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Who owns the billions of dollars worth of bitcoin that MtGox claims?

When Mark Karpelès’ MtGox exchange went bankrupt in 2014, a decade-long saga began. Nowadays, it’s incredibly difficult to determine who owns MtGox bitcoin claims with many claimants having sold their claims to third-party speculators.

In addition, customers have learned that Russian nationals Alexey Bilyuchenko, Aleksandr Verner, and their co-conspirators stole at least 647,000 bitcoin during MtGox’s lifetime — the vast majority of customers’ 850,000 bitcoin.

Of those 647,000 bitcoin, 300,000 went to one exchange, BTC-e, whose operator was extradited to the US on money laundering charges.

Despite those stolen bitcoin, as of September 2019, MtGox’s Japanese bankruptcy trustee disclosed holdings of 141,686 BTC plus 142,846 Bitcoin Cash (BCH). At today’s prices, its BTC and BCH is worth approximately $4.8 billion.

The banktupcy trustee also held hundreds of millions of dollars worth of cash, which has slowly dwindled due to bankruptcy legal fees.

As of September 2019, MtGox’s bankruptcy trustee Nobuaki Kobayashi had received 8,095 formal claims from creditors, then worth approximately $8.2 billion. At that time, the trustee fully recognized just $1.6 billion of those claims and was still processing the remaining claims.

An earlier report by the bankruptcy trustee tallied an even higher figure of 24,750 MtGox customers who have filed claims. This figure consolidates into the trustee’s 8,095 formal claims because many customers opted to file consolidated claims through third parties like Kraken.

These 24,750 claimants represent just 2% of MtGox’s 1.1 million total customer accounts in 2013. Indeed, the vast majority of MtGox customers either had a near-$0 balance or were able to fully withdraw prior to the exchange’s total collapse in February 2014.

Read more: US wins extradition war for Russian crypto exchange operator Alexander Vinnik

Brief history of MtGox

Jed McCaleb founded MtGox.com in 2007 as an online exchange for physical, Magic: The Gathering cards. However, by 2010, he had had pivoted MtGox into a bitcoin exchange.

In 2011, Mark Karpelès purchased it from McCaleb and by September of that year, Alexey Bilyuchenko and Aleksandr Verner had hacked the exchange and began siphoning bitcoin out of its wallets.

By January 2014, MtGox was processing at least 70% of global bitcoin transactions and at points in 2013, it processed over 90% of bitcoin trading volumes.

The exchange went bankrupt in February 2014, taking at least 141,686 of customers’ bitcoin into bankruptcy proceedings.

The major MtGox bitcoin claims owners

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MtGox claims are highly concentrated among the largest holders. Just 226 claimants own over 50% of MtGox claims. These 226 claimants could receive 84,650 bitcoin.

Researchers found that the median claim was worth just $92,500 as of August 9, 2022.

Due to bankruptcy proceedings in Japan, the identity of each claimant is not public. However, many claimants have volunteered their identity to the media. Below is a list of some of the largest known creditors of the failed bitcoin exchange.

  • The Mt Gox Investment Funds (MGIF): MGIF is the largest creditor of MtGox as of March 8, 2023.
  • Fortress Investment Group: Not to be confused with Fortress Trust, the group has offered cash buyouts to MtGox claimants.
  • Kraken: Jesse Powell of Kraken has a long history of attempting to assist MtGox customers. Powell worked at MtGox as a consultant. At Kraken, Powell created a web portal for thousands of victims to file claims. Many smaller MtGox claims have consolidated via Kraken.
  • Tibanne: Claims to own as much as 88% of MtGox equity.
  • CoinLab: Claims that MtGox owes it at least $170 million and as much as $16 billion. In 2019, CoinLab increased one of its lawsuits to a staggering $16 billion, disputing a revenue-sharing deal with MtGox. Its $16 billion claim far exceeds the combined claims of all other creditors and eclipses all assets held by MtGox’s bankruptcy trustee. The settlement figure of this lawsuit is uncertain.
  • Jed McCaleb: Might own up to 12% of MtGox equity.
  • Bitcoinica: Is requesting a $29 million payout.
  • Roger Ver: Claims 577 lost BTC personally.

Bitcoinica and MGIF collectively hold about 20% of the claims. In February 2023, they agreed to receive about 70% of their payout in bitcoin to alleviate worries about a sudden sell order. They decided to take their payout this year rather than wait for other lawsuits to be settled. MGIF later reiterated that it would not immediately sell the bitcoin.

Read more: After failing to conquer cross-border payments, Jed McCaleb sets his sights on space

Kraken and Jesse Powell

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Roger Ver and colleague Jesse Powell tried to help customers of MtGox in the days leading up to its collapse. Powell, who would later found Kraken, also tried to get MtGox back up running during an earlier hack in 2011 while Mark Karpelès took time off. As detailed in Nathaniel Popper’s historical book Digital Gold, both men attempted to assist Karpelès with avoiding a bankruptcy, to no avail.

In 2014, the MtGox bankruptcy trustee selected Kraken to assist with some claims processing. Kraken said it would help with investigation of lost or stolen bitcoin, create a system for filing and investigating claims, help distribute bitcoin and fiat currencies to creditors, and swap between bitcoin and fiat currencies.

Attorney and MtGox creditor Daniel Kelman set up MyGoxClaim.com, where certain claimants could sell their claims to interested buyers. Kraken assisted with facilitating the processing of some of these claims. Kelman noted that claims buyers were primarily interested in claims worth over $10,000. The Financial Times also reported that four other hedge funds were bidding for claims.

As of May 26, 2016, 24,750 creditors filed claims via Kraken’s platform. Accepted claims totaled $417,436,518. Of the claims that the bankruptcy trustee rejected, most of the fiat value came from one claim — 260 trillion Japanese Yen (JPY) out of the rejected claims’ total value of 263,473,658,709,868 JPY (over US$2 billion).

MtGox claims for pennies on today’s dollar value

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Users who lost bitcoin in MtGox’s final collapse had to wait at least until April 2015 to start filing their claims. The final deadline for claims arrived in March 2023. The MtGox trustee offered 90% of the lost assets’ value as part of a civil rehabilitation plan.

Due to the length of time the bankruptcy was taking, several smaller MtGox users naturally gave up and sold their claims to third parties like Fortress Investment Group.

Fortress Investment Group offered up to 80% of the claims’ value. It had reportedly been buying claims for years, once paying as high as $1,300 per bitcoin. One of its selling points was that claim holders would no longer have to wait for a payout under the civil rehabilitation plan when they could get cash or bitcoin now.

That Fortress Investment Group was willing to pay above $1,000 per bitcoin reflects the evolving state of legal claims against the MtGox bankruptcy estate.

Originally, or at least as of February 2017, buyout offers for MtGox claims were calculated based on the price of BTC at the time MtGox went into liquidation: approximately $438 USD per bitcoin. At that time, purchasers offered claimants a buyout discounted from that calculation — not the current value of the bitcoin.

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