Who owns the billions of dollars in Bitcoin from the MtGox claims?

Compiled by: GaryMa, Wu Says Blockchain

When Mark Karpelès' MtGox exchange went bankrupt in 2014, a decade-long drama began. Today, determining who owns MtGox Bitcoin claims has become very difficult, as many claimants have sold their claims to third-party speculators.

Additionally, customers have learned that Russian nationals Alexey Bilyuchenko, Aleksandr Verner, and their accomplices stole at least 647,000 Bitcoins during MtGox's operation, accounting for the vast majority of the total 850,000 Bitcoins held by customers.

Of these 647,000 Bitcoins, 300,000 flowed to an exchange called BTC-e, whose operators were extradited to the U.S. on money laundering charges.

Despite these stolen Bitcoins, as of September 2019, MtGox's Japanese bankruptcy trustee disclosed that it held approximately 141,600 Bitcoins and 142,800 Bitcoin Cash (BCH). At today's prices, the value of its Bitcoin and Bitcoin Cash is around $4.8 billion.

The bankruptcy trustee also held hundreds of millions of dollars in cash, which has gradually decreased due to ongoing bankruptcy legal fees.

As of September 2019, MtGox's bankruptcy trustee Nobuaki Kobayashi had received 8,095 formal claims from creditors, valued at approximately $8.2 billion at the time. At that time, the trustee had only acknowledged $1.6 billion of those claims and was still processing the remaining claims.

An early report from the bankruptcy trustee counted 24,750 MtGox customers who filed claims. This number was incorporated into the trustee's 8,095 formal claims, as many customers chose to file claims through comprehensive claims provided by third parties like Kraken.

These 24,750 claimants accounted for only 2% of the total 1.1 million customer accounts at MtGox in 2013. In fact, the vast majority of MtGox customers either had balances close to $0 or were able to withdraw their funds completely before the exchange collapsed in February 2014.

A Brief History of MtGox

Jed McCaleb created MtGox.com in 2007 as an online trading platform for physical cards. However, by 2010, he had transformed MtGox into a Bitcoin exchange.

In 2011, Mark Karpelès acquired the exchange from McCaleb, and in September of that year, Alexey Bilyuchenko and Aleksandr Verner hacked the exchange and began stealing Bitcoins from its wallets.

By January 2014, MtGox handled at least 70% of global Bitcoin transactions, and in 2013, it processed over 90% of Bitcoin transaction volume.

The exchange went bankrupt in February 2014, leading to the bankruptcy proceedings of at least 141,686 customers' Bitcoins.

Major MtGox Bitcoin Claim Holders

Claims against MtGox are highly concentrated among the largest holders. Only 226 claimants hold more than 50% of the claims against MtGox. These 226 claimants could receive 84,650 Bitcoins.

Researchers found that as of August 9, 2022, the median claim was only $92,500.

Due to Japan's bankruptcy proceedings, the identities of each claimant are not publicly disclosed. However, many claimants have voluntarily revealed their identities to the media. Here are some known major creditors of MtGox:

● MtGox Investment Fund (MGIF): As of March 8, 2023, MGIF is the largest creditor of MtGox.

● Fortress Investment Group: Do not confuse with Fortress Trust, this group has provided cash buyouts to MtGox claimants.

● Kraken: Jesse Powell of Kraken has a long history of helping MtGox customers. He served as an advisor at MtGox. At Kraken, he created a portal for thousands of victims to submit claims. Many smaller MtGox claims were consolidated through Kraken.

● Tibanne: Claims to own up to 88% of MtGox.

● CoinLab: Claims that MtGox owes it at least $170 million, potentially up to $16 billion. In 2019, CoinLab increased its lawsuit to a staggering $16 billion, disputing a revenue-sharing agreement with MtGox. Its $16 billion claim far exceeds the total claims of all other creditors and the total assets held by the MtGox bankruptcy trustee. The settlement figure for this lawsuit remains uncertain.

● Jed McCaleb: Possibly owns 12% of MtGox.

● Bitcoinica: Seeks $29 million.

● Roger Ver: Claims to have lost 577 Bitcoins personally.

Bitcoinica and MGIF jointly hold about 20% of the claims. In February 2023, they agreed to receive about 70% of payments in Bitcoin to alleviate concerns about sudden sell orders. They decided to receive compensation this year rather than wait for other lawsuits to be resolved. MGIF later reiterated that it would not sell Bitcoins immediately.

Kraken and Jesse Powell

Roger Ver and his colleague Jesse Powell attempted to help MtGox customers just days before the exchange's collapse. Later, Jesse Powell founded Kraken, and he also tried to get MtGox back up and running after an early hack in 2011 while Mark Karpelès took a break. As detailed in Nathaniel Popper's historical work "Digital Gold," both gentlemen tried to assist Karpelès in avoiding bankruptcy but were unsuccessful.

In 2014, the MtGox bankruptcy trustee chose Kraken to assist in handling some claims. Kraken stated that it would help investigate lost or stolen Bitcoins, create a system for filing and investigating claims, assist in distributing Bitcoins and fiat currency to creditors, and facilitate exchanges between Bitcoin and fiat currency.

Lawyer and MtGox creditor Daniel Kelman created MyGoxClaim.com, where certain claimants could sell their claims to interested buyers. Kraken assisted in processing some of these claims. Daniel Kelman noted that claim buyers were primarily interested in claims valued over $10,000. The Financial Times also reported that four hedge funds were bidding on claims.

As of May 26, 2016, 24,750 creditors had filed claims through Kraken's platform. The total accepted claims amounted to $417,436,518. Most of the value of the rejected claims came from one claim, amounting to 2.6 trillion yen (JPY), while the total value of rejected claims was 263,473,658,709,868 yen (over $2 billion).

MtGox Claims Are Insignificant Compared to Today's Dollar Value

After MtGox's final collapse, users who lost Bitcoins had to wait until at least April 2015 to begin filing claims. The final deadline for claims was in March 2023. MtGox's trustee offered a civil rehabilitation plan that included a 90% payout for lost asset value.

Due to the lengthy bankruptcy process, some smaller MtGox users naturally gave up and sold their claims to third parties like Fortress Investment Group.

Fortress Investment Group offered up to 80% of the claim amount. It has reportedly been purchasing claims for years, having once paid as much as $1,300 per Bitcoin. One of its selling points was that claim holders no longer needed to wait for the civil rehabilitation plan's payments; they could receive cash or Bitcoin immediately.

Fortress Investment Group's willingness to pay over $1,000 per Bitcoin reflects the evolving state of legal claims against MtGox's bankruptcy estate.

Initially, or at least as of February 2017, buyback proposals for MtGox claims were calculated based on the BTC price when MtGox entered liquidation: about $438 per Bitcoin. At that time, buyers offered claimants buyback quotes discounted from that calculation rather than the current value of Bitcoin.

Latest developments: In December 2023, Mt. Gox creditors reported on Reddit that they received compensation payments. Multiple posts on the Reddit page r/mtgoxinsolvency indicated that Mt. Gox is sending refunds in yen to users via PayPal, nearly ten years after these funds were locked on the trading platform.

In November, some MtGox creditors received emails from the bankruptcy trustee stating that the trustee planned to begin repaying creditors soon, working to start cash repayments in 2023; however, due to the large number of restructuring creditors who will receive repayments, the varying types of repayments, and the different preparation and processing times required, repayments will continue into 2024. Mt. Gox will allocate its holdings of 142,000 BTC, 143,000 BCH, and 69 billion yen, among others.