Bitcoin exchange MtGox to start liquidation process (Update)

Apr 24, 2014 by Peter Brieger
This photo illustration shows a man looking at the bitcoin exchange website of MtGox in Tokyo on February 25, 2014

Failed Bitcoin exchange MtGox, whose spectacular collapse hammered the digital currency's reputation, is to be liquidated after a Japanese court on Thursday ordered the start of bankruptcy proceedings, said a lawyer appointed to carry out the process.

The global virtual currency community was shaken by the shuttering of MtGox, which froze withdrawals in early February because of what the firm said was a bug in the software underpinning Bitcoin that allowed hackers to pilfer them.

The exchange filed for bankruptcy protection soon after, admitting it had lost 850,000 coins which were worth nearly $500 million at the time. It made a similar filing in the United States in early March.

The ruling by the Tokyo District Court on Thursday all but spells the end for a company that at one time processed around 80 percent of global transactions in the virtual currency.

"(I) will implement the bankruptcy proceedings, in which the assets of the bankrupt entity will be managed and converted into cash," said a statement attributed to bankruptcy trustee Nobuaki Kobayashi posted on the exchange's website.

"If funds for a distribution are secured, the liquidating distribution will be made."

He added that a creditors' meeting will be held on July 23, but warned that there were no guarantees about how much money—if any—investors would get back.

"The actual amount and value of Bitcoins and cash of the company will be investigated by the bankruptcy trustee with the cooperation of certain experts," the statement said.

Bitcoins are generated by complex chains of interactions among a huge network of computers around the planet and are not backed by any government or central bank.

Bitcoin trader Kolin Burges from Britain holds up a placard to protest against Tokyo-based bitcoin changer MtGox in front of the company's office in Tokyo on February 26, 2014

On Thursday, the statement from MtGox's bankruptcy trustee said it would investigate the lost coins "to the extent possible through (the firm's) asset administration".

- Lingering questions -

"The company has consulted with the police authority, and the bankruptcy trustee will also proactively cooperate with it when such cooperation is requested," the trustee added.

The liability of MtGox's under-fire chief executive Mark Karpeles would also be investigated as part of the bankruptcy proceedings, it said.

Last week, the court named Kobayashi as provisional administrator, which meant Karpeles ceded control of the company to him.

The France-born Karpeles has reportedly refused to travel to the United States, where he was being asked to appear for questioning in connection with MtGox's collapse.

Amid calls for a criminal investigation, the company said last month it had handed over documents to the Tokyo police, after it found 200,000 of the lost coins in a "cold wallet"—a storage device, such as a memory stick, that is not connected to other computers.

After trading for cents per Bitcoin for the first two years of its existence, the digital unit began a frenzied climb in 2011 that took it to $40 a coin in late 2012 and to $1,100 last year. It is currently trading at around $505.

Mark Karpeles, president of MtGox bitcoin exchange speaks during a press conference in Tokyo on February 28, 2014

The unit's relative anonymity and lack of regulation has been attacked by critics who fear it could be used to finance organised crime or terrorism.

Last month, the Japanese government said Bitcoin was not a currency but transactions involving it should be subject to taxation.

Tokyo also said that banks could not broker Bitcoin transactions or open accounts holding the virtual unit.

But as regulators around the world grapple with how to handle the virtual currency, Japan did not specify if Tokyo would immediately begin cracking down on it, or how it would do so, given the unit's opaque nature.

US Federal Reserve head Janet Yellen has said the central bank had no powers over a currency that only exists virtually with no central authority behind it.

Several countries, including Russia and China, have heavily restricted how Bitcoin can be used.

Explore further: Bitcoin exchange MtGox in administration, bankruptcy eyed (Update)

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User comments : 6

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Returners
1 / 5 (2) Apr 24, 2014
You have to realize you're trading in something that has absolutely no intrinsic value. It's less intrinsic and less reliable than normal currency. The people investing in this saw it as a way to "hide" value from the fluctuations of normal currency, and perhaps also a way to avoid taxes, and some illegal laundering of money as well.

Investing in this was simply idiotic, as I said from the beginning. Oh sure, some lucky people won the "lottery" on some of the ups and downs, but for the most part it's worse than a Ponzy scheme, as the only money anybody makes is at the expense of someone else's losses.

There is no productivity or value in this. Without ties to the stability of a government, and without backing of some sort of reserve or physical resource, it is only "Monopoly Money".

Facebook make money by trading two services: social networking and search advertisements.

Google makes money by trading content search with search ads.

Bitcoin does nothing...
kochevnik
not rated yet Apr 24, 2014
Without ties to the stability of a government, and without backing of some sort of reserve or physical resource, it is only "Monopoly Money".

Actually the exact opposite is true. Governments always dilute the value of their currency for war ventures, placating the powerful, and stealing from the electorate with inflation. Your USA is now floundering and enticing civil war in Ukraine as a desperate attempt to stop Russia from replacing it as the dominant world superpower. That because the Saudis are going to dump USA in favor of the BRIC nations because they know your debt game is done

Gold doesn't need governments. The "backing" you mentioned can only be done with something of intrinsic value like land or precious metal, not some career politicians who will sell out every election. Bitcoin has intrinsic scarcity and thus has intrinsic value among those who use it. Poker chips and African sticks can also act as currency
Returners
1 / 5 (1) Apr 24, 2014
Gold doesn't need governments. The "backing" you mentioned can only be done with something of intrinsic value like land or precious metal, not some career politicians who will sell out every election.


This part makes sense and isn't that what I said?

Bitcoin has intrinsic scarcity and thus has intrinsic value among those who use it.


No it doesn't. It's a digital symbolic code, who's value is only equal to the highest bidder. It has no intrinsic value whatever

At least a penny is made of copper, and other U.S. coins are made from combinations of copper and nickel. Even paper money is worth a bit more than nothing intrinsically. Worst case scenario is burn it for energy I guess...

A bitcoin is nothing except some binary code that can be changed. If it was intrinsically tied to something, then it would be different and more reliable. They didn't want it tied to anything because they wanted it to be more or less a "barter media," but that doesn't really work.
Returners
1 / 5 (1) Apr 24, 2014
I think a good currency should have it's value intrinsically tied to some natural resource.

One reason the U.S. accrued debt is because the government bought land from other nations, but then gave the land to people for free, raising money only through property taxes.

It would make more sense for the government to buy up forests and sell lumber, for example, making the profits directly and cutting out middle men.

It would make mroe sense for the government to buy land and make wind and solar farms, etc.

In such a case, the government could define money in terms of the value of both renewable and non-renewable resources. Currently the dollar in the U.S. is undefined officially, but in reality it's value is defined by a tug-of-war.

I think money should be defined in terms of things which are rare enough to not be fakable, but common enough to actually be used in civilization as something other than a shiny trinket.

that would be copper, land, timber, iron, even rock(construction).
Returners
1 / 5 (1) Apr 24, 2014
If your money is going to be a medium of exchange, then it's value should be defined in terms of the most important things people exchange, not shiny trinkets like Gold, and not some "invisible hand" nobody can define, which gets abused by a handful of people at everyone else's expense.

Property taxes do sort of tie the value of money to land, but without an "official" definition of the dollar, this tie actually is detrimental. obviously some form of taxation is required for any government to operate. I think government's should raise money through commerce where ever possible, not through taxation, and to that end I think it would be beneficial if the government actually invested in some sectors of commerce, such as lumber and energy, as though it were an actual corporation. Construction materials and energy are what drive healthy economies, not gold (unless the government is the one doing the mining), and not funny-money paper stock markets; This is bad integrity/accountability.
kochevnik
not rated yet Apr 24, 2014
Gold doesn't need governments. The "backing" you mentioned can only be done with something of intrinsic value like land or precious metal, not some career politicians who will sell out every election.

This part makes sense and isn't that what I said?
No you said that nothing has intrinsic value without government and banksters. Such a blatantly ignorant POV could only come from a conservative American

Scarcity begets value. You can post your bullshiyte all you want, or take an economics 101 course. The latter will help conservative physorg bandwidth