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The security breach of Mt. Gox in 2014 has been widely documented. It’s recorded as the biggest breach in cryptocurrency history, with the loss of 850,000 Bitcoins and $26,789 of investors’ funds and it has been almost a decade to try and recover the funds.
Over the years, Mt. Gox has repeatedly deferred plans to reimburse the lost funds from users since February 2014. The most recent announcement from the exchange has set to extend the waiting period even further, pushing the deadline for repayment from October 31, 2023, to October 31, 2024. This extension now marks another year of Mt Gox investors waiting for their funds.
The history of the Mt Gox saga
Immediately following the catastrophic breach in February 2014, leaked documents revealed the insolvency of Mt. Gox. These documents stated that “MtGox can go bankrupt at any moment.” At the time, Mt. Gox handled a staggering 70% of the total circulating Bitcoin, making the exchange’s fall a significant event in the industry. Following the fall, the exchange filed for bankruptcy protection in the Tokyo District Court, Japan, after incurring losses of nearly $500,000.
Amid the ongoing bankruptcy proceedings, Mt. Gox CEO Mark Karpelès faced arrest by Japanese authorities without formal charges for allegedly manipulating the exchange’s computer system. The still developing state of cryptocurrency regulations at the time made it difficult to prosecute individuals involved in crypto crimes.
In April 2015, the crypto exchange‘s bankruptcy trustee, Nobuaki Kobayashi, initiated a process for users to file claims for their missing cryptocurrency funds.
Lafter, Mt. Gox revealed that only $91 million in assets were available for distribution to claimants. The discrepancy between the available funds and the total claims became apparent. Claims for reimbursement ballooned to a massive $2.4 trillion, despite the actual loss amounting to around $500,000.
In November 2017, Karpelès announced plans for an initial coin offering (ICO) to raise $245 million to revive Mt. Gox. These plans were eventually discarded due to the regulatory complexities surrounding ICO campaigns, leaving investors out of pocket.
In 2017, Bitcoin saw a strong price recovery. As a result, Mt. Gox altered its policy in August 2018. It declared that all assets, including approximately 166,000 BTC, 168,000 Bitcoin Cash, and other derivatives held by the exchange, should be distributed to creditors rather than shareholders.
In 2019, Mt. Gox requested the Tokyo court to extend the deadline for the submission of the rehabilitation plan. The court granted this extension, pushing the deadline from October 28, 2019, to March 31, 2020. In early 2020, private equity firm Fortress proposed to buy out creditor claims from Mt. Gox. If the deal had materialised, eligible creditors would have received $1,293 for each Bitcoin held on the exchange’s wallet.
A new draft rehabilitation plan was issued by Mt. Gox in March. This bill revealed the intention to liquidate cryptocurrencies other than BTC and BCH. At this time, the Tokyo court approved another extension, citing matters requiring closer examination. As a result, the Bitcoin settlement date for Mt. Gox was pushed further into the following year.
Mt Gox investors left waiting despite Bitcoin price rising
In October 2021, Mt. Gox creditors finally approved a rehabilitation plan to compensate them for their substantial Bitcoin losses. Around 99% of the affected creditors supported the proposed reimbursement plans. With Bitcoin reaching an all-time high of $69,000 at the time, there was hope that the value held in Mt. Gox’s Bitcoin holdings would be sufficient to fully reimburse investors. This was not the case, and investors were left waiting.
Since then, the deadline for reimbursement registrations was postponed twice and Mt. Gox adjusted the repayment deadline to October 2024. Mt Gox has issued no response to inquiries about the commitment to pay users their funds.