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

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When Mark Karpelès’ MtGox exchange Rekt in 2014, a decade-long drama began. Nowadays, it has become very difficult to determine who owns MtGox Bitcoin claims, as many claimants have sold their claims to third-party speculators.

In addition, customers have learned that Russian nationals Alexey Bilyuchenko, Aleksandr Verner, and their accomplices stole at least 647,000 Bitcoin during MtGox’s operations, the vast majority of customers’ total 850,000 Bitcoin.

Of the 647,000 Bitcoins, 300,000 Bitcoins went to an exchange, BTC-e, whose operators were extradited to the United States on Money Laundering charges.

Despite these stolen Bitcoins, as of September 2019, MtGox’s Japanese Rekt Trustee disclosed holding about 141,600 Bitcoins as well as 142,800 Bitcoin Cash (BCH). At today’s prices, its Bitcoin and Bitcoin cash value is around $4.8 billion.

Rekt trustees also hold hundreds of millions of dollars in cash, which is gradually decreasing due to the continuous reduction of Rekt legal fees.

As of September 2019, MtGox’s Rekt trustee, Nobuaki Kobayashi, had received 8,095 formal claims from creditors, worth about $8.2 billion at the time. At that time, the trustee had only acknowledged $1.6 billion of the claims and was still processing the rest.

An early report by the Rekt Trustee counted 24,750 MtGox customers who filed claims. This number is consolidated into the trustee’s 8,095 formal claims, as many customers choose to file claims through consolidated claims provided by a third party like Kraken.

These 24,750 claimants represent just 2% of MtGox’s total 1.1 million customer accounts in 2013. In fact, the vast majority of MtGox customers either had balances close to $0 or were able to fully withdraw their funds before the exchange completely 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 bought Bitcoin from McCaleb, and in September of the same year, Alexey Bilyuchenko and Aleksandr Verner hacked the exchange and began stealing Bitcoin from its Wallet.

By January 2014, MtGox processed at least 70% of the world’s Bitcoin transactions, and in 2013, it processed more than 90% of Bitcoin transactions.

The exchange went Rekt in February 2014, causing Bitcoin to go into Rekt proceedings for at least 141,686 customers.

Major MtGox Bitcoin Claim Owners

MtGox’s claims are highly concentrated among the largest holders. Only 226 claimants own more than 50% of MtGox’s claims. These 226 claimants can receive 84,650 Bitcoin.

The researchers found that as of August 9, 2022, the median value of claims was just $92,500.

Due to Rekt proceedings in Japan, the identity of each claimant is not disclosed. However, many claimants voluntarily disclosed their identities to the media. Here is a list of some of MtGox’s biggest known creditors:

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

●Fortress Investment Group: Not to be confused with Fortress Trust, which has offered a cash acquisition to the MtGox claimants.

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

● Tibanne: Claims up to 88% equity in MtGox.

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

● Jed McCaleb: May own a 12% stake in MtGox.

● Bitcoinica: Asks for a payment of $29 million.

● Roger Ver: Claimed that 577 Bitcoin were personally lost.

Together, Bitcoinica and MGIF hold about 20% of the claims. In February 2023, they agreed to collect about 70% of payments on the Bitcoin basis to ease concerns about sudden sale orders. They decided to receive compensation this year instead of waiting for other lawsuits to be resolved. MGIF later reiterated that it would not sell Bitcoin immediately.

Kraken and JessePowell

Roger Ver and his colleague Jesse Powell had tried to help MtGox’s customers in the days leading up to MtGox’s collapse. Later, Jesse Powell founded Kraken, and he also tried to get MtGox back in operation during a Hacker attack in early 2011, while Mark Karpelès took a break for a while. As detailed in Nathaniel Popper’s historical book Digital Gold, both men tried unsuccessfully to assist Karpelès in avoiding Rekt.

In 2014, the MtGox Rekt trustee selected Kraken to assist with some claims. Kraken says it will assist in the investigation of lost or stolen Bitcoin, create a system for filing and investigating claims, help distribute Bitcoin and fiat currencies to creditors, and exchange between Bitcoin and fiat currencies.

Attorney and MtGox creditor Daniel Kelman created MyGoxClaim.com where certain claimants can sell their claims to interested buyers. Kraken assisted in facilitating the processing of some of these claims. Daniel Kelman noted that claims buyers are primarily interested in claims worth more than $10,000. The Financial Times also reported that four more hedging funds were bidding for claims.

As of May 26, 2016, 24,750 creditors had filed claims through Kraken’s platform. The total amount of accepted claims is USD 417,436,518. Most of the fiat currency value of the claims rejected by the Rekt trustee came from a single claim, 260 trillion yen (JPY), while the total value of the rejected claims was 263,473,658,709,868 yen (more than $2 billion).

MtGox claim is negligible relative to today’s dollar value

After MtGox’s eventual collapse, users who lost their Bitcoin won’t be able to start filing claims until at least April 2015. The deadline for claims is in March 2023. MtGox’s trustees offer a civil reorganization plan that includes a payment of 90% of the value of lost assets.

Due to the lengthy Rekt proceedings, some smaller MtGox users naturally gave up and sold their claims to third parties such as Fortress Investment Group.

Fortress Investment Group bid up to 80% of the claim amount. It has reportedly been buying claims for years, once paying up to $1,300 per Bitcoin. One of the selling points is that claim holders no longer have to wait for the civil reorganization plan to be paid, and they can get cash or Bitcoin immediately.

Fortress Investment Group’s willingness to pay more than $1,000 per Bitcoin reflects the evolving status of legal claims against MtGox’s Rekt estate.

Initially, or at least as of February 2017, the buyback offer for MtGox claims was calculated based on the BTC price at the time MtGox went into liquidation: approximately $438 per Bitcoin. At that time, the purchaser provided the claimant with a repurchase offer discounted from that calculation, rather than the current value of Bitcoin.

Update: In December 2023, Mt.Gox’s creditors took to Reddit to say they received compensation payments. Multiple posts on the Reddit page r/mtgoxinsolvency show that Mt. Gox is sending jpy-denominated refunds to users via PayPal, nearly a decade after these funds were locked up on the exchange.

In November, some MtGox creditors received an email from the Rekt trustee saying that the trustee planned to start repaying creditors soon and was working to start repaying in cash in 2023; however, due to the large number of restructured creditors who will receive repayment, the different types of repayments, and the different preparation and processing times required for repayment, the repayments will continue until 2024. Mt Gox will distribute its holdings of 142,000 BTC, 143,000 BCH and 69 billion yen, among others.