Mt. Gox was once the world's largest Bitcoin exchange, accounting for 70% to 80% of global Bitcoin trading volume. However, in 2014, the exchange went bankrupt due to a series of thefts, losing up to 950,000 Bitcoins. Ten years later, Mt. Gox began a repayment plan to distribute recovered assets to creditors. This is good news for victims who have been waiting for compensation for many years, but the price of Bitcoin fell to $59,000 last week.
Mt. Gox Incident Review: The Rise and Fall of the Mentougou Exchange
The birth and rise of exchanges
Mt. Gox was launched by American programmer Jed McCaleb in 2010. It was originally a platform for card game fans to trade cards online. In July 2010, McCaleb transformed the platform into a Bitcoin exchange. In March 2011, Mark Karpelés acquired Mt. Gox, and the exchange expanded rapidly to become the world's largest Bitcoin exchange.
In trouble
Despite the apparent prosperity, many problems had erupted within the Mt. Gox exchange. In 2013, Mt. Gox's former business partner Coinlab sued the company for $75 million. In the same year, the U.S. Department of Homeland Security was also investigating the unlicensed operation of Mt. Gox's subsidiary in the United States and seized $5 million from the company's bank account.
At the end of 2013, Mt. Gox lost its position as the world's largest Bitcoin exchange and fell to third place. Frequent hacker attacks on internal management and security loopholes eventually led to its bankruptcy.
Exchange bankruptcy
In February 2014, Mt. Gox stopped all Bitcoin withdrawals and suspended all trading on the 24th of the same month. The hacker attack resulted in the theft of 744,408 Bitcoins and the company declared bankruptcy. Although 200,000 Bitcoins were recovered, 650,000 Bitcoins are still missing. In 2018, the Tokyo District Court approved the transfer of Mt. Gox from bankruptcy liquidation procedures to civil rehabilitation procedures to compensate victims by selling the remaining Bitcoins.
Mt. Gox Refund Procedure
After years of legal battles and recovery efforts, Mt. Gox successfully recovered most of the stolen Bitcoins. In November 2021, the Japanese court and Mt. Gox creditors reached a compensation agreement, and victims can submit compensation applications through an online system. In September 2023, the refund period was extended to October 31, 2024 to ensure that all victims have sufficient time to submit applications.
In May 2024, some Bitcoin was transferred out, marking the further advancement of the repayment plan. On June 24, the trustee announced that it would start the repayment of Bitcoin and Bitcoin Cash in early July, and it is expected to pay 142,000 Bitcoins, 143,000 Bitcoin Cash and 69 billion yen by October.
How Will the Mt. Gox-Related Selloff Impact the Bitcoin Market?
The Mt. Gox trustee holds a large amount of Bitcoin, and its repayment work may lead to a large number of tokens being sold on the market. Investors are worried whether the Mt. Gox refund will bring selling pressure to the market, causing the prices of Bitcoin and other related tokens to fall further. John Glover, chief investment officer of crypto lending company Ledn, said that many investors may choose to lock in profits, which will translate into huge sales of Bitcoin.
Cryptocurrency prices faced further pressure in July as the majority of the liquidation of Mt. Gox creditors likely occurred in July, but have rebounded since August. The sale of 5,000 bitcoins by the German Interior Ministry also weighed on bitcoin prices.
However, some experts said the sell-off will not have much impact on the cryptocurrency market. The repayment will not have a significant impact on the price of Bitcoin. Most of Mt. Gox's early users and creditors are long-term Bitcoin enthusiasts and are unlikely to sell all their Bitcoins immediately.
The market has the capacity to absorb selling pressure. The amount of Bitcoin that will eventually be compensated by Mt. Gox will be less than expected. The overall impact of the Mt. Gox payment incident may dissipate. The Federal Reserve’s new interest rate forecast is one of the possible reasons for Bitcoin’s recent price drop.
