping $25,000 for the first time since June.

Creditors who do choose to wait may have to hold tight for a while – the litigation surrounding the bankruptcy may take another five to nine years, documents reviewed by CoinDesk indicate. The move by Bitcoinica and MGIF removes a significant portion of the total claim from any future battle.

The payouts will come in as part of the early lump sum option offered to creditors, now expected on Sept. 30, though the Japanese trustee overseeing the repayment process has a history of kicking the can on past deadlines.

Creditors have waited nearly a decade to get a portion of their money back after Mt. Gox – one of the first and, at one time, the largest crypto exchange in the world – was hacked in 2014. Hackers made off with 850,000 BTC, a sum valued at $460 million at the time. After the hack, Mt. Gox was left with approximately 142,000 BTC, 143,000 bitcoin cash (BCH), and 69 billion Japanese yen.

Creditors selecting the lump sum option can choose between receiving their payout in a combination of BTC, BCH and yen, or they can request the entire amount be paid in fiat. In opting for the early payout, Bitcoinica and MGIF have also opted to receive the crypto option, where the largest-possible portion of their payouts will be in BTC, sources told CoinDesk.

Opting for Mt. Gox’s 'bird in the hand' payout

If creditors don’t want to take the early lump sum at 90% of the amount owing, the only other option creditors have is to wait for the end of civil rehabilitation litigation (which includes a lawsuit by CoinLab, a now-defunct partner exchange, against Mt. Gox’s estate).

In theory, this option could yield a slightly higher recovery, but creditors have no guarantee that it won’t potentially be lower than the 90% of recoverable holdings guaranteed by the lump sum payout.

A legal analysis by a Japanese law firm suggested it could take many years for holdouts to see their money returned.

Creditors have until March 10, 2023, to decide whether to take the offered early lump sum or keep waiting for a potentially larger payout at an undetermined date in the future.

UPDATE (Feb. 16, 2023, 16:49 UTC): Updates to note that the price of BTC rose after this report was initially published.

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Cheyenne Ligon

Cheyenne Ligon was a CoinDesk news reporter with a focus on crypto regulation and policy. She has no significant crypto holdings.


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