Customers of the former largest crypto exchange Mt. Gox could finally receive compensation for their lost Bitcoin after years of uncertainty. Repayments are set to begin this July and could bring up to nine billion USD in Bitcoin (BTC) and Bitcoin Cash (BCH) to the market.
The crypto exchange Mt. Gox was once the most dominant trading venue for cryptocurrencies. Founded in 2010 as the first exchange, at times over 70% of the Bitcoin volume was transacted via Mt Gox. The sudden declaration of insolvency in 2014 therefore hit the then young crypto industry hard. The exchange stated that an attacker stole around 750,000 Bitcoin (BTC) from its customers and 100,000 of its own BTC. Investors who had a Bitcoin balance at the time of Mt Gox's shutdown were able to submit their claims to the responsible trustee. After a decade, Bitcoin claims could be paid out to creditors for the first time this July, according to a message from the Mt Gox trustee.
Subscribe to our newsletter
The best articles of the week, directly delivered into your mailbox.
Landmark case in Bitcoin's history
The platform, known as a crypto exchange, began in 2009 as an exchange for trading cards for the game Magic: The Gathering, from which the name is derived. The Magic: The Gathering Online Exchange (Mt. Gox) was rededicated as a Bitcoin exchange one year after its registration with the Tokyo Chamber of Commerce and quickly became the most important marketplace for the cryptocurrency thanks to its first-mover advantage. At the time, the exchange handled around 70 to 80% of Bitcoin trading volumes; an absolute market dominance that no other exchange could replicate.
This success story came to an end with a hacker attack. In February 2014, Mt. Gox filed an application for creditor protection with a Japanese district court, whereby 750,000 Bitcoin in customer deposits and 100,000 Bitcoin from the company itself were stolen. At the prices at the time, this corresponded to a loss of 800 million US dollars; today it would be over 52 billion. Around 200,000 Bitcoin were recovered a few months later.
In 2015, CEO Mark Karpelès was arrested by the Japanese police and sent to a high-security prison. He was released on bail around a year later before being found guilty in 2019. He had deliberately manipulated Mt Gox data in order to inflate the exchange's holdings. The Frenchman was acquitted of the charge of embezzlement and the trial ended with a suspended sentence of two and a half years.
Almost nine billion USD in Bitcoin
As early as 2018, the Japanese bankruptcy trustee began to compensate creditors with the sale of 200,000 Bitcoin (today around USD 12 billion), which were seized during the bankruptcy. Of the 650,000 BTC that were considered lost for a long time, Mt. Gox recovered a further 150,000 BTC. These have a current market value of around 8.6 billion dollars and could soon find their way back to their rightful owners, as the Tokyo District Court ruled in November 2022. In addition, there are 143,000 Bitcoin Cash (BCH) worth USD 52 million and 69 billion Japanese yen (USD 432 million).
Some investors fear the potential selling pressure that redemptions could exert on the price of Bitcoin. The victims of 2014 had bought Bitcoin at an average value of around USD 300 - several orders of magnitude lower than the current price. Investors are now speculating whether these market participants still have confidence in the cryptocurrency or want to realize their profits as quickly as possible. Whatever the former Gox users decide, a certain amount of price pressure is realistically expected. The market reacted negatively to the news.
