Digital currency exchange Kraken announced today that it has been chosen to support the investigation of Mt Gox's missing bitcoins, manage the claims process and distribute the defunct company's remaining assets to creditors.
The announcement was made at the second hearing for Mt Gox creditors held today at Tokyo's District Court.
Speaking at a press conference following the hearing, Kraken CEO Jesse Powell said he was "very humbled for the opportunity to help the community like this", and that his firm hopes to repair bitcoin's damaged reputation in Japan as much as build its own in the local market.
"It's Kraken's philosophy to always put the clients' best interests first, and this is a philosophy that we will carry with us through supporting the trustee."
There are still many decisions to be made in the process and Kraken has many questions of its own, he further added. The exchange will work closely with the trustee Nobuaki Kobayashi to investigate what happened at Mt Gox as much as possible, although it will not have direct access to Mark Karpeles, Mt Gox's CEO.
'Proven track record'
Kraken published a blog post earlier in the day saying the firm was chosen "for reasons including its proven track record of stable exchange operation and reliable customer support", and because it has the skill and expertise required to investigate the losses and look after creditors' interests.
If the Mt Gox bankruptcy trustee decides to distribute any of the remaining bitcoin assets as bitcoin, Kraken will encourage Gox customers to open new accounts with them. Clients will hopefully be pleased with the company's performance and continue to trade there, Powell said.
No plan to revive Mt Gox
Powell reiterated that the main job is to facilitate the liquidation process and redistribute assets to creditors as quickly as possible. He explained that Kraken has no interest in restarting or continuing Mt Gox's business in any form and that that exchange was finished as an entity:
"There's no code base of any value; the database can't be re-used. The customer database is of dubious value. The reputation is severely damaged. It's become a verb – to be 'Goxed' means to be screwed. The brand name is synonymous with fail."
Creditors' funds have now been tied up for 10 months and there is no justification in keeping them waiting any longer, Powell continued.
Asked why Kraken is interested in taking on bitcoin's biggest basket case, Powell replied that it is a chance to benefit the wider bitcoin community.
Bitcoin had seen previous messy liquidations – such as Bitcoinica, which "ended in disaster, and is still ongoing some years later". The community as a whole had been affected by that.
It is important for trustee Kobayashi's team to have someone reliable and respected within the bitcoin community to guide them through the process this time, he said, and to make sure creditors have a claims process to get as much money back as possible.
Slim hope of finding lost coins
While Kraken would also be tasked with investigating what happened to Mt Gox's missing bitcoins, Powell said it was still unclear if any bitcoins were actually lost, and that it is "extremely unlikely" that any will be recovered.
"I wouldn't hold my breath," he said.
The data available is incomplete and even if the bitcoins' current location could be identified, the chances that Kraken will be able to recover them are slim.
Kraken has a contract with specialist data analysis firm Chainalysis to examine whatever data remains at Mt Gox.
A team from local security firm Wizsec has conducted its own extensive investigation into Gox's missing coins over the past months. Powell also said that he hoped to be able to work with Wiz with better access to the database, saying "the more minds that work on this the better".
Ultimately it will be up to the trustee, taking into consideration any privacy issues, to determine how much access to data Kraken is allowed.
"We will make every effort to use the resources available."
Surprisingly, Kraken will not have direct access to Mark Karpeles, the person who could perhaps give the strongest clues as to what happened in the final weeks of Gox.
A spokesperson said the team will have the opportunity to pose questions through Kobayashi, but that direct questioning might put Karpeles in a difficult position.
Fully compliant exchange
Powell was also asked if Kraken had any experience dealing with organized crime as it related to the bitcoin world.
He replied that as far as he is aware, there have been no cases of organized crime groups working through Kraken. The company adheres to strict KYC-AML procedures, and sets transaction and transfer limits for the different levels of proof of identity its customers supply.
"I don't think we are by any means an easy exchange to launder money through. I'm sure organized crime groups can find lower hanging fruit elsewhere."
Some creditors expressed relief that Mt Gox's investigation and liquidation are finally in the hands of people who understand bitcoin and the bitcoin user community.
Creditor Peter Tilley said he was somewhat pleased with today's outcome after the disappointment that followed the previous creditors' meeting in July.
"As a creditor, I came away from this announcement with a much more positive view of the future. I'm happy to see these guys on the case, as opposed to others who aren't as qualified to handle it."
Kraken has not worked directly with Mt Gox in the past, although Powell personally intervened, along with Roger Ver, to assist the exchange and save its customers from suffering losses in 2011 when it suffered its first major hack.
Images: Jon Southurst/CoinDesk