[limited customers “getting out” once they receive distributions.]

There's a useful analysis of the Sunlot/Mt. Gox deal available. Key points:

"According to the March 28 Plan, Sunlot’s acquisition plan centers on a transfer of Tibanne KK, a Japanese corporation that owns 88 percent of Mt. Gox. KK, which is the subsidiary, actually operated the exchange." Now that's interesting. Tibanne isn't in bankruptcy, which means that Karpeles is still involved in some way.

Importantly, it should be noted that contrary to what has been reported in the media, customers will not automatically receive an actual interest in New Mt. Gox, but rather will be treated “as if they hold … a stake in New Mt. Gox” and will receive their proportional, potential upside accordingly, but they will not automatically be equity holders of New Mt. Gox. Uh oh.

Now, here's the really important part: the "screw the customers" plan.

Incentivization doesn’t always work to retain customers, so there are provisions in the March 28 Reorganization Plan that would have limited customers “getting out” once they receive distributions.

First, there is a “lock-up period” of one year following the Initial Distribution. Customers will immediately get their pro rata share of the 200,000 bitcoins comprising the Initial Distribution, however, the bitcoins they receive cannot be cashed out or otherwise transacted during the first year.

Second, the Sunlot reorganization plan contains prohibitions on customers cashing out their quarterly distributions from a commission trust account to be established (to continue to make customers whole after the Initial Distribution) until one year has lapsed after receipt of such distributions. In other words, if a customer receives a distribution from this trust account, that customer cannot immediately withdraw the distribution in cash. So under the March 28 Reorganization Plan there would be no early exit for Mt. Gox customers.

That is, unless a customer wanted to sell New Mt. Gox his/her claims. In that case, the March 28 Reorganization Plan provides pre-determined customer claims buyout discounts ranging from 50 percent to 80 percent of the claim value. Under the March 28 Reorganization Plan, if you want to cash out in the first year following consummation of the deal, you have to sell New Mt. Gox your claim at 50 percent of the claim value.

So that's the current plan. Customers don't get real Bitcoins or real money. They just get New Goxcoins and New Goxbucks.

Meet the new slimeball, same as the old slimeball.

"Defunct bitcoin exchange Mt. Gox files for liquidation: WSJ"

"(Reuters) - Defunct bitcoin exchange Mt. Gox has given up plans to rebuild under bankruptcy protection and has asked a Tokyo court to allow it to be liquidated, the Wall Street Journal reported, citing people familiar with the situation. These people cited the complexity of the procedure and the lack of realistic rehabilitation plans for the Tokyo-based exchange as reasons for the move, the newspaper said."

The immediate effect is 1) Karpeles is fired, 2) a trustee takes over, and 3) the trustee handles the liquidation and asset recovery.

"Mt. Gox faced questions on handling client cash long before crisis" - Reuters exclusive.

"A bankruptcy administrator and police are seeking to determine how a Tokyo start-up that shot from obscurity to dominate global trade in bitcoin managed to lose more than $27 million in old-fashioned cash held in a bank as well as bitcoins worth close to $450 million at today's prices."
...
"In interviews with Reuters, current and former employees at Mt. Gox described the strains that emerged over the handling of customer money just as the firm was gearing up for expansion and bitcoin was edging out of the shadows as an investment and a means of online settlement.

By early 2012, a small group of Mt. Gox employees, all of whom worked on one-year contracts, began to worry that customer funds had been diverted to cover operating costs that they estimated to be rising. Those costs included rent in a Tokyo high-rise that also housed offices for Hulu and Google, high-tech gadgets such as a robot and a 3-D printer and a souped-up, racing version of the Honda Civic imported from Britain for Karpeles, people who have reviewed expenses said."
...
"Karpeles was the only person at Mt. Gox who had access to the bank accounts, and each withdrawal request was handled manually, slowing the process, three former employees said."

With former employees talking to the press and police, jail for Karpeles looks a lot more likely.

The Mt. Gox Q and A of March 3 doesn't translate well with Google Translate. But that's mostly because text extraction from the PDF file puts in lots of bogus line breaks. If you clean up the formatting of the Japanese text, then run that through Google Translate, you get this:

Q. What is is the procedure and civil rehabilitation proceedings
A. It is a procedure that may apply " it is not possible to repay the debt on the due date without causing any significant adverse effect on the continuation of the business ," such as when , by majority vote of the creditors , civil rehabilitation proceedings , exemption of debt by with receive , and allow me to once again negotiated repayment the way forward , it is legal reconstruction procedures used to organize the debt , was to rebuild the company

Representatives of the Corporation Q. MTGOX, parent company , affiliates , have you petition .
A. At the moment , I do not do the alleged such . I do not know the possibility of the petition of the future .

Q. When briefing to creditors or will be held .
A. For a briefing to creditors , nothing has decided at this time

Q. When will resume exchange exchange of Q. bit coin .
A. It is not decided at this time. For the time being , I am believe that priority should be given the revelations of about and a bit coin is lost , for that account balance is insufficient .

Q. You Do not pull out the money you have deposited or bit coin .
A. By alleging civil rehabilitation proceedings , the court , ( it is called a " temporary restraining order " . Contents . Shown below ) instructions to preserve the property is subject to , the Company shall make payment to creditors are prohibited or that , or to dispose of the assets of the Company. Therefore , I am sorry , but it does not allow you to return the deposit and bit coin . For repayment of money or bit coin that had been deposited , you will have to come to show your repayment terms in the proposed rehabilitation plan to formulate future . We (the contents of the temporary restraining order ) any act of following .
It or reimburse (① below . Except for the exception of ③ and ②) debt 1 Company , arose under the cause of up to 27 February 2014 , to provide collateral for such debt
Debt to be collected by the example of the National Tax Collection Act of ① tax other
Debt resulting from the employment relationship with its employees and our ②
Debt according rent of office ③ The Company's , cost of utilities , the communication
Transfer of title relating to property 2 we occupy or own , setting of security interest , to the ( . Except the transaction which is managing director of the Company) the disposal of other rental
Transfer For claims with three company , How can I in order to receive a refund of the money and that the bit coin to (except the recovery of debts by the Company ) the disposal of any other settings of the security interest .

A, civil rehabilitation proceedings after the start , you'll need to the filing of claims .
Q. Do I do what the procedure to the filing proofs of claims .
A. We will by the time the civil rehabilitation proceedings is initiated , to a guide for filing proofs of claims in our website .

Q. Payment rate in the proposed rehabilitation plan or How many percent .
A. At this time, it is not possible to say the specific numbers .

Q. When proposed rehabilitation plan you be created .
A. I do not know at this time . Deadline to submit to the court a proposed rehabilitation plan is made to the court to determine at the time of rehabilitation proceedings is started , we will be able to create a rehabilitation plan before the deadline .

Q. When civil rehabilitation proceedings do you start .
A. It is yet to be determined . And whether or not to start the decision , you will be including their time , the court is determined upon decision carefully .

Q. Future , how civil rehabilitation proceedings or will continue to progress .
A. It is that the court is to determine the schedule of civil rehabilitation proceedings , do not know what kind to schedule at the moment playing procedures have not yet been started . However , the present case , since the number of creditors in many cases, the majority of which are overseas , be a schedule that is different from the civil rehabilitation proceedings general can be considered .

Q. When proposed rehabilitation plan you be created .
A. I do not know at this time . Deadline to submit to the court a proposed rehabilitation plan is made to the court to determine at the time of rehabilitation proceedings is started , we will be able to create a rehabilitation plan before the deadline .

Q. When civil rehabilitation proceedings do you start .
A. It is yet to be determined . And whether or not to start the decision , you will be including their time , the court is determined upon decision carefully .

Q. Future , how civil rehabilitation proceedings or will continue to progress .
A. It is that the court is to determine the schedule of civil rehabilitation proceedings , do not know what kind to schedule at the moment playing procedures have not yet been started . However , the present case , since the number of creditors in many cases, the majority of which are overseas , be a schedule that is different from the civil rehabilitation proceedings general can be considered .

Or more

(Input Japanese text:)

Q．民事再生手続とはどのような手続ですが
Ａ．民事再生手続は、「事業の継続に著しい支障を来すことなく弁済期にある債 務を弁済することができない」とき等に申し立てることができる手続であり、 債権者の多数決によって、債務の減免を受けるとともに、今後の返済方法を 改めて取り決めさせて頂くことによって、債務を整理し、会社を再建するた めの法的再建手続です
　　
Q.  株式会社ＭＴＧＯＸの代表者、親会社、関連会社について、申立てはしていますか。
Ａ．現時点で，そのような申立はしておりません。将来の申立ての可能性はわかりません。

Ｑ．債権者に対する説明会はいつ開催されますか。
Ａ．債権者に対する説明会については、現時点では何も決まっていません

Q. ビットコインの交換取引所はいつ再開しますか。
A．現時点では決まっていません。当面は、ビットコインが失われたことや、預金残高が不足していることについてついての真相解明が優先すべきと考えております。

Ｑ．ビットコインや預けたお金は引き出せないのですか。
　　　Ａ．当社は民事再生手続を申し立てたことにより、裁判所から、財産を保全するための命令（「保全処分」と呼ばれます。内容は以下の通り。）を受けており、債権者に対して弁済したり、当社の財産を処分したりすることを禁止されています。よって、申し訳ありませんが、ビットコインや預金をお返しすることはできません。預けていただいたビットコインやお金の返済については、将来策定する再生計画案の中で返済条件をお示しすることとなります。（保全処分の内容）当社は以下の行為をしてはならない。
１　当社が、平成２６年２月２７日までの原因に基づいて生じた債務（以下の①、②及び③の例外を除く。）を弁済したり、かかる債務に担保の提供すること
　　①　租税その他の国税徴収法の例により徴収される債務
　　②　当社とその従業員との雇用関係により生じた債務
　　③　当社の事業所の賃料、水道光熱費、通信に係る債務
２　当社が所有又は占有する財産に係る権利の譲渡、担保権の設定、賃貸その他の処分（当社の常務に属する取引を除く。）をすること
３ 当社の有する債権について譲渡、担保権の設定その他一切の処分（当社による債権の取り立てを除く）をすることビットコインやお金の返還を受けるためにはどうしたらよいですか。

Ａ，民事再生手続開始後に、債権の届け出をしていただく必要があります。
Ｑ．債権届出をするためにはどのような手続をすればよいですか。
Ａ．民事再生手続が開始される頃までに、当社のホームページにて債権届出について案内をする予定です。

Ｑ．再生計画案での弁済率は何パーセントくらいですか。
Ａ．現時点では，具体的な数字を申し上げることはできません。
　　　
Ｑ．再生計画案はいつ作成されるのですか。
Ａ．現時点ではわかりません。再生計画案を裁判所に提出する期限は、再生手続が開始される時点で裁判所が決定することになり、当社は、その期限までに再生計画を作成することとなります。
　　
Ｑ．民事再生手続はいつ開始されますか。
Ａ．現時点では未定です。開始決定をするか否かは、その時期も含めて、裁判所が慎重に判断のうえ決定することになります。

Ｑ．今後，民事再生手続はどのように進行していきますか。
Ａ．民事再生手続のスケジュールは、裁判所が決定することであり、再生手続が開始されていない現時点ではどのようなスケジュールになるかわかりません。ただし、本件の場合、債権者の数が多く、その大部分が海外であるため、一般的な民事再生手続とは異なるスケジュールとなることが考えられます。

Ｑ．再生計画案はいつ作成されるのですか。
Ａ．現時点ではわかりません。再生計画案を裁判所に提出する期限は、再生手続が開始される時点で裁判所が決定することになり、当社は、その期限までに再生計画を作成することとなります。

Ｑ．民事再生手続はいつ開始されますか。
Ａ．現時点では未定です。開始決定をするか否かは、その時期も含めて、裁判所が慎重に判断のうえ決定することになります。

Ｑ．今後，民事再生手続はどのように進行していきますか。
Ａ．民事再生手続のスケジュールは、裁判所が決定することであり、再生手続が開始されていない現時点ではどのようなスケジュールになるかわかりません。ただし、本件の場合、債権者の数が多く、その大部分が海外であるため、一般的な民事再生手続とは異なるスケジュールとなることが考えられます。

以上

Reuters: "Japan authorities looking into closure of Mt. Gox bitcoin exchange"

"At this stage the relevant financial authorities, the police, the Finance Ministry and others are gathering information on the case," Yoshihide Suga told a regular news conference when asked about Tuesday's shutdown of the Tokyo-based exchange.

That's a very high level for this to be handled at. Chief Cabinet Secretary Suga is second in command to the Prime Minister of Japan.
For Suga to make that statement is a huge deal. That will be interpreted at all the relevant ministries as "get to the bottom of this and fast".

[Suspension of payment by the debtor shall be considered that the debtor is unable to pay its debts generally.]

(I previously posted this in Service Discussion. Today, someone suggested I repost it in Legal. It seems timely.)

Here is a guide to bankruptcy in Japan, from Japan's largest law firm, Nishimura & Asahi:

IV. Liquidation under Bankruptcy Code

A. Commencement of Proceedings

An application can be made if (i) the debtor is unable to pay its debts generally or (ii) the liability of the debtor exceeds the value of the assets of debtor. Suspension of payment by the debtor shall be considered that the debtor is unable to pay its debts generally. An application for bankruptcy proceedings can be made not only by the debtor but also by creditors against the debtor.
...
D. Administration of Bankruptcy

1. Appointment of Administrator

The administrator is generally a practicing attorney. The administrator takes immediate possession of the debtor's assets (with the exception of assets which are exempt from the estate), administering and managing the bankruptcy estate until the final distribution of assets. Upon receiving permission from the court or the supervisory committee as described below, the administrator may convert all such assets into cash and deposit such in an appropriate bank.

Bankruptcies start fast - a week or two from filing to bankruptcy.

This will require a lawyer in Japan. It's what normally happens to companies in Japan who don't pay their bills.

Depositors with Mt. Gox may be able to argue that they have preferred status as secured creditors, because the Mt. Gox terms of service claim that depositor funds are kept in bank accounts separate from the company's own funds. So they should be paid before landlords, employees, etc.

[Suspension of payment by the debtor shall be considered that the debtor is unable to pay its debts generally.]

Here is a guide to bankruptcy in Japan, from Japan's largest law firm, Nishimura & Asahi:

IV. Liquidation under Bankruptcy Code

A. Commencement of Proceedings

An application can be made if (i) the debtor is unable to pay its debts generally or (ii) the liability of the debtor exceeds the value of the assets of debtor. Suspension of payment by the debtor shall be considered that the debtor is unable to pay its debts generally. An application for bankruptcy proceedings can be made not only by the debtor but also by creditors against the debtor.
...
D. Administration of Bankruptcy

1. Appointment of Administrator

The administrator is generally a practicing attorney. The administrator takes immediate possession of the debtor's assets (with the exception of assets which are exempt from the estate), administering and managing the bankruptcy estate until the final distribution of assets. Upon receiving permission from the court or the supervisory committee as described below, the administrator may convert all such assets into cash and deposit such in an appropriate bank.

Bankruptcies start fast - a week or two from filing to bankruptcy.

This will require a lawyer in Japan. It's what normally happens to companies in Japan who don't pay their bills.

Depositors with Mt. Gox may be able to argue that they have preferred status as secured creditors, because the Mt. Gox terms of service claim that depositor funds are kept in bank accounts separate from the company's own funds. So they should be paid before landlords, employees, etc.

For the last two days or so, there's been what looks like a "wall" of about 3000 BTC just below the current price. It's usually been on an even-dollar boundary. When it actually gets matched by a small sell order, the "wall" immediately drops by $1 or $2.  That's why, even though the market depth looks strong on the buy side, that strength is fake and the price continues to drop. I just watched it drop from $100 to $95 over a few minutes.

This isn't a particularly useful trading strategy.  It looks more like an attempt to prop up the price on Mt. Gox.

Does someone track bid retractions on Mt. Gox?

"Mt.Gox Bitcoins Devalued as Traders Ponder Insolvency (1)"
Key phrases: "Missing money", "Trapped funds".
Bloomberg reports "Mt.Gox didn’t return repeated requests by e-mail and phone for comment."

Bloomberg is covering this as a straightforward finance story.

[Jury Trial is set for 11/3/2014 at 09:00 AM in Courtroom 14206 before Judge Marsha J. Pechman.United States District Court, Western District of Washington at Seattle.]

It hasn't been in the news in months, but the $75 million suit by CoinLab against Mt. Gox is still underway and headed for trial in November 2014. This is a big hammer hanging over Mt. Gox.

Jury Trial is set for 11/3/2014 at 09:00 AM in Courtroom 14206 before Judge Marsha J. Pechman.
United States District Court, Western District of Washington at Seattle.

Length of Trial: 10 days

Schedule:
Joinder of Parties due by 11/14/2013,
Amended Pleadings due by 11/25/2013,
Expert Witness Disclosure/Reports under FRCP 26(a)(2) due by 4/7/2014,
Motions due by 5/7/2014
Discovery completed by 6/6/2014
Dispositive motions due by 7/7/2014
Motions in Limine due by 9/29/2014
Pretrial Order due by 10/22/2014
Trial briefs to be submitted by 10/22/2014
Proposed voir dire/jury instructions due by 10/22/2014
Pretrial Conference set for 10/24/2014 at 02:30 PM before Judge Marsha J. Pechman

Mt. Gox and Tibanne are represented by two US law firms, and various routine motions have been filed by both sides. There's no claim that the US courts don't have jurisdiction. One party is a US company, and that's good enough. So, yes, you can sue Mt. Gox in a US Federal Court.

Mt Gox claims to have moved their offices to Cerulean Tower 15F, 26­1 Sakuragaoka­cho, 150­8512 Shibuya Tokyo. They've used that address before; it's a short-term office space rental / virtual office location. Here's office rental info.

It's possible that Karpeles is holed up in there (they have enough building security and enough building exits to avoid protesters), but I doubt their whole staff is there. So where are they?

I'm watching the Mt. Gox BTC/USD price crash on BitcoinCharts (which is run by Mt. Gox) at http://bitcoincharts.com/markets/currency/USD.html. Sometimes, the value in the "Low" column takes a jump upward briefly, but it seems to come back down after a few trades.

Right now, MtGox $180/BTC; low of $176. It was around 230 an hour ago.

"Mt. Gox Shows Bitcoin's Growing Pains -- Update" - Wall Street Journal
Quotes:

Investors are increasingly concerned about the status of their Mt. Gox accounts.

In the email interview, Mr. Karpelès responded to questions about the company's solvency or protection for customers' funds by saying that the matter is confidential.

Japanese officials are cautious about making any comments about bitcoins as they wait for the Bank of Japan to finish a study about the virtual currency. Still, some Japan-based lawyers say certain restrictions, especially on exchange platforms, should be considered in order to prevent criminal use of the currency, such as for money-laundering.

"I believe that regulating exchanges would be the best way to address these problems," said So Saito, a lawyer at the Tokyo law firm of Nishimura & Asahi.

Press reports over the weekend are coming in. The financial press is saying "Bitcoin is OK, Mt. Gox is dead".

* "Bitcoin plunges 50% on Mt. Gox to hit USD230 as troubles continue" (From "Investing,com". The NASDAQ put this article on their web site.)
* "Bitcoin’s largest exchange is dying. Here’s why that’s not a problem for Bitcoin." (Washington Post)
* "Biggest Bitcoin Exchange Restores Service" (Wall Street Journal. They mean Bitstamp, not Mt. Gox.)
* "Bitcoin Protester Confronts Mt. Gox Executive. (Wall Street Journal. The WSJ itself writes: "In an email on Thursday, Reina Matsushita, a Mt.Gox spokeswoman, said the company would issue a statement later that day, but by Friday morning no new statement had appeared on the company’s website. Phone calls to the company’s office rang unanswered on Friday.")

Those are the weekend stories. It's going to be even worse for Mt. Gox on Monday, when the financial papers are back at work. Now that Bitcoin stories are being treated as regular financial stories, Bitcoin exchanges are being held to the standards of regular financial companies. Press coverage like that is usually followed by "Company declares bankruptcy" or "CEO arrested". We're past the point where excuses will work.

So what happens on Monday morning?  (A common phrase on Wall Street.)

Well, Bitstamp is back up, doing Bitcoin withdrawals as usual. The market has already recognized this; Coinbase and Bitstamp are back in sync, and BTC-E is trailing a bit. LocalBitcoins has a big bid/ask spread, but it's centered around the Bitstamp price, currently 610. (Note that the LocalBitcoins price on bitcoincharts.com (a Mt. Gox service) is wrong.) So the markets are back to normal, slightly lower than a week ago.

Except, of course, for Mt. Gox. Customers can't get anything out, so the price is a speculation on whether Mt. Gox will ever resume withdrawals of anything.

What's different this time is that the mess last week made headlines in the business press all over the world as a finance story. Not a tech story. Not a weird story. Bitcoin is now taken seriously by the financial press. Bitcoin is now being looked at like any other investment.

This doesn't mean Bitcoin is a success. It just means it's another financial product, judged on that basis. Risk, return, management competence, financial statements, the usual. Amateur hour is over. Expect more press scrutiny of Bitcoin as a financial product.

There is a regulatory summit in Japan coming up on March 6th, 2014. This is a chance to meet with Japanese regulators. Someone from the Bitcoin Foundation should try to get an invitation.

Preferably someone not currently under indictment or with a previous felony conviction.

Bitstamp issued a statement two days ago on their suspending Bitcoin withdrawals:

"Bitcoin withdrawal and deposit processing will be suspended temporarily until a software fix is issued. ... We will communicate any further developments regarding this issue."

No date was given for a fix. No alternative way to withdraw was given. Two days later, there's no new announcement. Not good. That's Mt. Gox type behavior. When Bloomberg writes a story about a failure like that, the company has to fix the problem very fast, or be lumped in with other failed and failing exchanges.

Exactly what is the proper, unforgeable way to determine if two transactions are really the same transaction? A match on inputs and outputs, first reduced to a canonical sorted form?

"Bitcoin Foundation Blames Mt. Gox ‘Unpreparedness’ for Downtime"

"The Bitcoin Foundation said the Mt. Gox Bitcoin exchange in Tokyo is to blame for technical faults that prevented customer withdrawals of the virtual currency that lost as much as 21 percent of its value today. "

The financial press isn't buying Mt. Gox's excuses.

There is a claim on Reddit that the Mt. Gox wallet program has a bug. The claim is that the signature algorithm is adding extra junk zeroes to signatures, which are ignored by some, but not all, clients. These provide the opportunity for a third party to modify the transaction by removing the junk zeroes, resulting in a valid transaction with a new transaction ID, which Mt. Gox's wallet does not recognize as its own. This allows spending Bitcoins sent by Mt. Gox, while Mt. Gox's own accounting treats the transaction as failed.

This is a checkable claim. If it's true, there should be such broken transactions in Mt. Gox's transaction list. Are there?

Also, this fix is supposed to fix the problem. But it takes bytes off the end of the signature string, not the beginning.  Is that valid?