you still have 11.61% of your money, if MtGox did full insider deal unpunished

[zhangweiwu]

The asset  liability table is on page 4:                                        
                                                                                
http://es.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft        
                                                                                
Asset in BTC = 2000 BTC, in Fiat = 932,930,000 USD (22430000 + 5000000 + 5500000)
                                                                                
Liability in BTC = 664200 BTC (624408+120000-80208), in Fiat: 55,000,000 USD

WORST SCENARIO

If nothing has changed since that document is written, and MtGox has debt liquidated, has receivable received, and suppose they only pay BTC in BTC, pay USD in USD, then you get 0.36% of the bitcoins you lent to MtGox, you get 60% of the fiat money you lent to MtGox. Tehnically, since they didn't lose as much fiat money as Bitcoins. The media can say that fiat money is safer than bitcoins (you may argue that bitcoin is safe, implementains are not weathered as fiat money, and that bitcoin will be as safe as fiat money in the future - then it did not contradict with the public preception that fiat money is safer against robbery for the time being).

MEDIUM SCENARIO

This involve MtGox doing insider deal but not doing arbitrage, because insider deal is simply done on the book but arbitrage requires real coins, and there are no more than 2000 real coins they can do arbitrage with - not without outside help. It's apparent that they bought lots of coints at $260 between 2014-02-19 04:00GMT and 2014-02-20 04:00GMT, so let's assume they emptied their fiat account to buy these coins, that converts 22430000 USD to 86268 BTC. They can sell some of these coins later to get fiat, at a reasonable aftermath price of 700USD. Suppose they wish to pay customers / creditors BTC and Fiat at an equal rate, let that rate be x:

664200BTC × x + 55,000,000 USD × x / 700 = 86268 BTC
x = 11.61%
you get 11.61% of your money back if MtGox used all its fiat money for insider deal and was not punished for that

We can also calculate that at the price of 260USD,  their asset can only buy themselves 86269.23 coins, that is only ¼ of what is needed. MtGox cannnot pay back their customer in fulll with insider deal.

BEST SCENARIO

Now let's say the document is outdated. The document says it plans to reduce liability as its first priority, and it plans to shutdown trading by 25th (which was done according to schedule), by the time it would have covered 50% coins of the 624408 customer liability - the plan is to be found on page 3. ¹

Let's suppose MtGox has reached that goal - it is an illegal insider deal, but let's say they did it. You may think doing arbitrage can get the money they want: that is impossible. They only have 2000 real coins, and arbitrage requires real coins, while insider deal simply removes liability from the book. With only 2000 real coins, there is no arbitrage to do: you take 2000 real coins, sell it in Bitstamp, get cash, and buy more coins from MtGox - but there is no more coins in MtGox at all. You can cook the book but Bitstamp wants to see real coins. So arbitrage is a dead end.

Let's say they managed to reach that goal in the end, however magically done - since they planed it, perhaps there is a way to do it - at the cost of all their fiat:

Asset in BTC = 312204 (624408/2), in Fiat = 0USD
Liability in BTC = 664200 BTC (624408+120000-80208), in Fiat: 55,000,000 USD

Having 0USD in fiat money sounds horrible but having considered that the post-MtGox era would see appreciation of BTC, it would indeed be a smart move.

Now, suppose liquidator requires fiat money be paid first (from the bottom of heart of Mark K. I speculate that he wishes to avoid weighting bitcoin less than fiat money, but it is perhaps not his decision to make), he would have to sell some coins to pay back client's fiat money. 700USD is a reasonable price for post-MtGox era, hence they need to sell 78571.43 BTC to get everyone's fiat deposite fully paid. That leaves him 233,632.57 coins, roughly 35.2% of liabilities in coins. Hence you get 35.2% of the bitcoins, and 100% of your fiat money.

Please someone with related knowledge point out, that if MtGox did a few rounds of arbitrage and insider deals, are they forced to compensate them before compensating creditors?

P.S.

I'd like to suggest everyone focus on how to resolve the situation, blaming Mark K. doesn't help any more. I don't know Mark, from the photo he seems to be in his 30s, like me (I am 31, ran a business), and I know how difficult it is to steer business for a youngster and how diffcult it is to admit incompetence. (Bobby Lee also look like of the same age, perhaps the same to all other bitcoin 'heros'.) You made the mistake to trust Mark the first time, you can't expect him to do beyond what he can. For your information I have 100 coins in MtGox, I transferred half of which into MtGox a few days before their accident, and it is a harder hit for me than those of you who live in the first world (if you live in the first world, imagine that you have 500 to 800 coins stuck in MtGox).

Note 1:
The document was ambigious: it can also be interpreted as "50% coins is already covered, and we plan to cover all coins by 25th". However, MtGox doesn't have nearly enough money to cover all customer coins, even if they don't want any fiat money reserve - and if 50% coins are already covered, they would not have only 2000BTC on their asset table. Thus the document can only mean they intend to cover 50% customer coins.

Note 2:
 (why 260USD? Because they apparently already bought a lot at that price, check price chart)

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[T.Stuart]

That document simply can't be real. It is written incredibly... amateurishly?

Oh... wait 

[zhangweiwu]

That document simply can't be real. It is written incredibly... amateurishly?

I know you are joking. A real document is expected to be amateurish, a fake one is perhaps professional. You know MtGox once demonstrated their coffer with a transfer of 424242.424242BTC, where 42 is "Answer to Life, Universe and Everything", that was amateurish and people ain't scaried off.

EVEN if the document is a fake, the real one should look better. How can MtGox later produce a more horrible genuine asset table when this one has only 2000BTC in the wallet?