After having claimed to have been hacked and possibly losing all of their users’ Bitcoins and then filing for bankruptcy in Japan, leaving all of their users out to dry, the once popular Bitcoin exchange Mt.Gox has now filed for Bankruptcy in the US and had their CEO’s and company’s assets seized by a Federal District Court Judge in Chicago. Remember that Mt.Gox is based in Japan and the CEO is also located in Japan as well, however both the founder and the company have obvious ties to the United States. This ruling came as part of a lawsuit filed on behalf of the exchanges thousands of users who were unable to withdraw their Bitcoins and cash from the exchange as it neared self-destruction. The lawsuit is seeking class-action status, allowing them to potentially sue for all of the lost assets among many other potential damages, if there is any way of obtaining them.
According to the WSJ, In court, lawyers for exchange customers alleged Mr. Karpeles has been siphoning money from the exchange. "Every day we wait our view is there will be less and less money," one of the attornies, Jay Edelson said. Although, due to the location of Mt.Gox and the fact that the Japanese entity has already filed for bankruptcy protection, the US Court was not able to put any temporary or permanent freezes of Mr. Karpeles or Mt.Gox assets. I believe that Mt.Gox and the CEO of Mt.Gox strategically filed for bankruptcy in order to protect the two from potential litigation, at least in the short term.
Another interesting plot twist is that some hackers claim to have seen Mt.Gox’s assets and claim that Mt.Gox is still in possession of the majority of the Bitcoins. 100,000 Bitcoins would amount to about $64 million worth of Bitcoins, sure it isn’t the estimated $400-$500 million, but its a step in the right direction if he is actually in possession of the currency. The hackers actually hacked his own personal blog and posted a message claiming that he had stolen the 100,000 Bitcoins, which if true, may make life even harder for the CEO of the exchange. The full message can be read here, in this Pastebin entry warning, there is some strong language.
The truth is that we may never know what exactly happened at Mt.Gox but many people have said that the exchange was a joke and could not exist if Bitcoin wanted to grow into a serious currency. So, there are both good things and bad things about this Mt.Gox episode, but the loss of $500 million+ worth of assets in both Bitcoins and dollars is simply and completely unacceptable. Hopefully it will serve as a lesson to the community to ensure that the proper safeguards exist in the future, if there is one.