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Free Minds & Free Markets

Bitcoin's Crazy Price Rise Might Lead Owner of Bankrupt Former Exchange Mt Gox to Crazy Profits

Customers lost billions in bitcoin, and former operator Mark Karpeles could gain well over half a billion.

Wouldn't it be nice to come out of a bankruptcy proceeding for your disgraced company with assets worth nearly a billion dollars? Even with the possibility you might end up proven to have embezzled a ton of your former customers' funds? That strange result may happen as one of the many interesting aftereffects of the almost shocking rise in value of bitcoin, the decentralized, inflation-resistant non-state electronic currency.

Mt Gox wikiMt Gox wiki

It's the bankruptcy case involving Mt Gox, which was until its 2014 collapse the leading exchange to buy and sell the cryptocurrency. The value of bitcoin has gone up around seventeenfold since Mt Gox died.

As The Wall Street Journal reports, the creditors in the Japanese bankruptcy case (the exchange was based there) are going to be paid off at the yen value of their bitcoin at the time the liquidation proceedings began in April 2014.

The bankruptcy trustee for Mt Gox believes legally that the many bitcoin left over after the yen value has been easily taken care of would belong to the shareholders of the extinct exchange, the biggest of which is another company owned by Mark Karpeles, who ran Mt Gox.

Karpeles told the Journal, not entirely convincingly, that he thinks he wouldn't personally end up making that much should that come to pass. He thinks, reports the Journal, that "finding bitcoin buyers would be difficult and it was common for bankruptcy assets to be sold at a fraction of their book value."

Nearly 25,000 people have made claims against Mt Gox for bitcoin they say they lost in the exchange. Karpeles is simultaneously facing criminal charges in Japan over alleged crimes involved in the collapse of the exchange. He claims he's not guilty of taking any customer coin. (As Mt Gox died, 850,000 customer bitcoin were lost, a total that would be worth $5.7 billion today.)

The infuriating math for those who lost bitcoin in Mt Gox:

The bankruptcy estate for Mt. Gox holds 202,185 bitcoins worth about ¥169 billion or $1.5 billion at current rates. Meanwhile, the trustee has recognized claims by exchange customers of ¥46 billion based on the April 2014 bitcoin price, a procedure that lawyers say has a sound basis in bankruptcy law.

After accounting for smaller amounts of nonbitcoin assets and liabilities, Mt. Gox has a surplus on paper of ¥111 billion, or $977 million, that could go to its shareholders, according to a calculation by The Wall Street Journal.

Karpeles' path to fortune that way is not clear, as the other company he owns that owns 88 percent of Mt Gox is itself involved in bankruptcy proceedings, as is he personally. "Trustees handling those cases would have to confirm that the bankrupt entities don't have significant additional liabilities before Mr. Karpelès receives any remaining assets," the Journal notes.

Reason on Mt Gox's 2014 collapse. Some of the other interesting consequences for the libertarian world of bitcoin's startling rise in dollar value will be discussed in a feature in the forthcoming January issue of Reason. Subscribe now!

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  • Fist of Etiquette||

    Bitcoin still seems like mumbo jumbo black magic to me. All of you making money off it are doing so at the cost of your very souls.

  • BestUsedCarSales||

    If you want god's honest truth? I feel that way about the bond market too. Bonfire of the Vanities only deepened those suspicions.

  • jogibew||

    I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

    This is what I do... www.netcash10.com

  • Stormy Dragon||

    Investing in anything is mumbo jumbo, really. "I'm going to trade for something I don't actually want because I think that later on, someone else will want it more than I want it now."

  • Mitsima||

    Soulcoin, the hot new ethereal idea to be monetized. Thanks for the idea! >:)

  • ||

    No matter how I try, I don't understand the mechanics behind bitcoin. Even when I watched a 'Bitcoin explained' video I still felt like Homer being told he was Mr. Thompson.

  • Half-Virtue, Half-Vice||

    Mining bitcoin is a bit more complex. It's easier to just buy bitcoin and trade it or horde it.

  • ||

    Okay. So I buy bitcoin. How many, for example, USD does it buy me and does it sit in an 'account'?

  • Stormy Dragon||

    Depends how you buy it. It's sort of like buying stock actually.

    You could, theoretically, go out an buy an actual share of stock in some company and get a certificate that says "This stock certificate entitles you to one share of Hypothetical Widget Co." That's what people who have "Bitcoin wallets" are doing. They have actual physical copies of all the bitcoins they own. Problem is that if someone steals your wallet, they now have all your bitcoins, and unless you can prove it's yours, there's no way to get it back.

    This is not how most people buy stock. Most people have a broker who buys stock for them and keeps in a big pile at a bank with all the other the other stock bought by other clients. This is basically what Mt.Gox was, you'd send them money to buy bitcoins for you, and keep it in one big pile, and keep records of what part of the pile belongs to who. Advantage of this is, (assuming the bank is trustworthy), your bitcoins can't get stolen because you have independent records that they belonged to you.

    The downshide is that makes the bitcoin no longer anonymous because MtGox can be subpoenaed. Also, Mt.Gox can turn out to be Bernie Madoff and the pile isn't as big as they say it is.

  • ||

    Ah. Interesting. Thanks.

  • Stormy Dragon||

    And one bitcoin is currently worth around $7000, but if you go through an exchange, you can buy fractional bitcoins.

  • Half-Virtue, Half-Vice||

    Right now a single bitcoin is worth around $6k USD. You actually by bitcoins in tenths or so, e.g., a person could own .0134 bitcoins.

    It's hard to say if it'll work when it is all said and done; it is supposed to be currency that you spend like cash out of your wallet. But most people horde the coins cause the price of the coin keeps going up. $100 worth of bitcoins in 2011 would be worth more than a mil now. But if everyone hordes the coins then it's not fulfilling it's purpose as currency to replace traditional fiat.

    That said the price of the coin keeps going up, and the diehards are convinced it could hit $20k a coin, hell $100k is what they are dreaming. Who can say? It IS still going up though, I figure I could game a thousand bucks with little to no risk beyond that for a chance at the pie.

  • Stormy Dragon||

    You actually by bitcoins in tenths or so, e.g., a person could own .0134 bitcoins.

    Not entirely true. Each bitcoin has one owner. It's just that if you buy through an exchange, the exchange owns the whole bitcoin and has records saying "I have 1,000 bitcoins, HVHV paid for 10.25 of them, Rufus paid for 2.3 of them, etc."

  • Half-Virtue, Half-Vice||

    Just tell me how to get rich Stormy!!

    :P

  • Stormy Dragon||

    If I knew the answer to that, I wouldn't be hanging out here! ;P

  • ||

    So where to store it safely?

  • MarkLastname||

    Sell drugs to children is one way to do it.

  • alpalp||

    This is not true. You can split bitcoins down to 8 decimal places and define ownership at that level. You assign ownership to an amount. There are no actual coins involved in the system.

    Exchanges will own bitcoins on customer's behalf, but give them an IOU. You can own your own coins by having your own private key.

  • Half-Virtue, Half-Vice||

    This guy knows what's up. As much as I thought but didn't feel confident to say.

  • Stormy Dragon||

    It's basically an encrypted database. In the case of bitcoin, the contents of the database is a ledger of all bitcoin transactions. Each bitcoin is basically part of the database, along with signature information that can be used to validate other parts of the database are valid.

    What "miners" are basically doing is verifying that all the bitcoins agree on the database state, and the process of doing so is designed so that doing the verification also gives you the information needed to calculate the contents of the next chunk of the database, which becomes a new bitcoin.

  • CE||

    So it's money that creates itself, sort of like the Fed.

  • Stormy Dragon||

    Kind of. Each new chunk of the database is harder to build than the one before, so you'll reach a point where the electricty needed to calculate the next chunk costs more than the new bitcoin is worth. The idea is that by the time that happens, the system will be established enough that the miners will be able to fund themselves via a transaction processing fee. The system is basically set up so at the beginning the transactions are free (encouraging adoption) and the miners are paid through the stream of new bitcoins, but eventually people will trust it enough to be willing to pay for the transaction processing, similar to a credit card processor.

  • Half-Virtue, Half-Vice||

    It was designed during the last recession with the purpose to never fail like the Fed. It's conception is actually an interesting story in and of itself. Bitcoins have an artificial scarcity built in, basically a hard cap of 21 million coins, once it hits 21 million no more coins will be created.

  • Half-Virtue, Half-Vice||

    There is a hard cap built in. Once 21 million coins are in circulation no more coins will be made. Distribution is essentially controlled by an algorithm, it won't hit 21 million coins until the next century.

  • Half-Virtue, Half-Vice||

    Bah. Go suck an egg Reason.

  • Half-Virtue, Half-Vice||

    I need to stop be a stupid pussy and hop on this damn train.

  • Half-Virtue, Half-Vice||

    I'd buy Reason an edit button.

  • Eidde||

    Max Boot applies neocon logic

    1) Roy Moore molested a 14 y/o girl in the early Reagan administration (there's no doubt this happened because the Washington Post said it happened).

    2) ?????

    3) Therefore, "Republicans in Washington" should "call on [Moore] to leave the race immediately and endorse his Democratic opponent if he doesn't."

    Again, Moore's Democratic opponent supports Planned Parenthood and wants to keep PP's snout in the federal treasury, and Planned Parenthood has repeatedly had scandals involving the cover-up of statutory rape, and their cover-up consisted of aborting children conceived through such rape.

  • Eidde||

    (contains shouty autoplay ad)

  • Eidde||

    (the first link, that is)

  • Half-Virtue, Half-Vice||

    One More Time by Daft Punk

    Cheers brothers!

  • Eidde||

    You know you want Moore.

  • Half-Virtue, Half-Vice||

    Well played, if I were wittier I'd have worked that into the original link.

  • Eidde||

    Oh, this is cute:

    "the presumption of innocence applies to criminal defendants, not political candidates."

    No perverse incentives in such a doctrine, nope. Just call a candidate you don't like a pigfucker, then tell him to step down because of the scandal.

  • Sevo||

    "the presumption of innocence applies to criminal defendants, not political candidates."

    And that hag still walks free?!

  • ||

    I heard it's too late to pull out or remove his name if he wanted to?

  • Eidde||

    There are plans for a Marion Barry statue in Washington, D. C.

    Supposedly, approval of the statue "is now on the Consent Agenda of non-controversial items that will be passed all together with one vote in the next council session" of the City Council.

  • Dalben||

    I guess the residents of DC can make statue of whomever they like, and they seem to like Marion Barry a lot.

  • Rich||

    "The bitches set him up!"

  • BestUsedCarSales||

    Don't know why you're quoting PB here, but okay.

  • Mitsima||

    When is it not a good time to quote Pietro Beretta?

    "La stronza mi ha impostato!"

  • Eidde||

    There are plans for a Marion Barry statue in Washington, D. C.

    Supposedly, approval of the statue "is now on the Consent Agenda of non-controversial items that will be passed all together with one vote in the next council session" of the City Council.

  • Eidde||

    Feminist catfight over Taylor Swift

    "As proof of her feminist failures, editor Kadeen Griffiths listed Swift's many faults: not criticizing President Trump, not "publicly support[ing] organizations" like Planned Parenthood and not attending the Women's March (her tweet apparently wasn't enough.)"

  • Sevo||

    In that case, my wife fails, except occasionally mentioning that Trump certainly isn't a winner.
    But then she has an Engineering Masters, not a J-school paper.

  • BestUsedCarSales||

    This feminism will always be perverse as long as they remove agency from women by denying them the right to differ in opinion. Until then, it is the same paternalism as they are so want to complain about.

  • Dick Puller, Attorney at Law||

    Police warn drugs on shopping carts can kill you.
    http://www.latimes.com/food/sn.....story.html

  • Rich||

    "The post about the fentanyl was sent so me from another officer at another Department. I simply shared it. I'm should have checked into it further before I posted it. Sorry for the confusion."

    "So sorry, in fact, that I've resigned, and I am trying to force his resignation as well."

  • Eidde||

    Wait, you mean there isn't already a picture of Lincoln in every Illinois courthouse?

  • Eidde||

  • BestUsedCarSales||

    He said that in the age of hyper-partisanship on all sides, preserving the Johnson Amendment would retain worship as an activity free from political disagreements.

    See, it's good those dumb fucking churches have a law that keeps them from being too political. Or else they'd go wild and die. Thanks Government!

  • Eidde||

  • Half-Virtue, Half-Vice||

    This is like a bad acid trip.

  • Jerryskids||

    I thought they already covered this with Man in the High Castle.

  • Sevo||

    I'm getting a pay-wall.

  • Half-Virtue, Half-Vice||

    "Jan. 20: Clinton is officially inaugurated as the 45th president of the United States. A star-studded lineup performs: Lin-Manuel Miranda composes a special "Hamilton" rap just for the occasion, and Clinton surprises everyone by doing that super-fast part from "Guns and Ships." Vice President Tim Kaine claps along enthusiastically on the sidelines. A video of Chelsea's daughter singing along goes viral"

    I weep for the people of Earth-B.

  • Sevo||

    They are making clear the nightmare we avoided.
    Can you imagine the worship of the hag after the treatment Obo got? Her very words would be preserved for posterity!
    Yeah, Trumps sucks, but we are still very fortunate.

  • ||

    Not very imaginative or interesting.

    I prefer the one where she becomes President and it's soon revealed she is in fact an enemy alien.

    If not, the second she takes over she cackles and says 'suckers' as she prepares her coup.

  • Sevo||

    "I prefer the one where she becomes President and it's soon revealed she is in fact an enemy alien."
    Which would not stop the adulation in any way whatsoever; being an enemy alien would instantly become the litmus test of any government worker.
    Rufus, you are presuming the hag's supporters actually had some reference to a principled stand.
    They had none; witness turd, Tony, Hole, truman and others.
    If she had been coronated, all would be wonderful!

  • Bra Ket||

    Hrm so if the assets lose value before selling them sorry tough luck creditors, but if they gain value he gets to keep it?

  • vek||

    Bitcoin is pretty dumb IMO. I think the whole idea is a bit stupid in the first place, but there are several major flaws in the execution too. Amusingly other crypto currencies fixed many of these, but have never taken off the same way. The number of coins in circulation should have been higher. Maxing out in the billions or trillions. Tiny fractions of a coin being a lot of money just doesn't work well with the way humans think, it's easier to conceptualize a loaf of bread costing 100 coins than .003 or whatever. Also it gets too much harder too fast, it's been a never ending cluster fuck for miners to even break even, let alone profit with how quickly the difficulty goes up. I could go on and on.

    Biggest reason though is I don't trust any "currency" that absolutely needs a massive network of computers functioning globally to exist at all. Even BS government fiat can still exist during a major cataclysm assuming people will still take it. So I say NO THANKS to Bitcoin or its copy cats.

  • Curt2004||

    Simple solution to your fractional coin problem. Divide by 1000 = 1 milli-coin, Divide by 1000000 = 1 micro-coin, etc. just like any other wide ranging value like distance or electric current.

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