Sorry for the late response, I have been under the weather as of recently, and wanted to spend some time researching before responding.
I want to say that I have read creditors can receive a BTC payout under certain circumstances.
That seems unlikely. Perhaps I'm mistaken about that though.
The relevant
section of the US Chapter 7 bankruptcy code refers to "property" being distributed to creditors, not "dollars" nor "cash" ect.. I understand that "property" of a debtor is usually sold by the bankruptcy trustee in a Chapter 7 bankruptcy because bondholders (and other types of creditors) have little use for the building that used to be a company's headquarters (and other similar assets) -- also a company may have many creditors but their assets cannot be easily divided, but have many creditors. For example a car dealership going through Chapter 7 bankruptcy may have 100 cars as their only assets, but have 1,000 creditors; a 1/10
th ownership stake in a single car will be of little value to a creditor (or most anyone really), but 1/1000
th of the liquidation price of 100 cars would have more value to the creditors. As you are aware, it is trivial to split up ownership of 1 BTC (or ~202k BTC), and if bitcoin is distributed via a deposit into creditors' kraken account, then things like transaction fees will not need to be accounted for.
A distribution of BTC to Gox creditors may work somewhat similar to a
Section 363 sale (
statute) via trading BTC for claims against the Gox estate. This is not quite an
applies-to-apples comparison, however I believe the principal is the same.
Here is a report by the bankruptcy trustee that has a listing of the assets, liabilities and approved bankruptcy claims of the MtGox estate.
Well, this is certainly interesting:
"The bitcoins held by the bankrupt entity
are not included in the assets set forth above.In addition, the amount of bitcoins managed by the bankruptcy estate as of March 5, 2017 is 202,185.36428254 BTC."
IIRC, at the time MtGox shut down, it was disclosed that their hot wallet was ~empty and Gox was "tricked" into ~emptying their cold storage, however not long after ceasing operations, a cold storage wallet that was "forgotten"/"lost" was subsequently found, and this wallet contained roughly this amount.
It is my understanding all account holders are unsecured creditors and that someone holding 100 million jpy worth of BTC would be treated the same as someone holding 100 million jpy worth of USD in terms of the jpy (equivalent) amount of money they will receive. it is my understanding that those who held BTC in their MtGox account do not have a claim against BTC owned against MtGox, but rather have a claim against all of MtGox's assets that are not otherwise encumbered (by a mortgage for example).
That is my understanding as well. It is part of why I expect that claims won't be paid in BTC.
See my comments above about the specific wording of the US bankruptcy law.
To say that "bitcoins" do not exist is really more of a technical statement than a legal one. You could make the argument that USD in your bank account does not exist because there is not corresponding physical dollars (anywhere) to backup the dollars your bank statement says you have.
Exactly my point. There are no physical dollars to back up the dollars your bank statement says you have. If there were a run on the bank and the bank was somehow NOT FDIC insured, then the bank would end up in bankruptcy. As such, their assets would be liquidated to pay claims. Since there are no actual dollars, there would be nothing to liquidate and nothing to pay with (aside from other assets such as the equipment).
A more common scenario is that a bank fails because of (credit losses), depositors up to $100,000 (as of about a decade ago, $250,000) are repaid in full, and depositors who have USD in excess of FDIC insurance limits will become unsecured creditors for amounts in excess of their FDIC insurance limits.
Most banks do not have sufficient "dollars" to honor withdrawals for all their depositors, but rather have physical cash in their various branches to handle the day-to-day cash withdrawal requests, have USD 'credits' on deposit at the Federal Reserve to allow the bank to pay checks deposited at other banks, and for a cushion, and own other assets (loans due to the bank), which make up the majority of a bank's assets.
The USD 'credits' at the Federal Reserve are treated a "real" dollars because the US economy and the banking system values these as "real" dollars. Similarly, the BTC economy has sufficient faith in private keys that can sign unspent outputs on the blockchain with the most work that follow Bitcoin consensus rules (I think I got that right), so that having a transaction confirmed to an address whose private keys are controlled by the receiver are just as good (better) than controlling the private keys to 13VgsHAKzGS6qh9dRtEETpycKvzRQHHsLY if someone wanted to own 0.01055688 BTC.
It would probably not be feasible to sell actual possession of private keys from one person to another as this is essentially accepting a 0/unconfirmed transaction on the part of both the buyer and the seller. If Alice were to sell the private key to address 1bitcoin... to Bob, if both are subject to the jurisdiction of the same court, and both have sufficient assets to satisfy any judgment then the transaction has the potential to end poorly.
Alice could agree to provide Bob with the private key to 1bitcoin... at 2:00 PM GMT on August 4, and that as of the block immidiately prior to this time, this address will have 0.3 BTC (etc.), and that Alice will not broadcast any transactions signed by this private key, in exchange for $500.00. If Alice were to provide Bob with this private key, and a transaction were to be broadcast to the network at 2:00:02 PM GMT that spends the entire .3 BTC to a never-before-used Bitcoin address, then it would be impossible to know which party broadcast this transaction; the case would get litigated and neither side would be able to prove the other party broadcast the transaction.
Certainly, but the intellectual property of the private key is the only actual asset. What can be done with that private key is secondary. Like I said, the law hasn't really caught up with the technology and it creates some very interesting situations.
The law somewhat already addresses this. For example, say I was purchasing property from you located at 123 Elm Street, in Cook county. If I were to purchase title insurance, the title company would look at the Cook county public records to make sure when you purchased the property that the grantor that
signed the deed to you matched the grantee on the previous deed, that the grantor that
signed the prior deed matches the grantee listed on the second prior deed, and so on for an amount of time that will vary based on the jurisdiction the property is located in. However if you had purchased this property at a foreclosure sale, then the grantor on the deed to you will not match the grantee on the previous deed, however the foreclosure would resolve this discrepancy (this is a broad simplification of how this works, however it conveys the overall point). The value of your property is not derived from your ability to sign the deed, but is rather derived from the property itself.
Another example would be if you agreed to buy 1 BTC from me at an agreed upon price, with the condition that I send 1 BTC to the address you specify - if I send 1 BTC to your address, but you fail to send me the agreed upon USD, then you would likely be guilty of larceny (depending on the specific circumstances).
One way to resolve the above problem would be sell agency ownership of the private key in which Alice agrees to sign any message/transaction provided by Bob with the private key to 1bitcoin..., to not sign any message/transaction not provided by Bob, but would retain sole possession of the Private key. However even this could be somewhat risky because of the risk that Bob asks Alice to sign a transaction with a weak "r" value (intentionally) as this would expose the private key to Bob.
Why wouldn't Alice simply refuse to use a weak 'r' value in her signature?
I seem to have made a mistake in this example because the 'r' value is from the person who generates the signature, not the person who generates the unsigned transaction.
