Bitcoin Forum

Given the lack of information coming out of the trustee for Mt. Gox in Japan, I'm beginning to think another class-action lawsuit in the U.S. may be the best way to go. The settlement with Sunlot is a pile of nonsense in my opinion -- how can one reasonably agree to a settlement before one even knows what was going on at Mt. Gox?

My understanding is that the class in Greene vs. Mt. Gox was never certified, so that it should be possible to start another class action, does that seem correct?

I am also searching for the Motion for Preliminary Injunction of April 8, 2014. According to exhibit 2 of the preliminary settlement, this 34 page document sets forth the results of the Plaintiffs discovery efforts. It seems like this could be an interesting read. Any pointers?

Found the documents on Pacer for case 1:14-cv-01437. Posted on scribd with all exhibits for those who may be interested: http://www.scribd.com/doc/225373622/Greene-vs-MtGox-Preliminary-Injunction-8-April-2014

Is this the lawsuit "settled" via the Sunlot deal? Are the terms of that available as court records?

Why do you suppose the plaintiffs were so quick to settle? Could there have been a flaw in their case, such as having listed the wrong set of defendants? Should a new class action suit be filed, it would be good not to repeat mistakes, if any, made by the earlier one.

The Plaintiffs probably got a much better deal plus a huge fee for their attorney. It is my understanding that the dropping of the complaint was only toward Gox, Gay Pierre and the former owner of Gox. However, Karpeles is not off the hook. He will probably cut some kind of deal to "find" more "lost" Bitcoins if he gets a piece of the action.

I wonder if we can pierce the corporate veil and go after Karpeles directly for negligence and spending our money on doughnut shops and domain names? I doubt Japan has any sort of criminal negligence liabilities in their civil laws.

I am still hoping Karpeles was not lying when he said the Bitcoins were not lost, just "temporarily unavailable" and that the government froze them.

Thank you for the Pacer files!

I also wonder if it is possible to sue the Japanese government for failing to find the coins or release any information to people that might be able to. There must be some sort of time line where they must make an arrest or at the bare minimum give a statement that they are purposely not making any statements for a good reason.

I think everybody knows that if they were not making statements for a good reason they would tells us. Since they are not making any comments or giving any updates, it sounds like a clusterfuck over there. They barely even heard of Bitcoin. I can just picture 3 Japanese Barney Fifes sitting trying to figure out this crime.

The longer they keep waiting and don't find the coins the colder the trail and the less chance we have at finding them ourselves. It would take me about 20 minutes in a room alone with Karpeles and I would know exactly where the coins are.

A couple of Jelly doughnuts, a pair of pliers, a hammer and a rusty tuna can lid would get him to talk.

If he knows where they are and how to get them back.

Which, being him Mark Karpeles, I highly doubt.

Yes the settlement and all documents are available through the Pacer system.

That particular class action was settled, but I don't believe the class was certified. This suggests another class action lawsuit could be started if needed, particularly in another district. They could eventually be consolidated, but that would be a later action.

Working on this presently. It is likely possible.

really would be good to have a way to recover from our losses; even if we don't get back all of it.

Yeah.

Forget about it.

The company is located in Japan.

There's a new announcement on mtgox.com that says there is a hearing to recognize the "amended recognition petition" for bankruptcy in Texas on June 17th.

Can anybody explain what that means?

It means another delay.

Remember that the main bankruptucy is filed in The Land of The Rising Sun and what Texas does has no effect on things there at all.

any new suits plz keep advised

Im in --


I really believed in SunLot though??    ???

 :(
think we should be in texas ? -- its gunna be tough going to Japan as if that will matter either

Gox did business in the US so you can get at them here. The problem is they don't have assets here do they?  You could try piercing the corporate veil but how are you going to serve karpeles if he never comes to the US again?

It's over.

Move along now.

Nothing to see here.

The asset stripping could never have been pulled off without at least tacit cooperation from Mt. Gox's bank, Mizuho, in regards to the "missing" $27 million in bank deposits.

The Japanese government is responsible for policing their banks and making sure that they don't engage in fraud. If the regulators slipped up this time, then they could be liable.

More importantly, it is very bad political juju in Japan for the authorities to permit any activities that further trash the country's attractiveness as a direct foreign investment destination. It wouldn't hurt to put a little pressure on the financial regulators in Japan to straighten out this mess, if a way can be found.

I don't think we know that either way. It's not the bank's job to check everything their customers are doing and make sure they're not ripping anybody off. It may turn out that Mizuho were aware of something illegal or robbed Gox themselves, but I don't think there's any evidence of that in the public domain at the moment. Wait and see what the police and the trustee come up with, if anything.


Japanese courts are very deferential to authority. Your chances of producing anything except some legal proceedings at your own expense are not very high.


They're much more likely to conclude that this bitcoin whole thing is a huge PITA, brush the Gox business under the carpet and do what they can to make life difficult for other bitcoin-related businesses.

I'm not sure how you know this, edmundedgar. Japan may have a lot more at stake with bitcoin than may otherwise seem:
http://asia.nikkei.com/Politics-Economy/Economy/An-Asian-trade-revolution-in-the-making (http://asia.nikkei.com/Politics-Economy/Economy/An-Asian-trade-revolution-in-the-making)

Nothing beneficial will come out of this. It's just better for everyone to take the loss.

I don't understand the relevance of that. Japan isn't Myanmar. It has excellent existing domestic electronic payments infrastructure: Fast, cheap or free bank transfers, near-universal POS digital money systems.

Who knows with the Japanese government, but a best guess would be that they are aiming to take over large segments of the developing trade with both Myanmar and Bangladesh:
http://www.globalpost.com/dispatch/news/kyodo-news-international/140320/japan-foreign-minister-visit-bangladesh-myanmar (http://www.globalpost.com/dispatch/news/kyodo-news-international/140320/japan-foreign-minister-visit-bangladesh-myanmar)
Bitcoin could be the key to it all, at least according to Yukio Noguchi. He's a a former Ministry of Finance bureaucrat and an adviser to the Graduate School of Finance, Accounting and Law at Waseda University. He probably knows of what he speaks.

For over half a billion dollars? No way. The people who lost money in Mt. Gox need to get organized, and they need to be active in the Tokyo courts.

The trouble is that the people trying to organize them have either been ineffective ("mtgoxrecovery.com" and the solicitor in the UK) or involved with the people behind Mt. Gox (Sunlot).

I have previously written about the Mt. Gox implosion having been a coordinated asset-stripping scheme. This probably included a strategy for preempting any effective legal approach to recouping the "disappeared" funds. All forms of litigation have likely been anticipated.

One aspect, apparently completely overlooked in their planning by the schemers, was that Mt. Gox has become a PR disaster for the Japanese government. It has been trying to promote Japan as an attractive investment destination. It does not help them in the least to have tens of thousands of foreign depositors in Mt. Gox very confused and frustrated by the Tokyo bankruptcy proceedings. One could say the whole affair has not been in Japan's self-interest.

All of the above suggests a political approach could be far more effective than merely intensifying the legal action alone in the Tokyo courts. For example, I would suggest a delegation of active claimants, who have lost deposits in Mt. Gox, try to link up with Mineyuki Fukuda. He is a member of parliament who has taken a keen interest in bitcoin. I believe he is involved with a committee of the ruling Liberal Democratic Party to try and decide what to do about Mt. Gox, and in general, cryptocurrencies. Another key contact to make is Keiichi Hida, who organized the local group ‘Rising Bitcoin Japan‘, having campaigned for months to bring bitcoin out of the shadows and into mainstream attention. and appears to be politically very well connected,

Were some kind of consensus possible among business and government leaders to "save Mt. Gox", Japan could turn around what has been a huge public relations liability into a major asset for the country. In fact, should more of the "disappeared" bitcoins resurface, or turn out to have never been missing in the first place, it might not even cost the government that much to help out Mt. Gox depositors.

That would require technically and legally savvy people to make such a scheme work. These people couldn't even secure a cold wallet. 

You certainly raise a very valid point. To succeed in the way it did, asset-stripping Mt. Gox would need to have many moving parts, and doubtless couldn't have been pulled off by merely one self-important poser, either acting alone, or else along with a couple of co-conspirators.

For starters, it would necessarily involve combined legal, financial, and regulatory strategies along with a plan to hack Mt. Gox using DDoS and transaction malleability attacks.

True. The whole Mt. Gox thing looks like a combination of ineptitude and crookedness, not some grand plan. Mt. Gox had a good moneymaker, and Karpeles blew it through a number of dumb moves, then tried to cheat out of the mess. (That's not unusual in business history. Enron, for example.) The Sunlot crowd just looks like opportunists. The recovery effort is getting nowhere because nobody competent is pushing forward in the courts in Japan.

Courts in common-law countries are purely reactive - they do nothing unless someone brings a case to them. You have to do all the work to move the case forward.

I don't have any basis to disagree with a thing you've said, yet I can give you a great many reasons why someone could have helped MK blow up Mt. Gox.

Think about how a magic trick works--your attention is momentarily distracted, and you focus in on the magician's hand waving, while unnoticed, he drops a bunny out of his other sleeve.

Everyone always concentrates on the 650,000 bitcoins that are supposedly missing, while almost nobody ever questions the $27,000,000 in bank deposits that have also disappeared. The 650,000 BTC either never existed in the first place, and were figments of Willy and Markus' machinations, or else are, for all practical matters, completely untraceable.

What do you want to bet someone at Mizuho Bank knows exactly where that $27 million went? I'm not saying they necessarily took it, but banks are in the business of knowing what happens to money--they'll know who has it, or where it went.

In any event, it's not like banks have never been known before to engage in asset stripping. They should at least be questioned. I refer you to the CCI investigation of Mizuho's European correspondent banks: http://www.mtgoxinvestigation.com/ (http://www.mtgoxinvestigation.com/)

The money trail should lead right to the guilty parties.

I'll organize. I need volunteers:

1) One person to build a website like mtgoxrecovery.com, but with more interaction to help those interested organize

2) One or more attorneys in Japan - corporate bankruptcy attorney - someone that knows what is going to happen to all of these assets of MtGox. For those of you that do not know, it is likely that all Bitcoin will be auctioned off, and converted to YEN. If you think the Bitcoin will be sold at current market rates, you need to spend more time at silent auctions for your local charities. Odds are this Bitcoin will sell for less than market rate.

3) Every MtGox depositor/creditor worldwide will be needed to make some NOISE: https://bitcointalk.org/index.php?topic=628191.0

If it is possible to revitalize MtGox, we can do it and create a market for lost coins: https://bitcointalk.org/index.php?topic=590160.0

Follow the FIAT, Follow the Bitcoin.

PM Me.

Great ideas, freedombit!

Similar to the miller's daughter in Rumpelstiltskin, you can probably best succeed with your organizing plan by "spinning straw into gold". Rather than merely setting up a new exchange, develop a mobile bitcoin ap too for conducting micropayments. It should be one that works well in developing countries such as Myanmar and Bangladesh. Also, please do not forget to make a few important friends in Japan who can make things happen for your committee. They will be impressed if you offer them something that appeals to them.

Yes. Large volume and high velocity equals lower risk due to market fluctuation for a payment processor. Surely Mark K. was working on this, but too distracted trying to hold the basic business together to take MtGox to next level. There are certainly areas where Bitcoin and a large international and liquid exchange like this could leapfrog current business infrastructure and create value propositions that will quickly require adoption for survival.

The quality of smart phones that people are using in developing countries is not as good as in the developed world. Any mobile ap would need to address the lowest common denominator in terms of cell phone technology to get the broadest possible coverage. Mt. Gox depositors could provide an ideal test-bed for testing out as many different versions of this mobile bitcoin ap as possible--one that will run on older smart and not-so-smart phones as well as the newer ones.

Since the Japanese government would want to develop and promote this technology as part of its "Asian trade revolution" strategy, this is something depositors can agree to do in exchange for the Ministry of Finance taking an oversight role with respect to the Mt. Gox bankruptcy proceedings in Tokyo. It could help to ensure that the matter is handled without undue delay and to alleviate any concerns about possible fraud.

These two things are not consistent.

If government is involved in any capacity there will always be "undue delay."

And this isn't just any government, it's the Japanese government.

Sad to see that exchange that initialy raised bitcoin in price and popularity is the same that did us alot of dmg by their incompetence
they had alot of profits during the days, it is their fault not to hire experts to do what they couldnt.

Everyone agrees - biggest mess ever. The question is, how do we ordinary people--some with expert skills ourselves--help clean it up.

Mt. Gox depositors can either take an entirely passive role, merely letting the bankruptcy court handle it all, and await the outcome at some future date--good or bad, or else attempt to influence the situation in a more proactive way.

Anyone who has been through a court proceeding knows that it helps to have a "friend in court". While the Japanese government is probably less than ideal, as most governments have never been known for playing "nice" with bitcoin, their oversight of the Tokyo bankruptcy could turn out to be key in getting a fair shake. At least it would give the community a little bit of leverage in the situation, instead on its present course, wherein it seems to have almost none.

In Japan, most of the mobile phone service providers, such as DoCoMo, are also payment processors, registered under the Payment Services Act. Mobile payments work just fine in Japan. No need for Bitcoin.

I don't think it is a good idea to file additional court cases against GOX.

They already have less assets then liabilities so account holders will receive less then what they deserve.

A court case is only going to force GOX to spend more money on their lawyers, money that they could have given to account holders.

There is always one winner in class action cases and it is always the same - the lawyers.

I probably should have been a lot more clear. I was never suggesting a mobile bitcoin app was needed in Japan, but rather in Myanmar and Bangladesh for micropayments. As mentioned in an earlier post, the Ministry of Finance has had an interest in stimulating trade with these two developing countries and believes bitcoin can play an important role. They call it their "Asian Trade Revolution" strategy.

What I was proposing is much more of a tit-for-tat exchange. The Ministry helps the bitcoin community by lending its oversight to the Mt. Gox bankruptcy in order to help prevent delay and fraud, and members of the community assist with Japan's strategy by offering to test a mobile bitcoin app for them--one that will work well in both these two countries for micropayments. It needs to be tried out with a wide variety of devices, because the cell phones available in developing countries are much less homogeneous than you find in developed countries where virtually everyone has a smart phone or tablet.

I'll admit, my idea is kind of half-baked, and it needs further fleshing out, but you have to ask "why would the government of Japan help out Mt. Gox depositors?", and perhaps one answer is because depositors, through their participation in the bitcoin community, are offering to do something in return that the government values.

I'm not sure that's the problem. I'd say the recovery effort is going nowhere because the situation is beyond recovery. They seem to be something over a billion dollars in the hole. If they'd lost 20% or something they might be able to get back to solvency by getting some large creditors to take voluntary haircuts - this is what Intrade did - but if you've lost 80% there's pretty much no way that's going to work. Every creditor who refuses to get crammed down increases the amount you'd have to cram down the depositors who do agree. Unless they've secretly got a lot more assets left than they're letting on, the situation is impossible.

I don't really understand what Sunlot are trying to do but the best guesses would be:
a) There's some kind of scam involved like fixing the final price on the exchange at about $100 (note that it seems like somebody did actually try to fix the price like this), valuing bitcoins at that, then claiming that's how much you owe the bitcoin holders. You'd think the trustee would see through that, but I suppose once they'd sunk a lot of time and money into it prior to the bankruptcy you couldn't blame them for trying it on and hoping they get lucky.
b) They really expect liquidation to happen, but want a seat at the table to buy some cheap assets when it does.
c) They're getting strung along by their lawyers for fees...

And where did it go? That's the big question. It didn't disappear by itself. Someone has the money (especially the bank deposits).

Takes a lot of money to pursue the issue in Japan and apparently that money is not forthcoming.

Situation normal, all fucked up.

S.N.A.F.U.

Offer them a deal they can't resist?

There needs to be some kind of flanking maneuver.

Then the situation could be B.T.N. ("Better than normal"). At least there is always that hope.

How much money you got?

What are you gonna do?

Threaten to nuke Tokyo?

I  don't have very much skin in this game and not a lot of money for it.

I've already outlined what I thought could work. It's human nature to respond better to carrots than sticks, so it would be counter-productive to ever threaten anyone with anything when you want to get their cooperation.

Simplistically stated, should you want to get a fair shake in Japan, try getting the Japanese authorities on your side. Offer them something they want in exchange for fair treatment.

While I'd love to be pleasantly surprised, it does not appear that right now the bankruptcy proceeding is being administered in the best interests of depositors. Rather, depositors will likely be lumped together with all other "unsecured creditors", and then apportioned some amount of cash from the proceeds of auctioning off the 200,000 bitcoins.

This really stinks, and there has to be a better way!

I suspect the bank deposits were used to buy BTC on other exchanges at a discount and then sell BTC on GOX (prior to halting withdrawals).

As far as the BTC, I am not sure. If there was an issue with missing private keys I would think that they would have disclosed this by now, or originally.

 

I don't think there's any information in the public domain about that either way. But in any case it seems unlikely that Gox have substantial debts beyond what they owe depositors, so even if depositors were somehow considered to have priority it wouldn't make much difference to the eventual payout.

Certain information is either known or can be conjectured from the available evidence.

There is the alleged missing $27 million in bank deposits. I presume Mizuho or one of Mt. Gox's other banks is probably sitting on it.

A second point is the proximate cause of Mt. Gox declaring itself bankrupt. It seems very likely that the company experienced a cash flow squeeze in which it was unable to service its debts, and said inability resulted in its banks calling in their loans. With no money, Mt. Gox could not continue to operate. Wages could not be covered; rent, service providers, etc. could not be paid, and these creditors would probably file suit in order to recover any outstanding balances. Bankruptcy was the only option at that point.

When a company is being stripped of its assets, the goal of the perpetrators often can be to force it into bankruptcy, and then pose as the saviours who will restructure and return it to profitability. Once they win control over the victim company, then they divide up the spoils, and leave behind an empty shell.

Asset stripping is a nasty business. That's why Mt. Gox depositors need a friend in court, and someone to look out for their interests.
 

GOX has very few other creditors (may their employees, and possibly a few vendors).

Grouping depositors with these other groups would likely have a very small impact on the ultimate payout

It's unlikely the bankruptcy was declared merely because Mt. Gox couldn't repay all of its depositor's BTC and cash withdrawal requests. By its own admission it still held over 200K BTC (in the old-format wallet). It would have probably chosen first to play fractional reserve banking, or Bernie Madoff 2.0 with those 200K coins, rather than declaring itself bankrupt and risk having the company liquidated.

Most depositors would probably have been better off had the bankruptcy never been declared. At least the smaller depositors (say, those with fewer than 1,000 BTC) in  piecemeal fashion could have withdrawn their coins sourced from the 200K Mt. Gox wallet.

Did you mean to say that the bankruptcy was declared by mistake, because Mt. Gox still held 200K BTC, and could have used them to fund any withdrawal requests? If so, then I could probably come closer to agreeing with you.

You say that Mt. Gox had few debts, yet more than likely, the bankruptcy was brought on by a credit squeeze. Do you have some actual knowledge that would indicate otherwise?

Uh, people.........................

It's over.

Deal with it.

GOX did not "know" about the 200k BTC wallet/address until after they filed bankruptcy.

They froze withdrawals when they though they had run out of coins. Over the next several weeks they tried to make back their coins by arbitrage, trading fees and customers depositing BTC. They were not successful.

Had Mt. Gox "known" about the 200K BTC in the old format-wallet, they may never have even declared bk, because they would still have been liquid enough to operate as a fractional-reserve "zombie" exchange, and in time could even have repaid everyone out of their trading fees. So, the bankruptcy declaration was doubtless a mistake.

As long as we're on the subject, it appears more than likely the claim that Mt. Gox lost 850,000 BTC could also have been wrong. They may never have had more than the 200,000 BTC found stashed in the old-format wallet. The narrative runs that 650,000 BTC are still missing, yet 650,000 is the exact same number of BTC traded by the two bots, Markus and Willy. If in fact the BTC traded by these bots were never paid for, then their trades could well constitute a massive uncovered short position, and this could easily explain why more BTC appear on the books than actually ever existed. For more on Markus and Willy, see http://www.theguardian.com/technology/2014/may/29/bitcoin-bots-bought-millions-in-the-last-days-of-mt-gox (http://www.theguardian.com/technology/2014/may/29/bitcoin-bots-bought-millions-in-the-last-days-of-mt-gox)

Finally, you mentioned that Mt. Gox did not have many debts beside the bitcoins and cash owed to depositors. The actual amount of debt exclusive of what was owed depositors, as stated in the bankruptcy filing, was $63 million. Source: http://www.coindesk.com/mt-gox-files-bankruptcy-claims-63-6m-debt/ (http://www.coindesk.com/mt-gox-files-bankruptcy-claims-63-6m-debt/)

You are correct, but only if they had known about the 200k wallet prior to halting withdrawals. I think they halted withdrawals because they thought they ran out of bitcoin. If they had found out about the 200k wallet after they stopped withdrawals then they would likely had a "run on the bank" Although this would be very unethical they could have sold that 200k btc on other exchanges and then purchase it back from customers on the GOX exchange. They probably couldn't have made 550k BTC (the amount of lost customer btc minus the 200 btc) from doing this but could have made a pretty penny.

I doubt the failure had anything to do with the bots. It wouldn't even make any sense for them to short via bots when the bots were what was making the prices go up. If anything then they should have been short cash and had extra BTC.  I personally do not believe any of the conspiracy theories about those bots, I believe that the bots were simply large investors trying to purchase large amounts of bitcoin without causing the price to spike.

The article didn't mention exactly what the debts were, but wasn't that about what customers were owed that had fiat deposited with them? Say for example you wired $1,000 to GOX but did not buy any bitcoin from them. They would owe you $1,000 in dollars and nothing in BTC. If I had deposited 2 BTC with GOX and did not sell it then GOX would owe me 2 BTC and nothing in fiat

The actual bankruptcy filing says a lot of interesting things, including blaming the shortfall on the bitcoin transaction malleability bug. However, this claim has elsewhere been thoroughly debunked. Mt. Gox appears to have experienced a very confusing situation, especially so far as losing the 200K bitcoins, and then later finding them again in the old-format wallet. It's very obvious though that they weren't really ever out of bitcoin, and certainly could have finessed this situation much better had they any mind to do it. It's not at all clear that they ever needed to declare bk. In fact depositors might have responded quite well to a frank admission that "we screwed up, but are going to fix it."
You are forgetting about the fact that there are always two sides to every trade. If the bots bought bitcoins, then they probably sold them too. The bots purpose may have been to suppress the price of bitcoin through a massive uncovered short position, not inflate it as claimed in the media. There were no trading fees charged for at least one of the two bots' trades, so perhaps their buys could have gone unfunded too.
I would assume like most businesses, Mt. Gox carried a line of credit with its bank to fund any routine needs for liquidity--for example, to pay back a depositor for an incomplete trade, as you mentioned. The actual status of cash deposits and withdrawals are very unclear in this situation, especially considering what the CCI investigators uncovered, suggesting that deposits bound for Mt. Gox from European depositors were deliberately  misrouted by its banks. These kinds of conditions could have resulted in a cash squeeze/illiquidity. Had its bank reacted by revoking Mt. Gox's line of credit, then that would completely dry up its access to cash.

The truth will come out in the bankruptcy investigation if this is true and the investigator passed a basic college-level accounting class. It is far too easy to follow the money.


The bank forced cash - squeeze theory certainly has the right motive, but I don't think MtGox would have had a great need for a LOC. While they seemed to live a lavish lifestyle, from the numbers I've seen, it is not much for the profits they were generating.

I agree, and the more thorough and sooner it can be completed, the better.  So far, the investigation, perhaps understandably so, has been rather opaque--yet that's not exactly the open collaboration way of doing things.

Having a LOC is a very common business practice in order to help manage cash flow. Most businesses of any size use them. It's not related to them 'livin' large', or not.

I don't think they every actually "lost the 200k" wallet, they rather tried to take bitcoin out of their cold storage only too see that the cold storage was (virtually) empty. As far as I can tell they did not have a good way to keep track of their cold storage addresses and they assumed that all were empty. When they later discovered that they controlled 200k in bitcoin they disclosed it.

They blamed the malleability issue, other exchanges looked into the issue and determined it would really not be a threat to them. There have been reports that malleability could not have done the damage that was done to GOX but the scope of time that this research did was less then the time that GOX was in existence, it would be very possible that a large part of this kind of attack happened several years ago, in GOX's early days when bitcoin was worth much less.This kind of attack could have happened when the price of bitcoin was much lower and would not have had as large of an impact at the time.

As far as the bot trading is concerned, anything that says the were manulipating the price of bitcoin is crazy. There is evidence that they were trading on behalf of large investors. If they were buying from others without any "real" person paying the price that the bots paid for the bitcoin and receiving the bitcoin that the bots purchased then the exchange would have a massive shortage of fiat. If the bots were "trying to suppress he price of bitcoin via a massive uncovered short positiion" then the exchange would have a massive surplus of fiat to the turn of tens (if not hundreds) of millions of dollars. The trades that the bots executed were (almost) always buy orders so a short position would make even less sense. I don't think there is evidence that has been leaked that shows the bots sold bitcoin to that degree.

I don't follow your logic to say that GOX would have needed a credit line to fund their short term liquidity needs. It is my understanding that GOX only used one bank (it was in Japan) for receiving deposits from customers and processing withdrawals for customers (and for any other banking needs that the exchange had).

I suppose it is possible they simply lost 200k BTC, but that's not consistent with their bankruptcy filing. Mt. Gox has always been careful to use the word "disappeared" or the term "unable to access" with regard to the missing bitcoins. To me that implies they knew all along that at least some of the bitcoins were still around, and not, as now claimed, removed by some "massive theft."
From what I can understand, the removal of bitcoins through the exploitation of transaction malleability would require a degree of social engineering. Someone would have to request a refund for bitcoins that appeared to have been sent by Mt. Gox, but supposedly could not be verified by the hacker-recipient. Then a Mt. Gox person would actually have to manually make such a refund. That either suggests that it didn't happen that way, or else if it did, perhaps a confederate of the hacker(s) was operating inside Mt. Gox.

Nevertheless, the scenario as you outline it seems rather far-fetched, because it requires one to believe that Mt. Gox lost track some time ago of how much it had in cold storage. However, there are records of an IRC chat with CEO Mark Karpeles during mid-2011 in which he moves 424,242 BTC from one wallet to another as a demonstration of Mt. Gox's solvency. So, at least by this early date, it appears Karpeles did have a handle on how much was in cold storage.
True enough, and I can quote you numerous press reports from the fall of 2013, during the big price spike occurring at that time, in which Mt. Gox customers were wanting to withdraw fiat, yet had to suffer very long delays in having their withdrawals completed. That does indeed suggest a shortage of fiat, for otherwise why else would there by these long delays?
I'll concede you're right on this point, at least a little, as I've seen no evidence that Markus and Willy (the  two bots) ever sold bitcoin--only bought them. Though, that does not change any the basic argument I made. Buying bitcoin without ever paying for them suggests that they were bought on margin. These bitcoins could have been unloaded in a private placement[s). The point being that if the bitcoins, purchased by the bots, were actually never paid for, and afterwards through some means sold, then that effectively constitutes an uncovered short position.
The LOC could be used to handle any situation whenin there was some urgent need to cut a check, or send out a wire transfer, yet Mt. Gox was still awaiting deposits to clear. As previously mentioned, the Swiss investigators, CCI, discovered a pattern of mis-routing deposits bound for Mt. Gox from Europe. These deposits would have been handled by the European network of correspondent banks to Mizuho Bank in Japan.

This is absolutely how most businesses operate. I just wonder to what extent MtGox used an LOC, as they must have known any LOC would have been a cash flow risk. Or I suppose, maybe they didn't, being more tech then biz oriented. I suppose that their own bank may have suggested it, even pushed it on them, as a way to stop getting the daily call, "Did the check come in from Poland?"

Even if they did have an LOC, what was the average weekly trading volume versus the total liquid asset base (fiat + Bitcoin)? I imagine weekly trading was no more than 10% of the entire asset holdings, therefore the LOC wouldn't have needed to be much more than that.

I am looking at your asset stripping idea. Maybe banks put the FIAT squeeze on MtGox, and Karpeles seeing the injustice and afraid of further losses, hid the Bitcoin to protect his users. Now he just needs enough evidence to prove that he didn't loose $100million USD, so that he can give $500 million USD worth of Bitcoin back to his depositors. The move by the Japanese government today is probably a step in the right direction.

Mt. Gox depositors, as a community, are missing a serious opportunity to obtain justice in Japan should they fail to build bridges with the committee within the ruling Liberal Democratic Party that is trying to address bitcoin and Mt. Gox. The committee's stated goal is that “Japan should become the world’s easiest place to run bitcoin businesses", but I'd say "not so much" unless they can help clean up the Mt. Gox situation and assure depositors are made whole.  

Depositors have bought into the whole false reality of a hacked Mt. Gox, when it is provably false, and have become utterly convinced to passively await their fate at the mercy of the Tokyo bankruptcy court. It never occurs to anyone that some very clever people have been manipulating the whole situation, behind the scenes, in order to create the outcomes that they have wanted.

I was always taught to "question my assumptions", yet I fear that's not a very popular outlook these days. Most people would rather just be spoon fed their opinions by the media, when it is well known, that with enough money, one can greatly influence media through public relations and manipulation. Why would anyone do that? I can give you about 500,000,000 or 650,000 ones, depending upon which flavour of dough you prefer.

One final note:

* Attorney Nobuaki Kobayashi, the Mt. Gox court-appointed bankruptcy trustee

* Kobayashi Maru    http://en.wikipedia.org/wiki/Kobayashi_Maru (http://en.wikipedia.org/wiki/Kobayashi_Maru)
Please read this wikipedia entry about Star Trek, and tell me whether it doesn't sound very analogous to what the Mt. Gox depositor's have experienced?

Don't you ever get the feeling that some very clever fellows are ROFL at depositor's expense, and have left behind this Trekish clue as their calling card?

If that is the case, there are unintended casualties. These are some of the first people that saw the light. Where are the medics?

The situation requires you to be your own medic. There is really nobody looking out for Mt. Gox depositors - in fact they have been officially redefined as "creditors" by the court, or as Investopedia says, a creditor is "An entity (person or institution) that extends credit by giving another entity permission to borrow money [emphasis added] if it is paid back at a later date."

Once again, depositors would gain a valuable ally by getting the Japanese government on their side. This is a lot more likely to happen should some benefit be found to offer in return. That's why I suggested cooperating with their development strategy which is hinged upon using bitcoin for micropayments in developing Asian economies. They need the bitcoin tech community to get on board with it.

Good luck getting any judgement granted in the USA to fly in any Japanese court.

I agree. In fact the best you can probably hope for is to talk the Japanese government into overseeing the actions of the Tokyo court in order to make sure that it is not defrauded. 

http://www.coindesk.com/government-backed-bitcoin-industry-association-launch-japan/ (http://www.coindesk.com/government-backed-bitcoin-industry-association-launch-japan/)

How to flip the Mt. Gox depositors' story "positive"?

Should probably talk to these guys. Mt. Gox depositors need someone on their side to make sure they get a fair shake. Things are not looking so great at this point.