Mt. Gox creditors fail to set repayment date, but markets to remain unaffected

Eight years ago, in 2014, the crypto world was rocked by the crippling hack of Mt. Gox, a popular Bitcoin (BTC) exchange, which was forced to shut down after miscreants were able to make away with approximately 850,000 BTC, worth more than $16 billion at today’s exchange rates. 

At the time of the incident, the Tokyo-based exchange was the world’s largest cryptocurrency trading ecosystem, processing over 70% of the crypto market’s daily Bitcoin trading volume. However, due to its lack of quality security protocols, hackers were able to make their way with the crypto assets of over 24,000 customers, which is still one of the largest such incidents in the history of the digital asset industry.

Now nearly a decade removed, Mt. Gox customers affected by the hack have been issued a notice that they have until Sept. 15 to make or transfer a claim. However, the payouts have been engulfed in a long-standing legal battle, with the rehabilitation plan being delayed numerous times. Recently, there have been rumors that the payout could happen soon, potentially in a major Bitcoin dump.

The rumors gained so much traction that Mt. Gox creditors recently had to take to social media to say that they were completely false, with one highlighting that the defunct exchange’s repayment system is still quite far from going live.

Creditors set the record straight 

As part of a recent Twitter thread, Eric Wall, a creditor for Mt. Gox, noted that contrary to the news floating on the internet that 137,000 BTC would be dumped into the market soon, the exchange had not yet devised the infrastructure needed to facilitate such a move and, therefore, there would be no repayments anytime soon.

Furthermore, as things stand, Wall highlighted that customers affected by the Mt. Gox hack have not even been able to register the address where their due Bitcoin and Bitcoin Cash (BCH) payments need to be transferred, signaling that there is no immediate reason to worry about an impending market crash.

The creditor also believes that the payments will most likely take place in many installments, thereby calming fears that thousands of BTC will be sold all at once and subsequently dump the price of the flagship crypto. Lastly, Wall noted that the crypto exchange has yet to issue an exact timeline regarding the repayment process, further arguing that even if the BTC were released, it would make sense to “buy rather than sell” the asset due to the prevailing market conditions. At press time, BTC is trading at $18,893.

Similarly, Marshall Hayner, another Mt. Gox creditor, took to Twitter to confirm that Mt. Gox was nowhere close to issuing its due payments. He assured market participants that a vast majority of the individuals due to receive Bitcoin had “vowed” not to sell their holdings in the near term.

The proposed redistribution plan and its possible implications

Earlier this year, in July, Nobuaki Kobayashi, the appointed rehabilitation trustee for the Mt. Gox rehabilitation plan, announced to the public that the exchange is preparing a repayment plan. In an official document, he and his team noted that eligible individuals have the option of receiving their payments in the form of either BTC or BCH. 

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The rehabilitation plan first came into existence two years ago and was approved last year. However, out of the 850,000 BTC owed, the exchange only has approximately 150,000 BTC to pay its creditors. Providing his insights on the matter, Konstantin Shirokov, a representative for decentralized money market Fringe Finance, told Cointelegraph:

“The distribution of the said coins is just a matter of time, and this accounts for what has fueled the rumors about the exchange finalizing plans to release this money. The agitation of the potential beneficiaries is very valid, and so are the concerns of the investors in the broader digital currency ecosystem about what the release and probable sell-off of that massive amount of coins can have on the price of Bitcoin.”

He added that while the proposed coins are worth just about $2.9 billion at today’s prices, which should not weigh the market down so much, the general sentiment in the market is rather negative. “As such, the release of the coins and the likely offload can depress the price of Bitcoin in the days following the release,” Shirokov stated.

Lastly, creditors are due to receive an initial base payment, after which they can choose to take the remainder of their funds via a lump sum payment or smaller reimbursements at a later stage. The repayments are being made via cash reserves acquired via the liquidation of Mt. Gox’s BTC coffers.

Mt. Gox’s stolen BTC stash moves after nine years

Late last week, it came to light that two old Bitcoin addresses created back in 2013 sent approximately 10,000 BTC to several different crypto accounts. Using heuristics and clustering techniques, it became apparent that the BTC was associated with Mt. Gox. In this regard, a data engineer working for OXT Research, a platform providing analysis of ongoing events in the Bitcoin ecosystem, noted: 

“Despite a Kraken deposit, these coins are not sourced from Kraken. They are however sourced from Mt. Gox and possibly controlled by Jeb McCaleb. […] The user annotation to this [BTC] cluster links to a blog post by @wizsecurity blog. Wizsec is the Mt Gox saga expert.”

Following this, another 5,000 BTC related to the defunct exchange was transferred to various third-party accounts. The movement was caught by BTCparser and occurred exactly 120 hours after the above-stated development. According to a researcher for OXT Research, this latest Bitcoin, too, is connected with Mt. Gox and could possibly even belong to Jed McCaleb.

What lies ahead for those affected by the Mt. Gox saga?

For this massive BTC stash — that had been lying idle for nearly a decade — to suddenly start moving around when the digital currency is trading for approximately $20,000 is striking, to say the least, since these tokens have absolutely nothing to do with Mt. Gox’s repayments other than the fact that the timing of this move is serendipitously aligned with the trustee’s latest update.

As per a rehabilitation plan released by Kobayashi recently, after Sept. 15, there will be a phase of “assignment, transfer or succession, provision as collateral or disposition by other means of rehabilitation claims are prohibited.” That said, the document is still quite gray in its wording when it comes to setting a deadline for the “restriction period” but does acknowledge that it will be followed by the first entire repayment to creditors, as outlined in the rehabilitation plan that was approved by 99% of all eligible users affected by the case.

Lastly, the document notes that claimants who file a notice of transfer after Sept. 15 may potentially see the trust being unable to determine who to send the due amount to, adding:

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“This may result in rehabilitation creditors being unable to receive their preferred Repayments, the Repayment date being delayed significantly compared to other rehabilitation creditors, or at worst, the Repayment amount may be deposited with the Tokyo Legal Affairs Bureau in accordance with laws and regulations.”

Therefore, while the Mt. Gox saga continues to pique the interest of people all over the globe, it will be interesting to see how it all plays out eventually, especially with so many new developments — such as the resurfacing of the above said dormant Bitcoin — coming to the forefront recently.