Bitcoin Mt. Gox creditors will soon benefit from $9 billion payback — their BTC is over 10,000% more valuable than when it went missing

News
By
published

At time of writing, one Bitcoin trades at $61,524— over 10,000% more value than its February 2014 $600 valuation

Bitcoin
(Image credit: Getty Images)

Bitcoin exchange Mt. Gox is most well-known today for its infamous halting of operations and bankruptcy back in February of 2014, a multi-million dollar loss for the Bitcoin community of the time. Since 2014, and after many lawsuits, Mt. Gox has managed to recover a very worthwhile amount of Bitcoins and is now sending an amount valued at $9 billion divided across Mt. Gox's former account holders [h/t CNBC].

The original Mt. Gox bitcoin heist meant that there were "up to 950,000 Bitcoin" lost, and reportedly 140,000 of those recovered Bitcoin are what's being returned to Mt. Gox's former customers.

While not every lost Bitcoin has been recovered, far from it, the exponential increase in Bitcoin's value since February 2014 means that each recovered Bitcoin is 10,000% more valuable than it was when it was lost. As John Glover of crypto lending firm Ledn said to CNBC, "Many will clearly cash out and enjoy the fact that having their assets stuck in the Mt. Gox bankruptcy was the best investment they ever made."

Depending on the party receiving the payout and how much they're receiving, though, the story may change. According to Luke Nolan of the CoinShares research firm quoted by CNBC, many Mt. Gox creditors opting for in-kind reimbursement (in Bitcoin) are doing so because of tax implications. JPMorgan, quoted by CNBC, suspects similar reasoning from creditors, though JPM also suspects that they are taking in-kind reimbursement "because they think liquidating now would void potential further price gains in the future".  

The previously-quoted John Glover of Ledn also speculated on the matter that "Those in jurisdictions with capital gains tax may elect to hold their positions to avoid this huge tax bill and instead use their Bitcoin as collateral to borrow dollars, thus monetizing the Bitcoin without having to sell it."

In any case, it seems like those who held out this long waiting for their cryptocurrency instead of selling their bankruptcy claims to prior high offers are set to be highly rewarded by huge gains on their old, returned crypto. However, since not all of that crypto has been recovered, it's unclear exactly how much everyone involved stands to gain versus how much they invested — though considering Bitcoin's pricing then compared to now, it would seem they will at least be made whole, if not much better off than before.

Christopher Harper
Christopher Harper
Contributing Writer

Christopher Harper has been a successful freelance tech writer specializing in PC hardware and gaming since 2015, and ghostwrote for various B2B clients in High School before that. Outside of work, Christopher is best known to friends and rivals as an active competitive player in various eSports (particularly fighting games and arena shooters) and a purveyor of music ranging from Jimi Hendrix to Killer Mike to the Sonic Adventure 2 soundtrack.

4 Comments Comment from the forums
  • Air2004
    How do they decide who's bitcoin has been recovered and who's hasn't? I would think all creditors would split what ever coins were recovered equally.

    Which brings me to another question... I thought the whole point of bitcoin was the anonymity aspect of the coin. So much for that selling point. /s
    Reply
  • DougMcC
    Air2004 said:
    How do they decide who's bitcoin has been recovered and who's hasn't? I would think all creditors would split what ever coins were recovered equally.

    Which brings me to another question... I thought the whole point of bitcoin was the anonymity aspect of the coin. So much for that selling point. /s
    I assume (but don't know) that the coins were actually held 'on deposit' by mtgox. So that they could loan/invest them. Therefore mtgox knows who held how much, but the losses were anonymized. I expect they would therefore repay proportionally (what I assume you meant by 'equally'). E.g. if they recovered 10% of the coins, everyone gets 10% of their amount of deposited coins back.
    Reply
  • Air2004
    DougMcC said:
    I assume (but don't know) that the coins were actually held 'on deposit' by mtgox. So that they could loan/invest them. Therefore mtgox knows who held how much, but the losses were anonymized. I expect they would therefore repay proportionally (what I assume you meant by 'equally'). E.g. if they recovered 10% of the coins, everyone gets 10% of their amount of deposited coins back.
    Proportionally, yes. Those that are owed would split the recovered coins equally, unless it can be proven that X amount of the recovered coins came from investors A,B and C. All recovered coins will be split equally. Now, does that mean some investors will make out better than others (losses across the board aren't equal) under the model I assume, sure, but that's because I'm not sure how this sort of thing will work out and that's the fairest thing I can think to do.
    Reply
  • jp7189
    Air2004 said:
    Proportionally, yes. Those that are owed would split the recovered coins equally, unless it can be proven that X amount of the recovered coins came from investors A,B and C. All recovered coins will be split equally. Now, does that mean some investors will make out better than others (losses across the board aren't equal) under the model I assume, sure, but that's because I'm not sure how this sort of thing will work out and that's the fairest thing I can think to do.
    Generally, the small investors are part of a class action wherein each creditor is paid a proportional amount of their total claim. There are a few larger creditors which decided to pursue their own lawsuits and are not part of the class. Their payouts are decided separately and originally their amounts would be deducted before the class gets paid from the remainder. However, the individual suits are taking so long that the class was broken in to two pieces. 1. An early payout which proceeds on assumptions before the all other suits are resolved, and 2. A late payout which proceeds after all other suits are concluded. Those in the class are able to choose which they would like.
    Reply