Mt. Gox’s 2 Biggest Creditors Choose Payout Option That Won’t Force Bitcoin Sales: Sources

The two largest creditors of Mt. Gox, the crypto exchange that failed due to a hack nine years ago, has chosen to be paid out bankruptcy restitution mainly in bitcoin (BTC), according to people familiar with the matter.

Defunct New Zealand-based crypto exchange Bitcoinica and MtGox Investment Funds (MGIF) – which together represent about a fifth of all Mt. Gox claim – as a result, will be paid 90% of their fundraising funds (which is estimated at roughly 21% of what they had locked up on the platform at the time of the 2014 hack).

Their decision to choose the former option could alleviate long-held fears among bitcoin holders that a wave of simultaneous liquidations linked to Mt. Gox bankruptcy could drive down the price of bitcoin. Had these two creditors chosen to take the payout in fiat, the trustee overseeing the bankruptcy estate would likely have been forced to sell a significant portion of Mt. Gox’s reclaimed bitcoin holdings to fulfill all fiat requests.

Creditors who choose to wait may have to stick around for a while — the bankruptcy court case could take another five to nine years, according to documents reviewed by CoinDesk. The withdrawal of Bitcoinica and MGIF removes a significant portion of the total claim from any future match.

Creditors have waited nearly a decade to get some of their money back after Mt. Gox – one of the first and at one time the largest crypto exchanges in the world – was hacked in 2014. Hackers got away with 850,000 BTC, a sum worth $460 million at the time. After the hack, Mt. Gox left with approximately 142,000 BTC, 143,000 bitcoin cash (BCH) and 69 billion Japanese yen.

Creditors who choose the lump sum option can choose to receive the payout in a combination of BTC, BCH, and yen, or they can request that the entire amount be paid in fiat. By opting for the early payout, Bitcoinica and MGIF have also opted to receive the crypto option, where the largest possible portion of their payouts will be in BTC, sources told CoinDesk.

If creditors do not want to take the early lump sum to 90% of the amount owed, the only other option creditors have is to wait for the end of the civil rehabilitation lawsuit (which includes a lawsuit by CoinLab, a now-defunct partner exchange , against Mt. Gox’s estate ).

Although this option may in theory provide a slightly higher recovery, creditors have no guarantee that it will not potentially be lower than the 90% of recoverable holdings guaranteed by the lump sum payment.

Furthermore, a legal analysis by a Japanese law firm suggested that it could take years for delays to get the money back.

Creditors have until March 10, 2023 to decide whether to take the early lump sum offered or continue to wait for a potentially larger payout at an unspecified future date.