Happy Tuesday, Ledger readers—we hope you enjoyed the long weekend like we did. We’ll be back to Mondays next week.
Brock Pierce, a onetime Mighty Ducks child actor who helped found the cryptocurrency EOS (among other projects), has recently begun peddling an unexpected new venture. Called Gox Rising, it’s a plan to ostensibly resurrect Mt. Gox, the famed Tokyo-based Bitcoin exchange that collapsed in 2014 and has yet to reimburse creditors.
Pierce is not the only one to float the idea of bringing back Mt. Gox, which shut down almost exactly five years ago after losing hundreds of thousands of Bitcoins. In late 2017, Mark Karpelès, the former CEO of Mt. Gox, raised the prospect of a “Mt. Gox revival?” in a post on his blog, suggesting that a new management team could purchase and take over the exchange for $245 million. It’s something I discussed with Karpelès when I interviewed him last year in Tokyo for a magazine feature on the Mt. Gox saga.
But instead of welcoming Pierce’s new proposal, Karpelès quickly shot it down in a very public Twitter fight. The spat stems from Pierce’s assertion that he already owns Mt. Gox, claiming to have acquired the 88% stake owned by Karpelès after the exchange went bankrupt in 2014, as well as the remaining 12% retained by Jed McCaleb, Mt. Gox’s founder. McCaleb, who also went on to found Stellar, confirmed to Fortune that he sold his Mt. Gox stake to Pierce’s group. Karpelès, on the other hand, disputes ever reaching a deal with Pierce to sell him majority ownership of the company.
Ultimately, though, whether Pierce or Karpelès technically own Mt. Gox is irrelevant. What’s left of the exchange is in the hands of a court-appointed trustee in Tokyo; Karpelès has been stripped of any authority in the proceedings, and is also facing a forthcoming sentence in a trial over his alleged misconduct at Mt. Gox (he denies the charges). In the court’s eyes, it’s unlikely that the shares of Mt. Gox—or anything but the cash and cryptocurrency it holds—have any value at all.
Brushing aside the controversy over the shares, Pierce’s plan appears more intriguing. In a FAQ released on the Gox Rising website last week, the company explains that it is offering to pay “fair market value” to acquire “intangible assets of Mt. Gox, including brand name, domains and other intellectual property.” The vision for the new Mt. Gox is a “decentralized exchange” that will not take custody of customer funds, reducing its vulnerability to being hacked or robbed. Pierce’s company and investors would own 83.5% of the revived exchange, while setting aside 16.5% for Mt. Gox creditors, who could then potentially recoup more of their losses through their ownership stake.
Beyond that, little is known about the proposal; Gox Rising planned to host a webinar to discuss more of the details, but has postponed it twice so far (it’s now scheduled for next week).
It’s unclear how much Pierce will bid for the Mt. Gox name and website, or what “intellectual property” exists beyond that (no one ascribes much value to the exchange’s technology, whose flaws contributed to it being hacked). The Japanese court is also a wildcard, as it could potentially kibosh the whole idea. Perhaps more curious is why Pierce would share ownership of a new Mt. Gox with creditors at all, given he himself did not lose money with the exchange (is he really just being charitable?). And of course, there’s a big question mark over whether Mt. Gox would even be able to attract customers again. As a creditor named Kolin Burges told me, “It’s like having another ship called the Titanic.”
That’s a question Pierce is ready to answer. (Indeed, the FAQ includes an entry for, “Why try to launch a new exchange under the Mt. Gox brand? Or: Why call our ship Titanic?”) Speaking at an event in Japan in January, Pierce said, “What if our story of Lehman Brothers, our story of Bear Stearns—what if our story as an industry had a different ending?” He continued, “What if our industry’s ending resulted in creditors having an optimal outcome?”
Then again, five years after Mt. Gox collapsed, many people would be happy to just let the memory of the scandal fade. It remains to be seen why Pierce wants to buy Mt. Gox now, and what’s in it for him.
THE LEDGER'S LATEST
J.P. Morgan Chase Becomes First U.S. Bank With a Cryptocurrency by Erik Sherman
Crypto Detective Firm Chainalysis Raises $30 Million, Cites Growth of ‘Stablecoins’ by Jeff John Roberts
To the Moon… Bitcoin breaks $4,000. U.S. pension funds buy crypto. A blockchain to prevent video tampering and deepfakes. Ant Financial acquires UK payments company. Cryptocurrency exchange Binance remains profitable despite crypto winter. The New York Times publishes the word ‘stablecoin’ for the first time. Fintech startup Nav raises $44 million from Goldman Sachs, Point72, etc. Stripe leads $40 million round in fintech startup Rapyd. Wealthfront launches FDIC-insured deposit accounts with an interest rate of 2.24% (though that’s lower than the 3% rival Robinhood initially promised). More than 150 people bought Domino’s pizza with Bitcoin last week. Cryptocurrency M&A set a new record in 2018.
…Rekt. Critics slam ‘JPM Coin’—but others call it a “slap in the face for Ripple.” Indonesian police arrest man for mining cryptocurrency using a college computer lab. Indian police bust alleged $14 million crypto scam. Hacked cryptocurrency exchange Cryptopia remains shuttered, despite being allowed to reopen. Cryptocurrency brokerage Coinmama suffers data breach exposing 450,000 users. SEC wins court ruling against startup whose ICO allegedly violated securities laws. QuadrigaCX founder fell behind on bills before he died.
BALANCING THE LEDGER
No Balancing the Ledger this week, but here’s a clip of an interview I did with Imogen Heap—the British singer of hits including “Hide and Seek” and “Goodnight and Go”—at Web Summit in Lisbon back in November, discussing her ideas for using blockchain technology to more fairly compensate artists for their work.
ICOs aren’t dead. Despite a continuing regulatory crackdown on initial coin offerings—and the enduring bear market that has depressed prices of most cryptocurrencies in existence—scores of companies are still raising money through ICOs and token sales, according to new CoinSchedule data cited by Bloomberg. (Still, 80% of ICOs in 2017 “were scams,” the article notes, referencing an analysis by Statis Group.)
Here’s a breakdown of the current state of the ICO market vs. prior years:
Money raised in ICOs
January 2017: $82 million
January 2018: $2.1 billion
January 2019: $291.7 million
MEMES AND MUMBLES
If it looks like crypto, walks like crypto…? Last week’s announcement by J.P. Morgan that it had created “JPM Coin,” a digital currency that the bank will use to transfer payments between client accounts “instantaneously,” was met with some derision in the crypto industry. Critics’ main gripe was that JPM Coin is not a true cryptocurrency, as many media outlets described it, in that it runs on a private blockchain controlled by the bank and only accessible to certain approved customers. That differs from Bitcoin, the original cryptocurrency, and others such as Ethereum, which have public blockchains that anyone can use to transact globally and without permission.
Jerry Brito, executive director of crypto think tank Coin Center, for one, took particular issue with the conflation of JPM Coin and cryptocurrency, and sought to draw a distinction in a Medium post as well as on Twitter. Others, meanwhile, compared JPM Coin to Chuck E. Cheese’s tokens.
To be fair, J.P. Morgan itself does not call its JPM Coin a “cryptocurrency,” and actually points out in a Q&A on its website several ways that make its currency “differ from other cryptocurrencies.”
FOMO NO MO'
Don’t miss out: Topic magazine has dedicated its February issue to money, with several feature stories exploring the nature of currency. None of the articles are actually about cryptocurrency, but they still touch on the appeal of alternative assets for transacting. “The Silver Currency of Cannabis Country,” for one, provides a glimpse into a town in Humboldt County where pure silver coins known as Petols are in circulation: