Mt. Gox, a Bitcoin trading post that managed to lose millions of Bitcoin belonging to customers, has been granted bankruptcy protection in the U.S. and its assets have been frozen.
According to Bloomberg, a federal judge in Chicago has frozen the U.S. assets of the exchange. U.S. District Judge Gary Feinerman issued a temporary order to tie up the money and property belonging to Mt. Gox, its corporate parent Tibanne KK, and Mt. Gox CEO Mark Karpeles after a hearing.
The order was not opposed by these parties.
Once the dominant Bitcoin exchange worldwide, Mt. Gox shut down last month. In total, approximately 750,000 Bitcoins deposited by users and 100,000 Bitcoins belonging to Mt. Gox vanished, which is worth roughly $500 million in today's trading rates.
Karpeles said the loss -- taking place over several years -- was due to "weaknesses in the system" which allowed cyberattacks and Bitcoin theft to occur, although critics argue that mismanagement was truly the cause of this oversight. Following closure, Mt. Gox filed for bankruptcy protection in Japan as well as Chapter 15 bankruptcy protection in the United States on Sunday.
Illinois resident Gregory Greene is suing the Bitcoin exchange on behalf of every U.S. consumer that claims to have lost investments due to the closure of Mt. Gox, as well as saying he has personally lost roughly $25,000. Greene accuses the firms and Karpeles of mismanagement and fraud. One of Greene's attorneys estimates that between $2.1 and $5 million in assets has been frozen by the order.
At the same time, Mt. Gox's bankruptcy protection in Japan and the United States shields the company from further litigation.
In related news, U.S. watchdog the Commodity Futures Trading Commission (CFTC) is considering the regulation of digital currencies including Bitcoin, in light of the disaster which has cost consumers millions worldwide. While outside of government control, Bitcoin can prove lucrative -- but also lacks government protection in the case of loss, as it is not backed by a central authority or bank.
Mark Wetjen, acting chairman of the commission, said the authority is exploring whether Bitcoin can be considered a commodity -- and therefore falls under CFTC rulings. While there is only internal at the staff level currently, Wetjen commented:
"I think people (in the agency) believe there's a pretty good argument that it would fit that definition. Then there's a separate question about whether or not there is some derivative contract based on, or denominated in a virtual currency and whether that's listed on an exchange. [...] There's some looking into that question too."