For a decade, users of collapsed Bitcoin exchange Mt. Gox have been trying to get their money back. Starting in early July, the company will begin returning funds to users.
Kiyoshi Ohta | Bloomberg | Getty Images
Mt. Gox, Japanese Bitcoin The exchange, which was pushed into bankruptcy by a major hack a decade ago, is finally paying its creditors, and their patience has been handsomely rewarded.
In the 2011 hack, as many as 950,000 Bitcoins were lost, with the cryptocurrency trading at a fraction of its current value. About 140,000 of those Bitcoins have been recovered, which at today’s prices means about $9 billion worth of Bitcoins will be returned to their owners.
Among the claimants was Illinois native Gregory Greene. Shortly after the exchange declared bankruptcy in February 2014, Greene File a class action lawsuit Oppose Mt. Gox and its former CEO. Green said at the time that his frozen account contained $25,000 in Bitcoin, but he did not disclose the specific amount of Bitcoin in the wallet.
Bitcoin was trading around $600 at the time. Today it is worth over $60,000. This suggests that Green’s missing collection is worth approximately $2.5 million at current prices, a 10,000% increase. However, it’s unclear how much of the bonus he will receive, which is expected to begin in July.
John Glover, chief investment officer of cryptocurrency lending company Ledn, said creditors are about to receive a historic windfall.
“A lot of people are obviously going to cash out and enjoy the fact that having their assets go into Mt. Gox bankruptcy is the best investment they’ve ever made,” Glover told CNBC.
What is Mt. Gox?
Mt. Gox is an online marketplace where people can buy or sell Bitcoin using different currencies. At the height of its success, the platform was the world’s largest Bitcoin spot exchange, claiming to handle approximately 80% of global Bitcoin USD transactions.
The company, whose abbreviation is derived from “Magic: The Gathering Online Exchange,” closed in February 2014 after a series of robberies.
Mt. Gox blames the disappearance of Bitcoin on a bug in the cryptocurrency framework. Mt. Gox said that while users received incomplete transaction messages when accessing the exchange, the coins may have actually been illegally transferred from their accounts by hackers.
On Monday, a court-appointed trustee took charge of overseeing the exchange’s bankruptcy proceedings. explain Distributions to the company’s approximately 20,000 creditors will begin next month. The payment method will be a hybrid of Bitcoin and Bitcoin Cash, an early fork of the original cryptocurrency.
Alex Thorn, head of research at crypto asset manager Galaxy Digital, said in a report last month that the vast majority of creditors he spoke to said they would accept in-kind payments, that is, in the form of cryptocurrencies rather than fiat currencies. They will also hold these assets to a large extent.
He said that many of the top holders of Mt. Gox assets are well known in the Bitcoin world. They include early Bitcoin investor Roger Ver, Blockstream co-founders Adam Back and Greg Maxwell, and former Bitcoin Foundation executive director Bruce Fenton.
Some people will “take the money and run”
Based on conversations with institutional investors who are paying dues, “we do not believe there will be a massive sell-off from this group,” Thorne wrote.
However, Glover, a former managing director at Barclays, said there was still the possibility of a massive sell-off by creditors, giving them a chance to lock in huge gains after years of waiting.
“Some people obviously take the money and run,” Glover said.
Mt. Gox creditors may sell off heavily next month, creating “downside risk,” albeit short-lived, JPMorgan analysts said.
“Assuming the bulk of the liquidation by Mt. Gox’s creditors occurs in July, cryptocurrency prices will come under further pressure in July but rebound from August,” the analysts wrote.
It’s also possible that some of Mt. Gox’s Bitcoin investors have cashed out. In the decade since the exchange filed for bankruptcy, a secondary market has emerged for those who want to liquidate their bankruptcy claims. Those who persevere are true believers, Thorne said.
“Thousands of creditors have waited 10 years for payments and have resisted compelling and aggressive claims proposals during that time, demonstrating their desire to get their tokens back,” Thorne said. He said he expected a sell-off The pressure is limited, but he admitted that even if 10% of Bitcoins were sold, “it would have an impact on the market.”
Certain tax consequences may hinder a sale.
Luke Nolan, an Ethereum research associate at digital asset management company CoinShares, said that an important reason why Mt. Gox’s creditors chose to repay in kind has to do with tax implications. JPMorgan said in a report on Monday that people tend to accept cryptocurrency payments “either for tax reasons or because they believe liquidating now will lead to further price increases in the future.”
Glover said there are ways to avoid the hefty capital gains tax while still taking advantage of the massive increase in Bitcoin’s value.
Glover said: “Those in jurisdictions that impose capital gains taxes may choose to hold positions to avoid large tax bills and instead borrow U.S. dollars using Bitcoin as collateral, thereby transferring their currency without having to sell Bitcoin. change.
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