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Mt. Gox Bitcoin Exchange Denied Rehabilitation, Looks to Liquidate Instead

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April 16, 2014

Mt. Gox Bitcoin Exchange Denied Rehabilitation, Looks to Liquidate Instead

By Steve Anderson
Contributing TMCnet Writer

The Mt. Gox Bitcoin exchange incident may well have proven one of the biggest signs that there was trouble ahead in the Bitcoin movement as a whole. Few expected an entire exchange to go down, potentially taking users' Bitcoin stashes along with the closure. But with the shutdown of the Mt. Gox exchange—formerly the largest such exchange out there—comes a new report that the entire operation is likely to be liquidated rather than restarted.

The reports from a Tokyo court administrator noted that Mt. Gox's plans to restart the business had been dismissed by the court, and that from there, liquidation was the next likely step. What's more, the exchange's CEO, Mark Karpeles, is likely to find himself investigated for liability in the matter, as based on reports from the provisional administrator Nobuaki Kobayashi. As to why the plan to rehabilitate the company rather than simply shut it down and liquidate it, reports suggest that it was largely a matter of difficulty to carry out Mt. Gox's part.

The Mt. Gox exchange lost around 850,000 Bitcoins, worth about $437 million.  Though the company later found 200,000 of the missing Bitcoins lost in a hacking staged on the company's systems that still leaves a major portion of the business gone. The court subsequently put the firm's assets under Kobayashi's control, ahead of official bankruptcy proceedings and the naming of a bankruptcy trustee. The court's decision was said to have followed revelations that Karpeles wasn't planning to answer questions about his bankruptcy case in the United States.

However, Mt. Gox may not be permanently shuttered. There are reports that an investors' group led by former child actor Brock Pierce have an interest in taking over Mt. Gox's operations, and the Tokyo court is apparently prepared to at least consider the offer. It may not come off, but certainly, investors would be happy to hear that Mt. Gox isn't shuttered completely and said users may have a chance at least a partial recovery.

Bitcoin in general hasn't had a good time of things recently. Not only is Bitcoin proving a greater target than some may have foreseen, the exchanges are taking hits too. Mt. Gox isn't the only exchange to have largely shut down in recent memory; the Vircurex Bitcoin exchange also took a hit, freezing customer accounts, though with a plan to repay. An entirely digital commodity—or currency, depending on how some choose to look at it—is a very tempting target for hackers, and thus Bitcoin exchanges make a prime target. But this underscores the need for greater vigilance and tighter security, possibly incorporating a two-factor authentication system, or even the outright use of biometric measures.

Bitcoin isn't likely to be sunk as an investment from a few failed exchanges, but there's clearly a value here in diversification and ample security measures. The end result here, however, is that Bitcoin has a few hazards all its own, though protecting against those hazards may allow users to realize some significant gains in the long term.

Edited by Maurice Nagle

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