Last week, Mt.Gox’s bankruptcy trustee sent all creditors a new notice inviting them to provide the details to receive repayments by January 10, 2023.
This means that until that date, repayments will not begin, and that after 10 January, new court approval will be required in order to proceed.
Mt.Gox refunds postponed
Mt.Gox is a crypto exchange that went bankrupt in 2014, so bankruptcy proceedings have been going on for eight years now.
After a colossal 850,000 BTC theft, about 141,000 BTC were recovered and are now in the hands of the bankruptcy trustee.
At the time of the closing in February 2014, Bitcoin’s market value was about $600, so the stolen 850,000 BTC was worth about $510 million. Now, however, the market value has risen to nearly $20,000, so the 141,000 remaining BTC have a total value of more than $2.7 billion.
Theoretically, therefore, the bankruptcy trustee should have enough funds to repay all creditors, but having offered two different ways to collect, it is not yet clear how much they will receive.
Indeed, creditors can choose whether to be paid in fiat currency (dollars or yen, since the exchange was based in Japan) or in cryptocurrencies (BTC and BCH), and by 10 January 2023 for that matter, they must state how they want to be paid and provide the details to be able to receive the payments.
Thus to date, it is not yet known how many will want to be paid back in fiat currency.
The fact is that those who have decided to receive repayment in fiat currency will be paid first, and they should receive a repayment worth the amount in fiat currency that their funds held on the exchange had at the time of the bankruptcy.
So depending on how many creditors request full repayment in fiat currency, the bankruptcy trustee will have to decide how many BTC and BCH to sell on the exchange so that sufficient fiat currency can be collected to repay creditors who have chosen this as their method of collection.
In theory, it would seem more convenient to request payment in cryptocurrencies, but since it is not yet known when this will happen, many creditors may be content with payment in fiat currency so as to recover all that they have lost.
How will repayments proceed
In order to proceed with the sale of BTC and BCH to cash in the fiat currencies to be repaid, the Mt.Gox bankruptcy trustee will still need court approval.
Thus after 10 January 2023, they will decide how many BTC to sell and propose their sale plan to the judge who may or may not approve it, although it seems quite likely that it will be approved.
Given that so far the timeline for this court proceeding has proven to be very long, it is safe to assume that it will continue beyond 10 January, so it could still be several months before the bankruptcy trustee starts selling BTC.
At this time, it is not known either how many BTC will have to be sold or when. However, there is speculation that they will be sold via OTC.
At this point, it is not even possible to speculate precisely what impact these sales may have on prices, to the point that if they are few they may not even have any impact.
On the other hand, the matter changes with regard to possible mass sales by creditors who have chosen to be repaid in BTC, hoping to collect more value.
Although the uncertainty regarding the timing of payments in BTC and BCH is even greater, it is possible to speculate that those who will have chosen this method of collection in the hope of making a profit may decide to sell the tokens received on the market as soon as they can.
Moreover, the creditors were given only the option of having them credited on a centralized exchange with KYC, for obvious reasons due to tracking and anti-money laundering laws, so they could literally sell them even immediately after actually cashing them in.
At this point, it is to be expected that when this happens it could have a significant impact on the price, suddenly increasing the selling pressure. This impact will depend not only on the timing but also, and more importantly, on the quantity of BTC sold in this way. To date, this is an uncertain and hard-to-estimate quantity.
Given the typical very elongated timelines of this court proceeding, it is very difficult for such a scenario to come true as early as in the weeks following 10 January 2023, but it seems more likely to happen over the following months, perhaps even in late spring.
Fortunately, at the very least, the bankruptcy trustee is continuing to keep everyone well-informed about the progress of this matter, with occasional public communications that reflect the very lengthy timeline of the process, but which have the advantage of allowing everyone to understand what is happening.