Breaking: Court Moves Mt Gox Case to Civil Rehabilitation, Creditors to Be Paid in BTC

  • The Tokyo District Court has moved Mt Gox's case from criminal bankruptcy to civil rehabilitation.
  • This means creditors won't be paid in JPY, but in BTC.
  • The trustee, who still holds over 137,000 BTC, likely won't trigger another sell-off until mid-2019 when creditors get paid.

The Tokyo District Court has reportedly moved the infamous Mt Gox case out of criminal bankruptcy into civil rehabilitation, meaning creditors will likely be paid in BTC in mid-2019, and that the exchange’s trustee won’t likely sell funds anytime soon.

According to a document published on Mt Gox’s website, the process is set to start early next year, and is mostly good for the cryptocurrency ecosystem. Mt Gox was notably a dominant cryptocurrency exchange that collapsed in 2014 amid claims of insolvency and security breaches.

At the time, hundreds of millions of dollars worth of BTC were lost, which saw the cryptocurrency’s price to crash. Recovery efforts managed to find 200,000 BTC, which were then held by the exchange’s trustee, Nobuaki Kobayashi.

Had the cryptocurrency exchange’s case remained in criminal bankruptcy, creditors would have been paid back in fiat currency, equivalent to bitcoin’s exchange rate at the time Mt Gox went down – less than $500 per coin.

Since 2014, bitcoin has appreciated to over $6,100. The exchange’s former CEO Mark Karpeles, who was charged with embezzlement and data manipulation, would’ve received most of the remaining proceeds.

Karpeles, as CryptoGlobe covered, has stated he doesn’t want said funds, which amount to about $1 billion. At the time, he said he never expected to received anything from the bankruptcy, and that it is an "aberration" that it was a possibility, adding that he believes it is his responsibility to make sure it doesn't happen.

Given that the case was moved to civil rehabilitation, Kobayashi is set not to sell any more bitcoin until creditors are reimbursed next year. As for cryptocurrencies created through bitcoin’s various forks – including BCH, BTG, and BCD – the document states:

At present, nothing has been determined regarding the sale of Bitcoin and cryptocurrencies split from Bitcoin (collectively, “Bitcoin, etc.”) in the future.

Mt Gox

How creditors will be reimbursed isn’t yet clear, and will likely be determined in subsequent legal proceedings. Mt Gox’s creditors will be required to refile proof of claim forms by October 22, 2018. This applies to all creditors, even those who didn’t manage to participate in the proceedings last time.

Currently, walletsassociated with Mt Gox still hold 137,890 BTC, worth nearly $880 million, along with these airdropped tokens. As Bloomberg reporter Yuji Nakamura puts its, a distribution of these funds could trigger a major sell-off next year.

CryptoGlobe had previously covered that the trustee’s last crypto sell-off, of over 35,00 BTC and 34,000 BCH, didn’t influence the market, according to him. At the time, he said the cryptocurrencies weren’t sold through an exchange, but “in a manner that would avoid affecting the market price, while ensuring the security of the transaction to the extent possible.”

Growing Institutional Interest in BTC & ETH Helps Grayscale’s AUM Hit $4 Billion

On Thursday (June 4), crypto investment firm Grayscale Investments, LLC ("Grayscale") reported that its total assets under management (AUM) had reached $4.0 billion, an increase of 8.1% compared to the size of the AUM a week earlier, and almost double what it was in May 2019.

Grayscale is wholly-owned subsidiary of Digital Currency Group, Inc. (“DCG”), which is an investor in some of the best-known businesses in the crypto space, such as Abra, Coinbase, Coindesk, BitGo, and Ripple.

Grayscale was founded in 2013 by Barry Silbert, who is the current CEO of Grayscale, as well as the founder and CEO of DCG.

Grayscale is the sponsor of nine single-asset investment products -- Grayscale Bitcoin Trust, Grayscale Bitcoin Cash Trust, Grayscale Ethereum Trust, Grayscale Ethereum Classic Trust, Grayscale Horizen Trust, Grayscale Litecoin Trust, Grayscale Stellar Lumens Trust, Grayscale XRP Trust, and Grayscale Zcash Trust -- and the manager of one diversified investment product (Grayscale Digital Large Cap Fund).

Its two most popular investment products are Grayscale Bitcoin Trust and Grayscale Ethereum Trust.

As Rayhaneh Sharif-Askari, Director of Investor Relations and Business Development at Grayscale, explained in episode #006 of "Coinscrum Markets", Q1 2020 was a record quarter for Grayscale (and the way things seem to be going, Q2 20202 might be even more impressive). 

During her interview with Nisa Amoils, an Investment Manager at Grasshopper Capital, Sharif-Askari said:

"From a broader perspective, COVID-19, and the policy implications especially, have really set the stage for Bitcoin to be seen as the store-of-value asset that we had hoped it eventually would be... Institutional investors are taking active long positions in digital assets through our products... 

"In Q1, we have raised half a billion dollars across all of our products -- $390 million of that was into our Bitcoin Trust... We also saw about $110 million in the Ethereum product..."

Even more interestingly, she pointed out that most of the interest in these investment products is from institutional rather than retail investors:

"Since the inception of our firm, about 90% of the inflows have been from institutional investors... This past quarter, about 88% of the flows came from institutions, and breaking that down further, we looked at the type of institutions...

"Within hedge funds... it's most traditional hedge funds."

On May 28, Grayscale provided the following AUM update:

Then, a week later (i.e. on June 4), Grayscale pointed out that its total AUM had increased by $200 million to $4 billion (with the Bitcoin product responsible for $3.515 billion):

Now, let's take a closer look at Grayscale's most popular investment product -- Grayscale Bitcoin Trust (OTCMKTS: GBTC). 

According to data from Grayscale's website, as of June 5, there were 378,088,800 shares outstanding and the amount of BTC per share was 0.00096107.

Crypto analyst/researcher Kevin Rooke pointed out on June 4 that since Bitcoin's third halving on May 11, Grayscale has added 28,413 BTC to the Grayscale Bitcoin Trust:

Since we know that after the halving event on May 11 Bitcoin's block mining reward was reduced from 1800 BTC per day to 900 BTC per day, this (roughly) means that since that date Grayscale has bought 147.98% of all the Bitcoin produced by the miners!

The reason we say "roughly" in the paragraph above is that we do not know the exact amount of BTC that Grayscale bought in the open market (from OTC brokers, prime brokers, or crypto exchanges) since according to the Grayscale's FAQ page, "Existing and prospective investors may contribute coins in kind for shares of Grayscale’s single-asset Products."

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