Mt. Gox gives up on resurrection, presses for liquidation

Summary:Any hope of the once dominant Bitcoin exchange regenerating has now been dashed.

Screen Shot 2014-04-15 at 09.28.36
Credit: CNET

Mt. Gox investors hopeful that the trading post might rally now have hopes dashed, as it appears the Bitcoin exchange has asked for permission to liquidate.

Read this

The Mt. Gox bitcoin debacle: Bankruptcy filed, customer bitcoin lost

UPDATE: Mt. Gox has closed the bitcoin exchange and filed for bankruptcy in Japan.

According to the Wall Street Journal, Mt. Gox has asked a Tokyo-based court for permission to formally and finally close its doors, citing rehabilitation complexities — and therefore appears to have abandoned plans to rebuild the company under bankruptcy protection issued in both Japan and the United States.

Sources told the publication that the difficulty of holding meetings with creditors worldwide and a "lack of realistic rehabilitation plans" for the once-dominant Bitcoin exchange were among the complicated aspects of trying to salvage the Tokyo-based exchange, and Mt. Gox isn't necessarily up to the task.

In February, Mt. Gox suspended customer withdrawals , resigned from the Bitcoin Foundation's board, and went silent for a number of days. The exchange then admitted that 850,000 BTC had been stolen over a period of years; 100,000 BTC belonging to the company itself and 750,000 BTC belonging to investors.

Moving forward, Mt. Gox later said it discovered 200,000 Bitcoin in an old-style wallet believed to be out of commission, which was immediately moved offline in to a cold-storage wallet.

However, hackers who investigated the system claim that Mt. Gox is potentially involved in fraud , and the company was still controlling "stolen" funds.

If the request to liquidate is approved, investors are likely to recoup less of their investment back, and a trustee appointed by the Japanese court will take over management of Mt. Gox from founder Mark Karpeles. However, one source said there was still hope a buyer might come forward to purchase the exchange, in which case investors might receive a portion of future earnings.

Mt. Gox's latest move comes after Karpeles' lawyers stated the Mt. Gox founder was unwilling to visit the US  to answer questions concerning the closure of the Bitcoin exchange. A summons from the US Department of Treasury's Financial Crimes Enforcement Network ordered Karpeles to appear in Washington this Friday, but the founder's lawyers said the order "did not specify topics for discussion." In addition, the filing stated:

"Mr. Karpeles is now in the process of obtaining counsel to represent him with respect to the FinCEN Subpoena. Until such time as counsel is retained and has an opportunity to 'get up to speed' and advise Mr. Karpeles, he is not willing to travel to the US."

While Karpeles has not been charged with any crime, his lawyers fear that he may be detained if he travels overseas, whether in relation to allegations of fraud or connections to marketplace Silk Road — the latter currently being investigated by the FBI.

It is not known how the request for liquidation in Japan will affect Karpeles' decision not to go to the United States, or how it will impact on the firm's bankruptcy protection under Chapter 15 in the country.

Tim Buckingham, partner at global law firm Eversheds, told ZDNet:

"The insolvency of Mt Gox was a predictable conclusion following its recent troubles, and many people will be using this news to jump on the bandwagon and criticise Bitcoin generally. The reality is that Bitcoin is here to stay, and the real issue here is to address, quickly, how this new form of currency can be properly regulated and monitored to help it move away from the adverse publicity that it has attracted, as well as the ad hoc refusal of some jurisdictions to recognise it as a currency."

Topics: Tech Industry

About

Charlie Osborne, a medical anthropologist who studied at the University of Kent, UK, is a journalist, freelance photographer and former teacher. She has spent years travelling and working across Europe and the Middle East as a teacher, and has been involved in the running of businesses ranging from media and events to B2B sales. Charli... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.