By David Meyer
December 13, 2017

As was reported last month, Mark Karpelès, the former CEO of collapsed bitcoin exchange MtGox, could make serious money from the exchange’s bankruptcy, thanks to the skyrocketing value of bitcoin and Japan’s bankruptcy rules.

Now MtGox’s creditors, who are wise to that fact, have mounted a legal challenge to pull the Tokyo-based exchange out of bankruptcy, so they too can enjoy the spoils.

MtGox claimed insolvency in 2014 after the alleged theft of around 850,000 bitcoins that it was holding for itself and on behalf of its customers. Karpelès is currently charged with embezzlement and data manipulation in Japan.

However, MtGox recovered some of the allegedly stolen virtual currency (it found a wallet it had forgotten about), and is currently sitting on just over 202,000 bitcoins.

Japan’s bankruptcy laws say a company’s liabilities must be registered at their market value when bankruptcy proceedings were initiated. When that happened in April 2014, one bitcoin was worth less than $500. Now it’s worth $17,200, meaning MtGox would get to keep the difference of around $3.3 billion if the bankruptcy proceedings follow through.

The exchange’s lawyers say the gains belong to MtGox, which is 88% owned by Karpelès’s Tibanne holding company, rather than the customers who lost big in the alleged theft. Those creditors vehemently disagree.

According to the Financial Times, four major creditors filed a petition this month asking the court to pull MtGox out of bankruptcy in order to distribute its bitcoin assets among claimants.

If the claimants succeed, they’re rich. If they don’t, and this stays a bankruptcy case, they get a payout at a value of around $440 per bitcoin, and Karpelès and MtGox’s other shareholders are very, very rich. On the other hand, he may then be a prime target for civil suits.

Karpelès suggested last month that MtGox might be revived by way of—what else?—an initial coin offering. However, he swiftly dropped that idea, writing: “After discussing with lawyers it has been confirmed this option is not practical (mostly due to compliance issues).”

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