MtGox withdrawal delays [Gathering]

[JorgeStolfi]

Someone who has made deposits on Gox from his own wallet could easily prove that he still owns the addresses from which the deposits were made by signing a message saying so, thus proving something that no hacker could.

I don't know whether the court will accept that.  However, the source of the deposits noes not prove account ownership.  Consider deposits in yen: what would have prevented person X from sending a bank transfer to MtGOX, to be deposited in the account of person Y?

Moreover, suppose that the real owner Y of the account is someone who cannot claim it because he is a criminal at large, a tax evader, a MtGOX manger, etc..  He could ask his "clean" proxy Y to claim the account, and sign the message himself.  Or even give Y the private key. 

The basic problem here is that knowledge of the private key gives possession of the coins in some address, but does not establish whose property they are.

[Amitabh S]

any info on how the 800k or so btc were "stolen"?

so much money does not just vanish into thin air.. there has to be a trail.

[JorgeStolfi]

Imagine that a gold exchange has got only two customers, George who deposited a chunk of gold worth 990'000 dollars, and Dick who deposited only 10'000 dollars, at the same time.  The same day the exchange goes bankrupt, and the liquidator finds only 5'000 dollars worth of gold and 5'000 dollars in cash, that is, 1% of what it was supposed to have.  How will they be split?

If the liquidator were to compute gold and dollar claims separately, Dick would get all the 5'000 dollars (50% of his deposit), while George would get all the gold (about 0.5% of his deposit).

That is why I think that the MtGOX liquidator must convert all claims to yen, so that he can establish the ONE fraction of the assets that each customer should get. EDIT: Not for moral reasons, but to avoid legal claims of unfair division of the spoils.

In the example above, George's claim would be 99% of total claims while Dick's would be 1%, so they would get 9'900$ and 100$, respectively (for both, 1% of their deposit).

Once the MtGOX liquidator has established the fractions, he may let each client choose whether he wants to get his slice of the total assets as BTC or as yen.  But, even in this case, he will have to compute the total worth of the assets using the current JPY/BTC price, irrespective of the criterion used to compute the claim values. But then he will have to administer the conflict between the disparate wishes and the amount of BTC actually remaining.

In the example above, what should the liquidator do if George wanted to get his part in cash (as the law entitles him to) and Dick asked to have his in gold?

I suspect that he will choose to auction the BTC and divide the yen, to avoid that messy situation.

[Tzupy]

Imagine that a gold exchange has got only two customers, George who deposited a chunk of gold worth 990'000 dollars, and Dick who deposited only 10'000 dollars, at the same time.  The same day the exchange goes bankrupt, and the liquidator finds only 5'000 dollars worth of gold and 5'000 dollars in cash, that is, 1% of what it was supposed to have.  How will they be split?

If the liquidator were to compute gold and dollar claims separately, Dick would get all the 5'000 dollars (50% of his deposit), while George would get all the gold (about 0.5% of his deposit).

That is why I think that the MtGOX liquidator must convert all claims to yen, so that he can establish the ONE fraction of the assets that each customer should get. EDIT: Not for moral reasons, but to avoid legal claims of unfair division of the spoils.

In the example above, George's claim would be 99% of total claims while Dick's would be 1%, so they would get 9'900$ and 100$, respectively (for both, 1% of their deposit).

Once the MtGOX liquidator has established the fractions, he may let each client choose whether he wants to get his slice of the total assets as BTC or as yen.  But, even in this case, he will have to compute the total worth of the assets using the current JPY/BTC price, irrespective of the criterion used to compute the claim values. But then he will have to administer the conflict between the disparate wishes and the amount of BTC actually remaining.

In the example above, what should the liquidator do if George wanted to get his part in cash (as the law entitles him to) and Dick asked to have his in gold?

I suspect that he will choose to auction the BTC and divide the yen, to avoid that messy situation.

That's why it's important to know when that auction will be. If a 30k BTC auction (Silk Road 1) triggered a significant price drop,
the auctioning of 100k - 200k BTC is going to do significant damage to the price.

[DrApricot]

I would be very surprised if the court agrees to let some of the creditors negotiate the distribution of some of the assets.  The whole point of the bankruptcy process is to make sure that all creditors get their fair share of the spoils.  So all the depositors would have to be contacted and agree on the settlement plan.

It is starting to look like no class of creditor, whether depositor or otherwise, will benefit very much should this liquidation continue. However, you are quite correct that communication between the various groups will be a real challenge. However, an effective out-of-court settlement of the bankruptcy could be a win-win solution for everyone concerned.

If we use the Kobayashi Maru test as an analogy, wherein Star Fleet cadets are tested on how they handle a no win situation, perhaps depositors would be wise to emulate the example of James T. Kirk instead of that of Mr. Spock. As you may recall, Kirk quietly reprograms the test simulator and comments that he doesn't believe in "no win" situations.  Even though he circumvented the rules, in the end he gets an award for "original thinking". Spock believes only through his own sacrifice can he deal with "no wins". See http://en.wikipedia.org/wiki/Kobayashi_Maru#James_T._Kirk.27s_test

Japanese law gives priority to certain classes of creditors (IIRC, employee salaries first, then secured creditors, then unsecured creditors, then investors, and management for last).

In this case the bulk of creditors are the former clients, which are all in the same bag.  On the average, they will get no more than 1/5 of their account balances, courts or no courts.  Thee is no "win" possible for them.

One big difference between bankruptcy and the Sunlot proposal is that the latter would NOT exclude management from the division; and in fact has "absolved" McCaleb and Gay-Bouchery from any wrongdoing even before any investigation, and would not say what they will do about Mark.

I don't think that the Japanese courts will take Star Trek jurisprudence into account.  Ultraman's , perhaps. 

It's a huge win for lawyers and accountants who will profit when the rightful owners of Mt. Gox's bitcoins can't agree on how to settle the matter. The only way to reverse this is for depositors to somehow work together and overturn this liquidation with an out-of-court settlement.

Thanks for pointing out the obvious though--liquidation is a total "no-win" for everyone. Even Spock would agree, liquidation isn't "logical" when there can be a better way.

[DrApricot]

I suspect that he will choose to auction the BTC and divide the yen, to avoid that messy situation.

That's why it's important to know when that auction will be. If a 30k BTC auction (Silk Road 1) triggered a significant price drop,
the auctioning of 100k - 200k BTC is going to do significant damage to the price.

Another excellent reason why liquidation should never be allowed to proceed.

I'm no lawyer, but my understanding is Japanese law provides having a committee participate in the proceedings assuming that it can meet certain conditions, including representing all depositors and other creditors, and having the support of more than half of these. At the very least Mizuho Bank and several of Mt. Gox's very large bitcoin depositors would have to come to some kind of agreement including presumably a plan to refinance the exchange.

This brings up the practical problem of how best to expedite formation of such a committee and fund its activities. This would entail the recruitment of legal representation in Japan to negotiate with the creditors and the court. The goal would be a quick and simple out-of-court settlement rather than a protracted liquidation wherein everyone loses.

Edit:
I was just rereading Nobuaki Kobayashi's report distributed at the July creditor's meeting. In it, he states:

VIII. Corporation assuming business
I am searching for a company which desires to assume the business, etc. of the bankrupt entity. The company that will assume the business is not determined at this point, but several companies showed interest and I continue to conduct the selection process.

From this, it does not appear the trustee intends to liquidate Mt. Gox at all, but rather to transfer it to some company that wants to assume its business. Of course, how much will be left for depositors is still an open question, as his primary objective appears to be finding a company who will acquire it. It should be noted that Kobayashi's law firm is involved in lots of mergers and acquisitions.

The only way around this is for depositors to take a more aggressive role, and press for an out-of-court settlement in which they get a better deal for themselves.

[JorgeStolfi]

It's a huge win for lawyers and accountants who will profit when the rightful owners of Mt. Gox's bitcoins can't agree on how to settle the matter. The only way to reverse this is for depositors to somehow work together and overturn this liquidation with an out-of-court settlement.

Thanks for pointing out the obvious though--liquidation is a total "no-win" for everyone. Even Spock would agree, liquidation isn't "logical" when there can be a better way.

You mean, let Sunlot get possession of the coins and money, instead of the liquidator? 

I give up, I don't know what else to say...

[JorgeStolfi]

Please folks, what you think is fair and what you would like to happen is TOTALLY IRRELEVANT at this point.  You should GET A LAWYER competent in Japanese bankruptcy law and ask him what is likely to happen and what choices you have, if any.

I don't understand you folks.  You were royally screwed by a couple of sleazy bitcoin entrepreneurs.  Now you want to take the little that is left of your money from the hands of the law -- which WILL return most of it to you, as fairly as possible -- and give it to other sleazy bitcoin entrepreneurs -- which will probably be the same guys who scammed you, actually.

[JorgeStolfi]

PS.  My favorite theory of what happened at MtGOX is that the missing coins were bought at MtGOX by one or more people, through normal trading but with non-existing money (that is, with credit created by the exchange from thin air) and sold in China, during or after the April 2013 bubble.  But those people then defaulted on the credit, by accident or by plan; the proceeds of the sales in China were somehow lost or pocketed, and MtGOX was left without coins and without money. 

If this theory is correct, the scam probably was known and/or helped by many people besides MtGOX's management -- perhaps some of the largest clients, some friends of the management, some Chinese exchange owners, some intermediaries with business connections in China and/or Japan, ...  And those people would naturally try by all means to stop the liquidation and any investigation of the theft ...

[DrApricot]

PS.  My favorite theory of what happened at MtGOX is that the missing coins were bought at MtGOX by one or more people, through normal trading but with non-existing money (that is, with credit created by the exchange from thin air) and sold in China, during or after the April 2013 bubble.  But those people then defaulted on the credit, by accident or by plan; the proceeds of the sales in China were somehow lost or pocketed, and MtGOX was left without coins and without money.  

If this theory is correct, the scam probably was known and/or helped by many people besides MtGOX's management -- perhaps some of the largest clients, some friends of the management, some Chinese exchange owners, some intermediaries with business connections in China and/or Japan, ...  And those people would naturally try by all means to stop the liquidation and any investigation of the theft ...

Your theory makes a lot of sense to me, yet there must have been more to it such as the seemingly synchronized negative PR campaign against bitcoin timed with the closure of Mt. Gox, the DDoS and transaction malleability hacking attacks in late February on it and other exchanges, as well as beforehand the rather dubious behaviour of the company's banks in slowing down its deposits in order to create an artificial cash squeeze.

The ultimate purpose of all these coordinated actions may have been to create a situation for the company wherein a takeover would be the only possible remedy. Liquidation may be a good way to prevent a takeover, yet it will also be very difficult for customers to have to wait so long and settle for so much less than they had there on deposit. That's why I would favour a simple and quick out-of-court settlement instead of a protracted liquidation. However, a takeover seems like the worst of both worlds, and should, if possible, be avoided.

[DrApricot]

If this theory is correct, the scam probably was known and/or helped by many people besides MtGOX's management -- perhaps some of the largest clients, some friends of the management, some Chinese exchange owners, some intermediaries with business connections in China and/or Japan, ...  And those people would naturally try by all means to stop the liquidation and any investigation of the theft ...

Sound familiar?. (Hint: In the news article below, substitute the word "hackers" for "suppliers", "depositors" for "people/workers/staff", "bitcoins" for "jobs", and "Mt. Gox" for "Phones4U".)

Asset-stripping by bosses finished Phones4U
How Phones4U failed

More than 5,500 people in 550 workplaces across Britain could lose their jobs after sales company Phones4U went into administration.

Phones4U bosses have done everything they can to paint themselves as victims of duplicity by its ruthless suppliers. They are less keen to talk about their own role.

Former boss John Caudwell made £1.5 billion when he sold it to private equity sharks.

It is currently owned by BC Partners, which bought it with money it didn’t have then milked it dry to pay off debts.

This meant that Phones4U had little “commercial flexibility” as its massive profits went towards paying its creditors. This led to it losing out in the cutthroat competition between rival companies.

BC Partners still made a 30 percent profit out of the scam. But the staff who made their success possible have been kept in the dark then thrown to the wolves.

One shop worker told Socialist Worker, “I knew for about six months that things were coming to an end, but was told I was wrong.

“Upper management were chopping and cutting back staff levels to an unmanageable degree and expecting everyone to do more. They cut commissions massively last year, then again in July.

“The messages from the top were inconsistent and contradictory. They knew this was coming.”
http://www.socialistworker.co.uk/art/39005/Asset-stripping+by+bosses+finished+Phones4U

[freedombit]

If this theory is correct, the scam probably was known and/or helped by many people besides MtGOX's management -- perhaps some of the largest clients, some friends of the management, some Chinese exchange owners, some intermediaries with business connections in China and/or Japan, ...  And those people would naturally try by all means to stop the liquidation and any investigation of the theft ...

There are too many people that have a significant interest in this case, and the Bitcoin value doesn't disappear, it just transfers. Mark Karpeles, Nobuaki Kobayashi, and probably others have key pieces of information that can easily be made public:

1) The total Bitcoin and fiat lost
2) The destination addresses (in the case of Bitcoin) and SWIFT accounts (in the case of fiat) where the cash and assets were pulled (or transferred)

Any government official that has the authority to enforce the release of this information and fails to do so will fall into great public scrutiny and I think not fair well as it only hurts the Japanese economy. I just don't think that the Japanese society will allow this to be brushed under the table. Too many eyes are watching worldwide, and if Bitcoin becomes a world currency and it's value strengthens, then the actions today will be further scrutinized in five or ten years.

Nazi war criminals from WWII are still being chased today:
http://news.nationalgeographic.com/news/2013/13/130507-nazi-war-criminal-holocaust-auschwitz-hans-lipschis-simon-wiesenthal-center-demjanjuk/

As much as many Bitcoin fans would like to see the MtGox issue go away, anything short of the truth will only damage its reputation amongst the very core people that helped it get to where it is now.

[Newar]

Some reading material (it really starts from about page 25):

http://k.lenz.name/LB/?p=10916

I have written a short book on Bitcoin regulation in Japan. A free PDF file is here:

Lenz Japanese Bitcoin Law

[vayvanne]

it would be interesting to back track btcs are dumping on okcoin to check are they origin from mtgox or not.

[bitcoinvest]

what can we expect from this?

http://www.brandonsun.com/business/breaking-news/court-partially-certifies-canadian-class-action-lawsuit-in-mt-gox-collapse-276974341.html

[JorgeStolfi]

what can we expect from this?
http://www.brandonsun.com/business/breaking-news/court-partially-certifies-canadian-class-action-lawsuit-in-mt-gox-collapse-276974341.html

So the Canadian victims too agreed with the Sunlot plan? All of them?

IMHO, if the Japanese court agrees to turn MtGOX over to Sunlot, you can expect that the management of MtGOX will walk away free and keep all that they got, that Sunlot will distribute some part of the remaining 200'000 BTC to the victims (after taking their cut),  that there will be no criminal investigation, and that the new MtGOX will flop so those 16.5% equity will be worthless.

[iikun]

what can we expect from this?
http://www.brandonsun.com/business/breaking-news/court-partially-certifies-canadian-class-action-lawsuit-in-mt-gox-collapse-276974341.html

So the Canadian victims too agreed with the Sunlot plan? All of them?

IMHO, if the Japanese court agrees to turn MtGOX over to Sunlot, you can expect that the management of MtGOX will walk away free and keep all that they got, that Sunlot will distribute some part of the remaining 200'000 BTC to the victims (after taking their cut),  that there will be no criminal investigation, and that the new MtGOX will flop so those 16.5% equity will be worthless.

or Sunlot, after taking over, could just as easily claim the problem was bigger than they thought & arrange to wind the company up. As according to the equity split at that time they would then walk away with the majority of 200,000btc (against their investment of 1btc). I don't trust Kobayashi even to wipe his ass after he goes to the toilet so I can easily see him "overlooking" adequate safeguards as would prevent this kind of thing from happening.

[hgmichna]

… I don't trust Kobayashi even to wipe his ass after he goes to the toilet …

Japanese toilets have auto-clean warm water jets. So no problem, at least not for him. 

[bitcoinvest]

after so many months why no response from Tokyo Police? what are the investigation results? why no updates on mtgox.com from Kobayashi?

[IIpeBeD_MeDBeD]

after so many months why no response from Tokyo Police? what are the investigation results? why no updates on mtgox.com from Kobayashi?

because we dont see our bitcoins
NEVER