Mt. Gox Settlement Offer

[Durden_T]

Hello All,

I represent a small hedge fund in the US that has taken a position in the Mt. Gox bankruptcy being administered in Tokyo. As you all know, roughly 25k accounts (including mine, albeit a very small position, as I keep the majority of my personal holdings in cold storage) remain frozen as the court appointed trustee continues to go through the claims process and the other legal matters, chief among them, coinlab litigation.

Several months back we were approached by a Mt. Gox creditor who offered to sell his position to us for USD. I did not inquire to his motives, but I understood it was an illiquid non performing position. And frankly, I didn't care. I saw the chance to get my fund into a bitcoin play. We hired a law firm in Tokyo to engage Nobuaki Kobayashi, the Mt. Gox trustee, to help standardize the process. And we are now able to fund a cash out within 2-3 weeks of execution. The majority of the turnaround is spent waiting for a confirmation from Kobayashi's email, so in theory it could be much shorter. The transfer process is a little messier than in the States, but it offers greater transparency to offset what it loses in efficiency.

I don't pretend to know where the value of bitcoin will be 10, 5, 2 years or hell even two weeks from now. I weigh a five times fold increase roughly about the same as a complete collapse. I view the investment without bias. Bankruptcy cases have others costs as well, chief among them, administrative and legal fees. You have a fully equipped staff of expensive professionals that have been working on this case for three years and will continue to do so. Their salaries will be paid from the estate. Lastly this is a unique case in that the underlying assets are subject to massive fluctuations and in reality, have little intrinsic value.

With that said - If you want the liquidity, the hedge, the inverse of my bet, or if you want the cash to make a large bet on number 22 before the wheel spins. Please message me. I am willing to pay 25% of the converted JPY value. I can pay in US dollars. And we can escrow funds, if need be. I can also provide references.

I encourage any questions about the process or any debate in general. Happy to engage and negotiate. I am simply making a market. All I ask is that if you do not wish to sell or engage in a cordial debate, please refrain from launching into any profanity laced rant about vultures and scammers.

[BurtW]

I am not sure what you are selling here.

Let's say I have 100 Bitcoins locked up in legal molasses in my Mt. Gox account.

What is your offer?  How can you help me?

[Durden_T]

I am not sure what you are selling here.

Let's say I have 100 Bitcoins locked up in legal molasses in my Mt. Gox account.

What is your offer?  How can you help me?

Thanks for the enquiry

Okay. If you had a 100 BTC at the time of filing - Your claim amount was converted into JPY to lock in the "claim value" at the time of the loss. The rate to JPY then was roughly JPY50,050... In your case (100*50,050) the claim amount would be approximately 5,005,000 in JPY. This is all pretty easy to verify, I have the allowed claims master list with names and amounts.

The total pool of all unsecured claims in JPY is 45,609,593,503.00. The amount ultimately distributed to creditors will be based on this number. Value of the assets in the estate minus legal and administrative costs will be distributed on a pro rated basis to creditors in however many years this takes to wrap up.

My offer to you is 25% of your claim value is US dollars right now. As in 5,005,000 * .25 = 1,251,250JPY... At today's rate that would be roughly $11,500.

Does that make sense?

[Durden_T]

28%?

[bitcoinvest]

Regarding the proposal,i personally found it like joke....
As the price goes up there are many scenarios that we will get more than 70% in payout... and in one very dream scenario if price goes more that 2000 and stay there then theoretically
we can have the 100% payout.. so the offer here is way out of thinking!
 

[SolarSilver]

Regarding the proposal,i personally found it like joke....

Agreed, but can't blame him for trying ;-)

As the price goes up there are many scenarios that we will get more than 70% in payout... and in one very dream scenario if price goes more that 2000 and stay there then theoretically
we can have the 100% payout.. so the offer here is way out of thinking!

wait, I am missing something here, they sold the seized bitcoins for JPY and since then the BTC JPY exchange rate has increased 4fold. If I ask my 100 MtGox Bitcoins back in BTC (not USD), I will get less?

[Durden_T]

Regarding the proposal,i personally found it like joke....
As the price goes up there are many scenarios that we will get more than 70% in payout... and in one very dream scenario if price goes more that 2000 and stay there then theoretically
we can have the 100% payout.. so the offer here is way out of thinking!
 

I certainly can't argue with your hopes and dreams. From a fundamental perspective, in trying to value this is an investment, setting aside any emotional bias, I have to price in the nightmare scenario. And what if the price reverses? Drops to 500. And coinlab gets a chunky settlement. Have we any indication as to what Kobayashi's bill will be? If a US trustee administered a $400mln bankruptcy for 5 years that number would be in the 10s of millions for him and his staff.

All I'm saying is, if you're going to do scenario analysis, consider them all, I did. And then I'd like to make at least 15-20% return to hold on to this for x number of years with zero liquidity, which I'm using as my required rate of return to price the instrument.

I will concede that given the recent rally, while as a contrarian I think is completely propped up, does increase expected value for me. Last trade we did was @ 36%.

If you think it will pay 70 - Then really you should be countering at 50-55. Why is what you think going to happen perfectly valid but my thinking is a joke? Easy to sell something, much harder to make an offer.

[Durden_T]

Regarding the proposal,i personally found it like joke....

Agreed, but can't blame him for trying ;-)

As the price goes up there are many scenarios that we will get more than 70% in payout... and in one very dream scenario if price goes more that 2000 and stay there then theoretically
we can have the 100% payout.. so the offer here is way out of thinking!

wait, I am missing something here, they sold the seized bitcoins for JPY and since then the BTC JPY exchange rate has increased 4fold. If I ask my 100 MtGox Bitcoins back in BTC (not USD), I will get less?

Thanks I think. FYI if you guys really think it will pay that high, I will sell you my Mt. Gox position.

Also they have not sold the BTC yet. They still have them, a running debate is whether they will sell the bitcoin (either block trading or Silk Road style auction) or pay in BTC. I think the former is much more likely. What they've done is they've locked your "loss value" by converting the BTC amount to JPY using the rate at the date of filing. For simplicity, losing 100 BTC today is not the same as losing it pre MT.Gox...

[bitcoinvest]

Regarding the proposal,i personally found it like joke....
As the price goes up there are many scenarios that we will get more than 70% in payout... and in one very dream scenario if price goes more that 2000 and stay there then theoretically
we can have the 100% payout.. so the offer here is way out of thinking!
 

I certainly can't argue with your hopes and dreams. From a fundamental perspective, in trying to value this is an investment, setting aside any emotional bias, I have to price in the nightmare scenario. And what if the price reverses? Drops to 500. And coinlab gets a chunky settlement. Have we any indication as to what Kobayashi's bill will be? If a US trustee administered a $400mln bankruptcy for 5 years that number would be in the 10s of millions for him and his staff.

All I'm saying is, if you're going to do scenario analysis, consider them all, I did. And then I'd like to make at least 15-20% return to hold on to this for x number of years with zero liquidity, which I'm using as my required rate of return to price the instrument.

I will concede that given the recent rally, while as a contrarian I think is completely propped up, does increase expected value for me. Last trade we did was @ 36%.

If you think it will pay 70 - Then really you should be countering at 50-55. Why is what you think going to happen perfectly valid but my thinking is a joke? Easy to sell something, much harder to make an offer.

I have to admit that you did spend much more time to answer to me from the time that i spend to write before.
There are some points that maybe you are right and others that not. I can comment that the offer of 50% is something that i would for sure take time to think. the numbers i gave is only for example.
anyway, more is happening from what you mentioned and i do think that we will receive more than 50-55% you wrote. if all goes well for all of us one day in the near or long future will be here to write how much we did received. the fact that as the time pass more and more people willing to buy our claims is something that need put us on thinking all of us we have claims there.
i wish you all the best in your investment!

EDIT: can you tell me if decide to proceed for example how i guarantee that i will take the money will agree?

[Durden_T]

Regarding the proposal,i personally found it like joke....
As the price goes up there are many scenarios that we will get more than 70% in payout... and in one very dream scenario if price goes more that 2000 and stay there then theoretically
we can have the 100% payout.. so the offer here is way out of thinking!
 

I certainly can't argue with your hopes and dreams. From a fundamental perspective, in trying to value this is an investment, setting aside any emotional bias, I have to price in the nightmare scenario. And what if the price reverses? Drops to 500. And coinlab gets a chunky settlement. Have we any indication as to what Kobayashi's bill will be? If a US trustee administered a $400mln bankruptcy for 5 years that number would be in the 10s of millions for him and his staff.

All I'm saying is, if you're going to do scenario analysis, consider them all, I did. And then I'd like to make at least 15-20% return to hold on to this for x number of years with zero liquidity, which I'm using as my required rate of return to price the instrument.

I will concede that given the recent rally, while as a contrarian I think is completely propped up, does increase expected value for me. Last trade we did was @ 36%.

If you think it will pay 70 - Then really you should be countering at 50-55. Why is what you think going to happen perfectly valid but my thinking is a joke? Easy to sell something, much harder to make an offer.

I have to admit that you did spend much more time to answer to me from the time that i spend to write before.
There are some points that maybe you are right and others that not. I can comment that the offer of 50% is something that i would for sure take time to think. the numbers i gave is only for example.
anyway, more is happening from what you mentioned and i do think that we will receive more than 50-55% you wrote. if all goes well for all of us one day in the near or long future will be here to write how much we did received. the fact that as the time pass more and more people willing to buy our claims is something that need put us on thinking all of us we have claims there.
i wish you all the best in your investment!

Analyzing bankruptcies and making markets in them is what I do, so I do take it seriously. Once again I am not saying you will get 50-55, but it is what I would ask for if I thought ultimately this would land somewhere in the 70s. Your issue isn't my price, its that you're afraid of not getting a good deal, because you don't know what a good deal looks like. I am sympathetic to this. The key is to identify as many potential outcomes as possible, assign probabilities to them, and calculate an expected value, it would be subjective no doubt. Build in a return for taking on the risk, and discount it for x number of years. Just saying I think it will pay this, it will pay that, means literally nothing. It's all guesswork

As a rational investor, you would have a hard counter to sell. Allow me to illustrate.

If the US government offered to sell you a note that would pay $100 in three years, the safest counter party in the world. What would you pay for it today? Taking a modest return of 3% a year, that would get priced roughly 91-92. We believe this to be a slam dunk, because not paying its debt would trigger a cataclysmic geopolitical series of events.

Let's move down the list. Take that same example and change it from US to Microsoft. You'll want a slightly higher return. Maybe you pay 87-88 for it? This is still assuming without a shadow of doubt you get a 100% in three years.

How about JC Penny or Sears? 75-80?

How about a company already in bankruptcy? What's the penalty for them not paying you back? They are already bankrupt. Now introduce lawsuits, the Government of Japan, the volatility of BTC, the illiquidty premium( I can unload Microsoft, US paper), Misc costs, transaction costs of transferring claims. And the fact that I think 100% is just as likely as 0%.

I can understand not agreeing with my analysis or wanting to make an undiversified bet by sticking it out. Just trying to highlight the thought process

[rcocchiararo]

So, if my claim is for 30.8 btc (rounding down), it matters not how much BTC is worth now/when offer or distribution happens for:

1) What you offer
2) What i might get paid when/if distribution finally happens?

I am 100% sure i understand correctly that you offer 25% of the JPY conversion (including or excluding damages?)

What now i have doubts about is in regards to what/how/how much i would get payed when/if distribution happens.

Will i get a % of the btc i lost, or a % of the recognized JPY? (depending on the BTC value, if the 2nd option is correct, i might get from nothing to the total that was accepted and converted).

If the first option is the correct one, and i get, say, 20% of the accepted BTC, in BTC, then i might end up with more than the JPY recognized.

I would need confirmation on how it would go, to think if i should accept this offer or keep waiting

[bitcoinvest]

AFAIK the distribution will be done according to the converted JPY.
We are locked on this.
It doesn't matter anymore how much Bitcoins you had there. All the % that we are speaking is for this converted ammount you have now in JPY.

[Durden_T]

AFAIK the distribution will be done according to the converted JPY.
We are locked on this.
It doesn't matter anymore how much Bitcoins you had there. All the % that we are speaking is for this converted ammount you have now in JPY.

Exactly.

[rcocchiararo]

AFAIK the distribution will be done according to the converted JPY.
We are locked on this.
It doesn't matter anymore how much Bitcoins you had there. All the % that we are speaking is for this converted ammount you have now in JPY.

Ok

So, best case scenario, we get 100% of the JPY that is listed, worst case we get nothing.

Higher BTC value gives us better chance to get the total JPY.

I got confused when they talked about distributing in btc.

[Tzupy]

What happens if at the time of distribution, bitcoin price will be about 3000$ (could reach 4000$ at the end of this year)?
Will the creditors get ~150% of their approved claims, or will they get only 100% and Kobayashi will keep what's over 100%?

[cruiser]

What happens if at the time of distribution, bitcoin price will be about 3000$ (could reach 4000$ at the end of this year)?
Will the creditors get ~150% of their approved claims, or will they get only 100% and Kobayashi will keep what's over 100%?

MtGox may become solvent and claims could be closed.

[freedomno1]

What happens if at the time of distribution, bitcoin price will be about 3000$ (could reach 4000$ at the end of this year)?
Will the creditors get ~150% of their approved claims, or will they get only 100% and Kobayashi will keep what's over 100%?

MtGox may become solvent and claims could be closed.

A legal set of arguments trying to determine if the coins should be pro-rata or not and a fun set of legal cases on if the returns are done in Fiat and what happens to remaining coins after the suit claim period expires.

[bitcoinvest]

In the meantime some things changed and according to some calculation at current price we can have up to 100% repayment.
What i wanted to ask is what % you offer at this point?