Topic: Did Mt.Gox ask for Provisional Administration or did the Court order it? (Read 1943 times)

That's what bothers me. Where are the Tokyo police in this?

It took a while for it to come out, but Karpeles' business, Tibanne, is still in operation.  Tibanne employed all the employees, rented the office space, and owned all the equipment. Mt. Gox was just a shell.

The U.S. Bankruptcy Court in Dallas, Texas ordered Mark Karpeles to be deposed in Dallas, Texas on Thursday, April 17. On April 7, only ten days before the deposition was supposed to take place, when it appeared that his testimony was imminent in Dallas,  suddenly one of Karpeles' lawyers received a Subpoena from FinCEN requiring him to appear and provide testimony on Friday, April 18  in Washington, D.C.,  the very next day after the deposition had been planned for Dallas.

The fact that he had not yet retained counsel for the FinCEN hearing was used as a basis to ask the Dallas court on Monday, April 14 for an emergency hearing the next day to ask for a continuance of the deposition date originally scheduled for Thursday, the 17th. The court agreed to postpone the deposition until May 5.

In the meantime, the lawyers got busy in Japan and on Wednesday, April 16 Attorney-at-law Nobuaki Kobayashi was appointed as Provisional Administrator so he, and not Mark Karpeles, would be the one representing the company in the Dallas deposition rescheduled for May 5. Needless to say Karpeles never appeared in either Dallas or Washington, D.C. and has remained, apparently under orders from the Tokyo bankruptcy court, in Japan.

Since Karpeles has never been deposed in any of the lawsuits, either says nothing at all, or else talks about his cat, apple pie and sushi and speaks in riddles whenever he has been interviewed by journalists, there has been a distinct lack of anything of any substance coming from him or anyone else connected with the investigation even worthy of any confirmation. The fog cover over details of the case or what really happened to shutter Mt. Gox is virtually complete, and has remained that way for more than 6 months.

Creditors started to sue him.

He filed for bankruptcy protection (the full name of the legal procedure) in Japan to stop those multiple lawsuits and replace them by a single lawsuit (that is the purpose of bankruptcy protection law).

While under bankruptcy protection, the company can try to produce a recovery plan to resume business until it can pay off all creditors.

Mark wanted that solution, of course, and sought to sell the company to someone who would keep it operating.

The first thing that the bankruptcy court must decide is whether the recovery plan produced by the company has a chance to succeed and pay off all creditors.  The court easily decided that MtGOX could never recover the ~600'000 missing coins.

That being decided, bankruptcy protection law says that the company must be closed, and a professional liquidator must be appointed by the court with the task of gathering all the remaining assets and dividing them among the creditors', proportionally to their claims.  

I don't know whether that is a routine decision in bankruptcy proceedings, but the prohibition to travel without permission is plain common sense.  Someone who 'lost' half a billion of customer's money would be highly tempted to run away.

I don't recall clearly the events in the US.  IIRC, Mark filed for bakruptcy protection there too, since he had a MtGOX subsidiary company registered in the US.  Either the US bankruptcy court, or a separate (criminal?) court ordered him to appear in person, he didn't.  Things were about to turn nasty, but then Sunlot convinced the person who was suing him in the US to withdraw the lawsuit, and the US bankruptcy court decided that the Japanese bankruptcy court should be the one to do the liquidation.  With those obstacles removed, Sunlot then hoped to convince the Japanese court to stop the liquidation and take control of all the remaining assets (including the ~200'000 "found" coins) for the generous sum of 1.00000000 BTC.

Needless to say, one should not trust anything that Mark or other MtGOX people will say, without confirming it with independent trustworthy sources.  Of which there is an acute shortage, it seems...

Thanks to the Mark Karpeles interview published yesterday in The Daily Beast we may have a partial answer to this question. In it, he talked about his ability to travel outside Japan, and says:
He seems to imply that it was the court that put Mt. Gox into administration, and it was never something he wanted. They won't even let him leave the country.

The timing of the beginning of provisional administration was rather interesting.  As you may recall, the Texas judge was demanding that Karpeles come there to be deposed. Attorney Nobuaki Kobayashi was appointed provisional administrator just in time to prevent Karpeles from having to go to Texas and represent the company in the proceeding.

He is still giving out vague answers and talking in riddles. We know more about his preferences for sushi (tuna and salmon) and pie (apple) than we do about the addresses of the rogue traders who made off with the bitcoins (if that's what really happened)

Is that a fact, or mere supposition? At some point the employees of a failed company just find themselves without a job.

Bitcoin is only a tool - albeit a good one - but just a tool.

Anarchy nor governance can truly exist in itself. Within governance you will find anarchy and vice-verse. New governance, new law, will arise here. Our goal should be to give it good guidance - reusing the best and eliminating the worst.

When in the Course of human events:
The Declaration of Bitcoin’s Independence

...Do not underestimate DNA; nothing is born completely neutral. Follow the protocol: it has anarchistic implications. Bitcoin is inherently anti-establishment, anti-system, and anti-state. Bitcoin undermines governments and disrupts institutions because bitcoin is fundamentally humanitarian. There’s an elimination of 3rd party intrusion. It’s purely peer-to-peer. The blockchain is free speech. It’s decentralized, voluntary, and non-aggressive. Bitcoin is not supposed to work within our current mechanisms. Bitcoin needs not entities of authority to acknowledge it, incorporate it, regulate it, and tax it. Bitcoin does not pander to power structures, it undermines them.
http://bitcoinmagazine.com/13072/declaration-bitcoins-independence

^^It is a good, radical statement in case anyone hasn't read the whole thing. 

When in the Course of human events...

It's way too quiet now. The courts should be required to make public statements/updates to keep people informed. When everything happens in the dark, there is plenty of room for corruption.

Karpeles was replaced by the cut-out, Mr. Kobayashi, so the former couldn't be deposed in Texas, as ordered by the bk judge.

What happened here is common in business bankruptcies. Initially, the old management wants to stay in control.  They often think, if only we had a little more time, we could get out of this hole. Something great will happen. ("Bitcoin will go to the moon!") We'll find a buyer with deep pockets. (The guys who wanted to pay 1BTC for Mt. Gox don't qualify).

But it usually doesn't work that way. More often, things get worse, the courts send in bankruptcy pros, check out the situation, and report back that there's no way out - this is a dead company. So the court sends the case to liquidation.

If there's fraud involved, this is when it starts to come out. The old management has been fired, and a bankruptcy trustee is in full charge. Bankruptcy trustees have seen it all before. When there's a lot of money missing with no good explanation, they get suspicious. That's part of their job. They have all the authority they need - all the remaining employees now work for them, the business records are all under their control, they can bring in auditors and experts, and they can get court orders from the bankruptcy court.  They can ask the court to "pierce the corporate veil" and act against the old management. They can undo insider transactions involving transfers of assets out of the company.  They can also file criminal complaints with police, or ask for a police investigation. The trustee has all the tools needed to find the missing money.

The supervisor in the Mt. Gox case has already mentioned that they're bringing in outside experts and are talking to the Tokyo police. There's clearly an investigation underway. I expect more of the missing funds will turn up.

That could be a very good reason for Karpeles opting out of civil rehabilitation and going straight for provisional administration: now he's no longer in charge and he doesn't have to go to the USA, where he could face a lot more troubles than some friendly questioning. He could have done this (if he actually did, like the press keeps saying) for exactly this reason.

The application for civil rehabilitation it's my understanding has been pending for some time now. The court may have recognized, but it doesn't say which party if any was advocating for this recognition. So from a legal verbiage point of view, there's no clear reason that the court wasn't simply recognizing it because of arguments put forth.

That's usually what courts do, right, recognize an argument? By dismissing the application, it was just removing a prior motion that was in conflict with the court's recognition. So Mt. Gox could have easily asked for this at some point in the proceedings, due to changing evaluation...

The Tokyo court appointed a supervisor for Mt. Gox weeks ago. The supervisor's job was to prevent any more assets from disappearing, and to report back to the court on whether the company could be salvaged.

The Japanese style is to try to achieve consensus, or at least the appearance of it. It's likely that once the supervisor had seen how bad the mess was, they told Karpeles and the judge that "civil rehabilitation" wasn't going to work. Consensus of a sort having been achieved, Mt. Gox goes to liquidation.

So Karpeles got fired. However, he no longer has to go to the US for the Chapter 15 bankruptcy claim. The supervisor, the trustee, or, more likely, someone representing them, will appear in the US bankruptcy court. That just ties the US case to the case in Japan; it's mostly a procedural thing. It's not clear how that works, but it may mean that claims by US persons can be filed in Dallas rather than Tokyo. That could be convenient.

None of this gets Karpeles off the hook on fraud and negligence issues, in the US or Japan. Also, while Karpeles is gone, some other employees remain around and they don't work for Karpeles any more. The court-appointed supervisor or the trustee soon to be appointed is now their boss. They'll now be a lot more willing to talk about exactly what went wrong and what Karpeles did.

I agree with everything you said.

But the reasoning behind my question is: if the Court issued that ruling on its own, fine, that's what everyone was expecting for a supposedly unsalvageable company. But if MK retracted his request for civil rehabilitation after having asked for it and with no apparent reason, there might be something else going on of which he is aware and we are not... and that something is very likely to not be anything good.

Also, why is every news piece talking about the latter and not the former, especially when the official press releases seem to say exactly the opposite?

It's hard to say. There's more going on here than the announcements indicate.

Originally, Mt. Gox asked for "civil rehabilitation". That was never going to work, and the court recognized that right after a creditor (the person behind "mtgoxrecovery.com") filed a complaint with the court alleging fraud. The Tokyo court delayed the matter a few weeks to allow for further investigation, and called in the Tokyo Metropolitan Police.

Today's statement from the provisional administrator reads "Today, in circumstances in which it would be difficult for the Company to carry out the civil rehabilitation proceedings, the Tokyo District Court recognized that it would be difficult for the Company to carry out the civil rehabilitation proceedings and dismissed the application for the commencement of the civil rehabilitation proceedings, and at the same time, issued an order for provisional administration by which I was appointed the provisional administrator. " That probably means the court-appointed supervisor, who is now the provisional administrator, asked the court to do that.

This is just a temporary holding state until the court appoints a bankruptcy trustee to handle the liquidation. As of right now, "The representative director of the Company has lost his authority to administer the Company’s assets pursuant to the order for provisional administration." In other words, Karpeles was just fired.

The court-appointed supervisor also writes "It is expected that, if the bankruptcy proceedings commence, an investigation regarding the liability of the representative director of the Company will be conducted as part of the bankruptcy proceedings." In other words, Karpeles will be investigated personally and may be held responsible for the missing assets.

Exactly my thought...

"Today, in circumstances in which it would be difficult for the Company to carry out the civil
rehabilitation proceedings, the Tokyo District Court recognized [...] and dismissed the application for the
commencement of the civil rehabilitation proceedings, and at the same time, issued an order for
provisional administration by which I was appointed the provisional administrator."

Sounds like court ordered.
So the media is wrong again?

A bit of uncertainty here.

According to the official statements on Mt.Gox's website, it looks like the Court didn't believe the company could put together a decent plan to bring it back into business, thus it declined the request for Civil Rehabilitation and ordered instead Provisional Administration, i.e. Karpeles being removed from management and a court-appointed person taking charge of the company until future decisions are taken:

https://www.mtgox.com/img/pdf/20140416_001_press_release.pdf


https://www.mtgox.com/img/pdf/20140416_002_announce_en.pdf


Most notably, while the first quote is from MK's statement, the second one is from the appointed Provisional Administrator, which is supposedly representing the Court and not the near-bankrupt company; thus it should be considered quite thrustworthy.

Both statements tell quite clearly that the Court, after examining Mt.Gox's situation, declined to accept the request for Civil Rehabilitation and ruled as stated above. And yet, most press sources report a quite different story, namely that it was Mt.Gox itself to request this, retracting their initial request and going straight to Provisional Administration.

Thus, my question is: did Mt.Gox request to be volontarily put into Provisional Admnistration (as the press seem to imply), or did the Court order it on the assumption that Mt.Gox's situation is not salvageable (as the official statements seem to say)?

This might seem a minor detail, but for various reasons it's not and could instead tell a lot about the real situation of Mt.Gox...