Gox Rising Creditors Update April 2019
DISCLAIMER: All information and materials have been prepared for general information purposes only to permit you to learn about Mt. Gox Bankruptcy and Civil Rehabilitation proceedings. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice. Communication on this website does not create or constitute an attorney-client relationship. Please see our complete disclaimer below.
On March 20, 2019, the Mt. Gox Trustee held a creditor meeting in Tokyo and provided several supporting documents and answered questions.
If you are a creditor who has not filed a claim in either the bankruptcy or the civil rehabilitation process, you have until May 7, 2019 to file an application for claim assessment or you may lose your claim. Please see Section 2. for details.
The deadline for filing a plan for Civil Rehabilitation continues to be April 26, 2019. It now looks likely, however, that this date will be significantly delayed.
This is principally due to the need for resolution of so-called Non-Exchange Related Claims, i.e. those claims that do not stem from the former users of Mt. Gox (which are so-called Exchange Related Claims).
The major components of the Non-Exchange Related Claims are (i) Tibanne, the holding company of Mt. Gox (which is itself in Japanese bankruptcy proceedings), and (ii) Coinlab.
Both claims have been rejected by the Trustee but both Tibanne and Coinlab have objected to this and filed petitions for claim assessment. See Section 3. for details.
Due to these unresolved claims, it is possible that a resolution to the Mt. Gox civil rehabilitation process is still more than a year or two away. This has led to the head of Mt. Gox Legal, an important, unaffiliated creditor group, selling his claim and resigning from his leadership of the group. See Section 4. for details.
In Section 5., we provide several schedules setting forth important dates, a simplified estimate of current recovery potential as well as synthesis of information provided by the Trustee in terms of estate assets and claims.
2. ACTION REQUIRED.
Creditors who have claims that the rehabilitation trustee is aware of but have not filed proofs of claim in EITHER the Civil Rehabilitation Process or the Bankruptcy Process must respond to the Trustee by May 7, 2019 or may lose their claim.
- • In accordance with the Civil Rehabilitation Act, the Trustee approved rehabilitation claims of users who have not filed proofs of claim in the Civil Rehabilitation Proceedings but have positive balances at the Mt. Gox Bitcoin exchange, as “self-approved rehabilitation claim(s).” These claims will not entitle users to vote on a Civil Rehabilitation Plan.
- • On March 28, 2019, certain creditors objected to self-approved rehabilitation claims for which relevant users have not filed proofs of claim in either the Civil Rehabilitation Proceedings or the bankruptcy proceedings
- • If these objecting creditors do not withdraw their objection to your claim and you do not file an application for claim assessment with the Tokyo District Court between March 30 and May 7, 2019, you will lose your rights as a creditor.
- • There has been recent reporting of (some of the) objections having been allegedly withdrawn (https://cointelegraph.com/news/unconfirmed-mt-gox-automatically-filing-creditors-for-repayment) but there has been no confirmation of this by the Trustee on the www.mtgox.com website. As a result, it is advised to follow the procedure set forth below regardless.
- • If your email address is registered with Mt. Gox, the Rehabilitation Trustee will email you and explain the assessment procedure. If you believe a creditor has objected to your filed claim but the Rehabilitation Trustee has not yet emailed you, please email firstname.lastname@example.org and provide the following information and attach a copy of your photo ID to the email: (i) Your name, (ii) Username registered with the Mt. Gox Bitcoin exchange, and (iii) the Email address registered with the Mt. Gox Bitcoin exchange
- • Creditors who have filed proofs of claim in the Civil Rehabilitation Proceedings (i.e., creditors with creditor numbers starting with “X” or “Y”) or in the bankruptcy proceedings of Mt. Gox (i.e., creditors with creditor numbers starting with “A” or “B”) are not affected by the matters discussed in this section.
- More information can be found at https://www.mtgox.com/img/pdf/20190403_announcement_en.pdf and https://www.mtgox.com/img/pdf/20190403_qa_en.pdf
3. TIBANNE AND COINLAB ARE DELAYING THE PROCESS.
Tibanne and Coinlab form the vast majority of so-called Non-Exchange Related Claims, which are claims unrelated to the former users of Mt. Gox. The claims of former users are referred to as Exchange-Related Claims.
Tibanne is the parent company of Mt. Gox and is itself in bankruptcy proceedings. This means that any discussion pertaining to claims is handled from one trustee to another.
The Tibanne claim stems from BTC held in Mt. Gox wallets. Due to the parent-subsidiary relationship and the fact that both entities are in bankruptcy / civil rehabilitation proceedings, it is likely that the claim will ultimately be rejected by the courts.
Coinlab, backed by Tim Draper, Barry Silbert and Roger Ver, entered into an agreement with Mt. Gox in 2012 to act as its US arm. Coinlab eventually sued Mt. Gox for $75 million for breach of agreement.
When the Mt. Gox bankruptcy was converted to civil rehabilitation proceedings, Coinlab made a new, massively increased, claim of US$ 16 billion. In addition, Coinlab has requested documents pertaining to their claim be sealed making it difficult to analyze their arguments.
In the civil rehabilitation, the Trustee has rejected both the Tibanne and the Coinlab claim. However, both Tibanne and Coinlab have objected and filed petitions for reassessment. This likely the beginning of a long process that can involve several rounds of litigation and appeal.
The ultimate size of Tibanne and Coinlab’s claims as determined by the courts will determine their rights to vote on any civil rehabilitation plan submitted. This is regardless of the fact that the details of the overall voting process have not yet been finalized.
It is unlikely that any civil rehabilitation plan will be put to a vote before the outcomes for Tibanne and Coinlab are decided as there is currently no way to determine how to weight their voting rights versus that of other creditors.
The various stages of the decision process could take several years to resolve.
In addition, it is possible that when the time comes competing plans for civil rehabilitation will be put forth which could cause additional delays.
4. LEADERSHIP CHANGES AT MT. GOX LEGAL.
Mt. Gox Legal (https://www.mtgoxlegal.com/) is a large organized creditor group founded in fall of 2017 which represents former account holders of the Mt. Gox exchange. It reportedly has over 1,000 members with aggregate claims exceeding 150,000 BTC.
The group, unaffiliated with Gox Rising, was one of the principal driving forces behind converting the Mt. Gox bankruptcy into a civil rehabilitation proceeding.
In early April, Andy Pag, the founder and coordinator of Mt. Gox Legal, announced that he was selling his personal claim and stepping down from running the group due to the protracted timeline pertaining to the legal issues with Coinlab and Tibanne among others. His tireless efforts on behalf of creditors will be missed.
Mt. Gox Legal has found a successor to lead the group. We look forward to more great work from the Mt. Gox Legal team on behalf of creditors.
- 5.1 Calendar
- 5.2 Estimated Recovery as of April 18, 2019
- 5.3 Assets of the Mt. Gox Estate
- 5.4 Summary of Claims
- 5.5 Non-Exchange Related Claims
- 5.6 Exchange Related Claims
Schedule 5.1 Calendar
Schedule 5.2 – Estimated Recovery as of April 18, 2019
Using April 18, 2019 crypto (US$ 5,306.36 BTC and US$ 309.65 BCH) and fiat (see Schedule 5.6) exchange rates, crypto creditors can roughly expect a recovery of approximately 25% of their mark-to-market claims. Mark-to-market refers to the current value of claims based on the crypto currencies held at the time of bankruptcy.
This simplified analysis
- • does not consider on-going running costs of the Civil Rehabilitation Process,
- • is based on the claims approved by the Trustee (as opposed to the total filed) and those the Trustee is aware of, and
- • assumes fiat claims are paid out 1:1.
Some of the claims rejected by the Trustee, such as Coinlab and Tibanne (see Schedule 5.4 hereto), are currently subject to legal challenge the result of which could substantially change the actual recovery percentage estimate.
Schedule 5.3 – Assets of the Mt. Gox Estate
The assets of the Mt. Gox Estate (expressed in US$) rose from a total of US$ 1.2 bn on March 20, 2019 to a total of US$ 1.4 bn on April 18, 2019 principally due to the increase of BTC and BCH prices.
Assets include approximately US$ 10m in claims that the Trustee has conservatively valued at zero as shown with footnotes below.
Schedule 5.4 – Summary of Claims
Claims filed in the Civil Rehabilitation fall into two groups:
- (i) Exchange-related claims (basically the former account holders / users of Mt. Gox)
- – 23,267 creditors filed claims for US$ 6.2bn in crypto and US$ 144m in fiat, US$ 4.5bn in crypto and US$ 64.3m in fiat was approved.
- – As per Civil Rehabilitation rules, also included were another 89,027 creditors the Trustee was aware of but who did not file with claims of US$ 755.7m in crypto and US$ 26.5m in fiat.
- (ii) Non-Exchange-related claims, principally Tibanne and Coinlab, which were overwhelmingly rejected by the Trustee.
The chart uses exchange rates as of April 18, 2019, specifically BTC at US$ 5,306.36 and BCH at US$ 309.65.
Schedule 5.5 – Non-Exchange Related Claims
Tibanne accounts for the entire amount of non-exchange related crypto claims and approximately 0.02% of fiat claims. Coinlab, with a claim of US$ 15.2bn at April 18, 2018 exchange rates, accounts for approximately 99.8% of non-exchange related fiat claims.
Both the Tibanne as well as the Coinlab claim were rejected by the Trustee. In response, both have filed petition for claim assessment and these petitions will have be decided by the courts in Japan. No non-exchange related claim assessment petitions were filed by other parties.
The non-exchange related claims which were approved by the Trustee add up to a mere US$ 38k.
Schedule 5.6 – Exchange Related Claims
Exchange related claims, i.e. claims from former Mt. Gox account holders, fall into four categories:
- • Claims filed in the Civil Rehabilitation,
- • Additional claims from claim filers that the Trustee is aware of [note (1)],
- • Claims the Trustee is aware of from users that filed in the Bankruptcy process but not the Civil Rehabilitation process [note (2)], and
- • laims the Trustee is aware of from users who did not file in either the Bankruptcy or the Civil Rehabilitation process [note (3)].
Figures are shows in the original currency of the claim as well as converted to US$ using exchange rates as of March 20, 2019 and April 18, 2019.
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