Mt. Gox has filed a petition to protect itself in the US as it tries to reorganize.
The defunct bitcoin exchange said that a petition for Chapter 15 protection was filed in the US Bankruptcy Court for the Northern District of Texas on 10th March, and a temporary relief order was issued the same day. The preliminary relief order is scheduled for confirmation on 1st April. The exchange stated:
“This means that the effect of the Civil Rehabilitation applies now on a temporary basis to assets located in the United States which will be preserved. Accordingly, the acceptance by the US court of the Civil Rehabilitation means that any enforcement of a judgment against MtGox Co., Ltd, any attachment of its assets, the creation of any lien against its assets or the disposition of any assets located in the United States are temporarily no longer possible.”
In a chapter 15 filing, a representative of an insolvent foreign company with assets or interests in the US files for recognition in the US. It’s designed to assist that representative in gathering assets, defending against litigation, or anything else that would help with with the foreign proceeding.
This is an ancillary legal procedure, designed to complement what’s happening in Japan. The Tokyo District Court has issued an order prohibiting any disposition of the assets of Mt. Gox. Assets located in the US will be used to repay creditors, so their preservation was necessary to ensure the civil rehabilitation progress proceeds smoothly.
A legal source close to the case suggested that what’s happening in Japan is the rough equivalent of a chapter 11 bankruptcy filing in the US, designed to protect a company while it reorganizes. The chapter 15 filing here is designed to help with that.
“The Japanese debtor needs assistance from the US court. Its foreign representative can file a Chapter 15 in the US,” said the source. “That filing asks for them to be recognized as the foreign representative, and grant them some relief. In this case they’re asking to stay some lawsuits.”
Mt Gox was allowed to do this by its Japanese insolvency supervisor, on condition that CEO Mark Karpeles was the foreign representative for Mt Gox in the filing. His personal declaration is here:
Earlier this week the US District Court for the Northern District of Illinois in Chicago imposed a temporary restraining order and froze US-based assets controlled by Mt. Gox CEO Mark Karpeles. The order is temporary, but the assets will remain frozen for at least two weeks.
Mt. Gox says a petition was made on 11th March in an effort to stop the proceedings of “a lawsuit taking place in the US” pursuant to chapter 15 and the petition was accepted.
The Chapter 15 petition explicitly states that one of the goals is to secure Mt. Gox assets in the US. The exchange has been sued by a number of customers in the US, and they are hoping the suit can attain class action status.
However, lawyers representing the plaintiffs believe Chapter 15 protection will not stop the suit from moving forward, as Chapter 15 protection only covers Mt. Gox KK, registered in Japan. It does not apply to Mt. Gox Inc, Tibanne or Mark Karpeles.