Hedge funds gamble on Mt Gox bitcoin payout

[alyssa85]

Article from Financial Times. :

https://www.ft.com/content/821ae69a-f0d1-11e6-8758-6876151821a6

Hedge funds in the US and Japan have devised a daring wager on the future price of bitcoin as the Tokyo courts continue to wade through the aftermath of the Mt Gox exchange collapse and one of the biggest digital heists in history.

According to people with direct knowledge of the situation, at least four hedge funds have begun buying or offering to buy claims from the many thousands of former trading account holders who lost bitcoins and cash when Mt Gox — then the world’s biggest bitcoin exchange — declared bankruptcy in February 2014.

None of the 24,000 or so claimants is expected to get back more than a quarter of the lost bitcoins and cash in their accounts. But the payout will eventually come entirely in the form of bitcoins, so the potential advantage is huge.

Nobody knows how long it will take for claims to be settled but there is the potential for it to be at least another year while five other Mt Gox-related legal disputes are resolved.

Hedge funds are offering claimholders a shortcut that lets them sell their claim now and receive 15 per cent of the yen value of each claim in cash. The hedge funds, meanwhile, are gambling on a bitcoin windfall at some point in the future.

When the claims were lodged in 2014, the Mt Gox trustees calculated their value using an exchange rate of just under $450 per bitcoin. After gains throughout 2016 the market price of one bitcoin in January surpassed $1,000 for the first time since the Mt Gox collapse, and on Monday was trading just above $1,012.

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[gentlemand]

I knew hedge funds were primed to take risks, but this seems stunningly out there to me. I presume it's peanuts to them but still seems like a bonkers roll of the dice.

Are they absolutely certain about being paid out in BTC? If I was a Gox victim the last thing I'd do is allow myself to be preyed upon again.

[alyssa85]

I knew hedge funds were primed to take risks, but this seems stunningly out there to me. I presume it's peanuts to them but still seems like a bonkers roll of the dice.

Are they absolutely certain about being paid out in BTC? If I was a Gox victim the last thing I'd do is allow myself to be preyed upon again.

I think the Japanese govt has retrieved some bitcoins from MtGox, see

https://coinreport.net/status-mtgox-claims-determined-japan-approves-bill-regulate-digital-currency-exchanges/

Overall, the amount of bitcoin the MtGox estate holds is approximately 202,185 XBT

So they have got stuff to distribute, and they have apparently verified the status of all the claims. So it is a question of waiting and seeing what amount people get.

[aardvark15]

I'm surprised that they are able to recover anything, but this could be a positive for Bitcoin. It could be a sign to potential investors that even in scams or hacks, some coins can be recovered.

[The Sceptical Chymist]

Pfft...this isn't surprising that someone is trying to monetize the payouts.  That's what hedge funds do, they gamble.  Good luck to the claimants, I say.  It would be good if they got anything back.  Fuck Gox.

[notme]

Pfft...this isn't surprising that someone is trying to monetize the payouts.  That's what hedge funds do, they gamble.  Good luck to the claimants, I say.  It would be good if they got anything back.  Fuck Gox.

My perfectly legitimate claim was denied, but unless I can find a Japanese lawyer, I'm SOL.

[pitham1]

I'm surprised that they are able to recover anything, but this could be a positive for Bitcoin. It could be a sign to potential investors that even in scams or hacks, some coins can be recovered.

People usually focus on the amount of coins lost, not the amount of coins recovered. In this case, if the hedge funds are able to buy out the claims at a deep discount, Mt Gox users will get screwed twice over.

[Hazir]

Fortunately I haven't lost any BTC during MtGox crash. But if I had I would be happy to receive any form of compensation.
So they have over 203,900,000 million dollar worth of BTC right now, why the heck they don't want to give it all to people?
I am not that shocked that hedge funds are trying to monetize it even further that is their way of doing things.

[gentlemand]

So they have over 203,900,000 million dollar worth of BTC right now, why the heck they don't want to give it all to people?

The longer it's drawn out, the more they can erode that figure with their own fees. Bankruptcy is a long and agonising process at the best of times. Somewhere as messy and opaque as Gox would be doubly so.

And what the hell happened to all the fiat? I've never seen a mention of that anywhere.

[Kimpoiluiseta]

if true MT gox bitcoin can pay out
many problem, bitcoin price can down and crash, is remember after MT GOX accident in 2013 bitcoin crash, and bitcoin price extreme down price

[LFC_Bitcoin]

$203,900,000 worth of bitcoin's? If they hand out even 1/10 of that it'll crash the price?

[gentlemand]

$203,900,000 worth of bitcoin's? If they hand out even 1/10 of that it'll crash the price?

I'd be very happy to put up with a crash if it meant some people were reimbursed.

And it's quite possible it'll attract some major OTC attention. Where else on planet Earth could you guarantee that quantity of coins and a bunch of sellers who are probably royally sick of it all? This hedge fund might be the start of much institutional interest.

[Victorycoin]

Pfft...this isn't surprising that someone is trying to monetize the payouts.  That's what hedge funds do, they gamble.  Good luck to the claimants, I say.  It would be good if they got anything back.  Fuck Gox.

I won't call that gambling as it's more to me an educated guess, seeing all the creditor claims made to date have been reviewed and the Japanese government is quite keen at restoring some sanity and confidence to the industry. Moreover, there is already 202,185 XBT, about $91 million calculated at $451 cooling down at Kraken.

At the prevailing Bitcoin price of over $1000 compared to $451, the risk by the hedge funds is well worth the taking and the Bitcoin community would be better off for it even as they won't recoup all their claims.

[jjacob]

$203,900,000 worth of bitcoin's? If they hand out even 1/10 of that it'll crash the price?

They might reimburse in bitcoins. And the people who get reimbursed might just decide to hold.
There are estimates that $300Mn might flow into Bitcoin if the ETF gets approved. That could easily counter any Mt Gox dump.

[alyssa85]

I'm surprised that they are able to recover anything, but this could be a positive for Bitcoin. It could be a sign to potential investors that even in scams or hacks, some coins can be recovered.

People usually focus on the amount of coins lost, not the amount of coins recovered. In this case, if the hedge funds are able to buy out the claims at a deep discount, Mt Gox users will get screwed twice over.

Well, everything is a risk, it depends entirely on how long it takes for the Mt Gox claims to come through.

Suppose a claimant sells his claim to a hedge fund now, when the price is $1030, and then the winklevoss ETF is denied and the price falls back to $500. The claimant has done well.

On the other hand, suppose the claimant sells now, but the ETF is approved and the price goes to $2000. The hedge funds win.

So it's really a gamble on what you think bitcoin will do in the near future.

[alyssa85]

$203,900,000 worth of bitcoin's? If they hand out even 1/10 of that it'll crash the price?

It is 203,900 bitcoins. Not dollars.

[hollandvan]

I'm surprised that they are able to recover anything, but this could be a positive for Bitcoin. It could be a sign to potential investors that even in scams or hacks, some coins can be recovered.

If this is recovered, people will massive dump bitcoin, when mtgox dead, the price was 400 usd, they have chance to dump at 1000 usd, and they will dump it.

[Victorycoin]

I'm surprised that they are able to recover anything, but this could be a positive for Bitcoin. It could be a sign to potential investors that even in scams or hacks, some coins can be recovered.

If this is recovered, people will massive dump bitcoin, when mtgox dead, the price was 400 usd, they have chance to dump at 1000 usd, and they will dump it.

Guess that entirely your opinion but dumping of Bitcoin is no longer all said and done, because as more and more people are embracing Bitcoin, its decentralized nature really comes to the fore. I tell you what will happen, some people would simply sell their coins and wait to buy again at lower prices and that is called profit taking and not dumping. Good coaches don't replace a winning team!

[panju1]

I'm surprised that they are able to recover anything, but this could be a positive for Bitcoin. It could be a sign to potential investors that even in scams or hacks, some coins can be recovered.

If this is recovered, people will massive dump bitcoin, when mtgox dead, the price was 400 usd, they have chance to dump at 1000 usd, and they will dump it.

Guess that entirely your opinion but dumping of Bitcoin is no longer all said and done, because as more and more people are embracing Bitcoin, its decentralized nature really comes to the fore. I tell you what will happen, some people would simply sell their coins and wait to buy again at lower prices and that is called profit taking and not dumping. Good coaches don't replace a winning team!

I agree that there might not be dumping. The people who will be reimbursed are the early adopters. Most people here would not even have known about bitcoin when Mt Gox collapsed. So there is a good chance that those people might hold on to their bitcoins.

[alyssa85]

I'm surprised that they are able to recover anything, but this could be a positive for Bitcoin. It could be a sign to potential investors that even in scams or hacks, some coins can be recovered.

If this is recovered, people will massive dump bitcoin, when mtgox dead, the price was 400 usd, they have chance to dump at 1000 usd, and they will dump it.

The coins have been recovered and the status of the claims has been verified, but we are a long way before people actually get compensated. It might take another year to finalise. That is kinda why the hedge funds are making their offer to claimants - they pay cash to take ownership of the claim. The claimant gets money now, the hedge fund is gambling that they will make money in the future when the coins get paid and are worth a lot more.