Proposal for MtGox Depositors and the General Bitcoin Community. <Thoughts and edits are very welcome. This is a very rough plan.>
First, the community must understand MtGox’s status in as much detail as possible. Full public disclosure and audit of the MtGox books, including assets, liabilities, fiat and Bitcoin in, fiat and Bitcoin out, and of course deposits must be provided. Without such an audit, there are just too many assumptions at play. As of right now, the fact that any Bitcoin is actually missing, or that the sum of MtGox deposits exceed 200k Bitcoin are assumptions, albeit very likely.
Until such public record is made, no company should have the opportunity to buy the exchange. There is one exception: that is if a condition of sale requires the new owner to return 100% of the assets (fiat and Bitcoin) to their rightful Depositors. This means Depositors with Bitcoin get Bitcoin back, and Depositors of fiat get fiat back – the full amount. This is a possible scenario if a buyer deems the exchange worth USD $1 Billion or something like that.
Now, for the sake of this discussion, let’s assume that we don’t have a buyer that is willing to reimburse Depositors (and secondary Creditors), and that the Bitcoin Deposit Assets to Bitcoin Deposit Liabilities Ratio is 200k : 750k. Mark’s Bitcoin and MtGox’s Bitcoin are surrendered for the purposes of returning Depositor claims. Also, that the actual company assets and liabilities (not to be confused with Depositor Deposits) do not exceed more than $1 million either direction.
With that said, here is a possible solution:
1)
New Exchange. First establish and entity for the purposes of purchasing MtGox and creating and managing a New Exchange. As a condition of sale the New Exchange will be required to put 100% of the recovered Bitcoin (200k) and fiat currency into a custodial account to be held for later distribution, and that the distribution is proportionate to old MtGox Depositors. We need Depositors satisfied that this deal is no worse than liquidation.
2)
Lost Bitcoin Claims. As a second condition of sale, for the remaining Lost Bitcoin (550k), Depositors in this situation will maintain a proportional claim to the Lost Bitcoin. If and when more Bitcoins are found or otherwise recovered, the Bitcoin will again be distributed proportionately to those holding such claims. These Lost Bitcoin Claims are transferrable and may be sold. These Lost Bitcoin Claims will also represent an ownership stake in the New Exchange as seen in the next section. Those holding the rights to the Lost Bitcoin Claims will be called Lost Bitcoin Claimants at this point.
3)
Claims vs. Cash. It has been suggested that old Depositors should have Lost Bitcoin Claims converted into ownership in a New Exchange, but thus far offers presented by entities willing to risk new cash have not been well received by nervous Depositors burned by MtGox. On the other hand the MtGox bankruptcy situation has attracted cash investors and such a party (or parties) will be critical to the revival of the New Exchange. Without a cash injection, the attempt to re-launch the exchange would be a failed attempt. Investors (Bitcoin, fiat, or otherwise) must also feel that they are getting a good return on their investment.
4)
Ownership Split. Under this plan, the proposed ownership split would be determined by the value of the Rights to the Lost Bitcoin relative to the Market Value of the New Exchange. For example, if the Lost Bitcoin is valued at USD $550k ($1 per Lost Bitcoin Claim), and the overall company is valued at $10 million, then the Lost Bitcoin Claims would gain 5.5% control of the company ($550,000 / $10 million). Looks grim, but remember, this is what the market thinks the claim is worth. On the flip side a Lost Bitcoin Claim may be valued at $1000 (For some reason real Bitcoin jumps to $1500), and the company appears to be worth $1 Billion, then Lost Bitcoin Claimants gain 55% control. As a last scenario, maybe Lost Bitcoin Claims become worth $100 each (25% chance of being found or 25% of lost coins expected to be found) and the company is still only worth $10 million (or 1 Bitcoin). If this becomes the case, then there is no need for a Cash Investor. The market is saying that the Lost Bitcoin Claimants will retain 100% control of their Lost Bitcoin and that this is worth more than the proposed new entity.
It should be noted that a prospective cash investor may allow the liquidation process to occur and attempt to acquire assets at that time. This plan may allow for Depositors to be represented at Liquidation proceedings to ensure they are compensated to the full market potential. Another thought to consider under this plan is that a Cash Investor can purchase Lost Bitcoin Claims from those willing to sell, either as individuals or as an entity attempting to purchase old MtGox assets and reduce as many liabilities as possible. In this later scenario, a Cash Investor Entity can take ownership of purchased Lost Bitcoin Claims, effectively increasing its overall percentage share of the company, possibly exceeding 50%. This should be okay, because Lost Bitcoin Claimants that want to hold out are free to do so and still maintain a percentage of the new company.
5)
Valuation of Lost Bitcoin Claims. So how do we value to Lost Bitcoin Claims? By establishing an auction. The auction should last at least a week to give everyone worldwide the opportunity to participate.
6)
Company Valuation. Because this is after the public audit, or at least after we have a good sense for the assets and liabilities at stake, the valuation will be much more reasonable than figures thrown out today. However, there are some that claim it has zero to negative value and others that are seeing a fortune at stake. Rather than speculate, let’s again let the market decide. Like the Lost Bitcoin Claims, this will be done by auction. However, value must be place on non-tangible items such as bringing in the retired director of the United States Federal Bureau of Investigations, or an already established Exchange. These have value on top of the cash value. Under this proposal, the Lost Bitcoin Claimants should have the right to “add value” to any of the Cash Investing candidates by either voting on the non-tangibles, or actually transferring Lost Bitcoin Claims to any of the Cash Investing Candidates. We may be splitting hairs here, so for the purpose of this proposal, we will opt for the right of Bitcoin Claimants to transfer Claims to Investors as it is easiest to manage.
7)
Launch. Upon launch of the New Exchange, all old Depositors will be able to log into their accounts and find their Bitcoin and fiat cash balances. They can begin the process of withdrawing their balance immediately.
Unclaimed Balances. Unclaimed balances are subject to local country laws. However, as a 3 condition of sale, and where possible, should they exist for one year or longer, the unclaimed balance should be treated as “found” Bitcoin and distributed to Lost Bitcoin Claimants per Section 2.
9)
Regulations. There are regulations in various countries that may limit the flexibility to run this plan as proposed. However, under this plan we first acknowledge that like Bitcoin is changing the world, we can improve the way corporations come into existence and operate throughout the world. As such, we petition all courts involved, Japanese, US, and everywhere else, and ask that we self regulate. If we cannot get the court (especially Japanese Court) to agree, which is the most likely scenario, then we move on to Section 10.
10)
Home Country. Carefully consider the home country of the New Exchange. Japanese courts may require that the assets stay in Japan, however other options include the United States, where most current users of Bitcoin reside (
http://www.bitcoincharts.com/charts/volumepie/), Denmark where Bitcoin is going unregulated, Germany where it is becoming accepted, United Arab Emirates where new world finance is trending, or any number of other great countries where free markets rule:
http://www.forbes.com/best-countries-for-business/list/. Set up shop in the selected country.
11)
Action. To make all of this happen will cost money. How much, is not known, but it shouldn’t exceed USD $1 million and likely can be done for under $100k and a few smart volunteers. If each Depositor kicks in USD $1 to $2 per Bitcoin lost, this should be enough, but may not even be necessary. On the volunteer side, to begin, we need a Japanese attorney fluent in English, Japanese and corporate bankruptcy. It would be good if they practice patent law as well, as some proof of technical prowess. Secondly, we need Blockchain and financial auditors. More will need to follow.
12)
Donations. Donations can be made to a public wallet that is protected by someone that can be TRUSTED. (Like it or not, we need trust to do business.) I will not create or manage such a wallet and I ask that you do not send donations to me for this purpose.
PS> For shits and giggles, is there anyone out there that can write the code for this new business? I’d love to see this be the first corporation managed by the Bitcoin platform. Ethereum?
