Mt. Gox's liquidation an its impact...

johnny211

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Quote from: Wilhelm on April 21, 2014, 05:16:20 AM

1) "Insolvency is the inability of a debtor to pay their debt."
2) "The state of having liabilities that are greater than assets"

It is obvious that 1 applies.
Since Gox is shut down and doesn't have a real office what assets or income do they have? A few servers, corporate car, printer, desk stapler? (most of these cost money to run)

How can you say they are still solvent?

I'm simply saying that if you exclude BTC debt and treat the BTC held by Gox as assets, you're looking at 137M USD of assets (BTC + fiat at bank accounts) and 63M USD of liabilities (gox user, fiat balances).

Gox is only insolvent if BTC debt is included, so why is the liqudator involved if the debt isn't?

Jr65

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No, they will dump it privately and by the time we hear about it, it will be way too late.

nuff

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Quote from: inca on April 21, 2014, 09:25:30 AM

Quote from: Jr65 on April 18, 2014, 12:06:12 PM

Thanks for your responses. I still fear that the Japanese Bankruptcy Court can do whatever it wants to do with the 200,000 BTC it controls. In other words, they could sell them and return the proceeds to creditors or return the BTC to its creditors, pro rata. If the Court succeeded in selling the 200,000 coins, it would brutalize BTC's price. Why is this not a real possibility? I'm not trolling for cheap coins, (I'm already all in at a average cost of approx. $495! Plus, I can't control the Court's decision!) I'm just very curious about pressing BTC matters that could impact us all.

You seriously think the bankruptcy court is going to dump 200,000 coins on the open market to achieve a best sale price?

Perhaps you should apply for a job at the CFTC.

And what makes you so sure they won't? Look, as far as the Japanese are concerned, they might just look at Bitcoin like any other asset, they ask 'what do I do with this', then the reply goes 'sell it' then they said "ok do it for me" and some person in charge just make sure he gets to convert those 'assets' to fiat and his job is done, maybe with "ok i'll take those bitcoins for a 100 yen" John....

nuff

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Quote from: goose20 on April 21, 2014, 08:27:30 AM

No one will get any btc back.

Since the btc can't be separately identified (Similar to oil in an oil tanker owned by many 'customers' etc Google 'retention of title'), any btc held will be classed as an asset and auctioned off.

The 1st hand to get paid is that of the liquidator. They will spend thousands of man hours investigating and reporting etc etc at high hourly rates and eat up most/all of the assets.

You guys need to remember the theory of an insolvency case and the actual practice are two very different things.

The theory goes an independent qualified person takes over to secure any assets, realize those assets, and pay out creditors under a prescribed priority scale.

In practice, any assets realized are taken by the insolvency practitioner as the 1st one on that priority scale. They do work to eat up those funds. They stop work once there is no more funds. Funds are rarely paid back to unsecured creditors.

Well then, that's the worst possible outcome - being business as usual, following usual protocol to just liquidate everything and the liquidators get a fair chunk, the buyers of below-market-price btcs getting a great deal, the users get nothing. I do hope the Japanese government is not that naive

kooke

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Bitcoin super-duper-mega-ultra-hyper-node

Karpeles' mom defending her son:

http://m.torontosun.com/2014/04/21/mt-gox-bitcoin-exchange-boss-mark-karpeles-easily-led-not-dishonest-mother

I kinda feel sorry for the guy now. Looks like he bit off more than he could chew.

Odalv

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Quote from: inca on April 21, 2014, 09:25:30 AM

Quote from: Jr65 on April 18, 2014, 12:06:12 PM

Thanks for your responses. I still fear that the Japanese Bankruptcy Court can do whatever it wants to do with the 200,000 BTC it controls. In other words, they could sell them and return the proceeds to creditors or return the BTC to its creditors, pro rata. If the Court succeeded in selling the 200,000 coins, it would brutalize BTC's price. Why is this not a real possibility? I'm not trolling for cheap coins, (I'm already all in at a average cost of approx. $495! Plus, I can't control the Court's decision!) I'm just very curious about pressing BTC matters that could impact us all.

You seriously think the bankruptcy court is going to dump 200,000 coins on the open market to achieve a best sale price?

Perhaps you should apply for a job at the CFTC.

Lol, court will be dumping coins on Huobi and BTC-e. :-)

inca

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Quote from: Jr65 on April 18, 2014, 12:06:12 PM

Thanks for your responses. I still fear that the Japanese Bankruptcy Court can do whatever it wants to do with the 200,000 BTC it controls. In other words, they could sell them and return the proceeds to creditors or return the BTC to its creditors, pro rata. If the Court succeeded in selling the 200,000 coins, it would brutalize BTC's price. Why is this not a real possibility? I'm not trolling for cheap coins, (I'm already all in at a average cost of approx. $495! Plus, I can't control the Court's decision!) I'm just very curious about pressing BTC matters that could impact us all.

You seriously think the bankruptcy court is going to dump 200,000 coins on the open market to achieve a best sale price?

Perhaps you should apply for a job at the CFTC.

kooke

sr. member

Activity: 448

Merit: 250

Bitcoin super-duper-mega-ultra-hyper-node

Don't tell them the ugly truth. Gox's liquidation is bullish and people are going to get at least 20% of their btc back, which is going to encourage them to buy more coins, followed by a rise to the moon before we blast off to mars and beyond Tongue

Some people try to twist everything into great news for bitcoin...

goose20

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No one will get any btc back.

Since the btc can't be separately identified (Similar to oil in an oil tanker owned by many 'customers' etc Google 'retention of title'), any btc held will be classed as an asset and auctioned off.

The 1st hand to get paid is that of the liquidator. They will spend thousands of man hours investigating and reporting etc etc at high hourly rates and eat up most/all of the assets.

You guys need to remember the theory of an insolvency case and the actual practice are two very different things.

The theory goes an independent qualified person takes over to secure any assets, realize those assets, and pay out creditors under a prescribed priority scale.

In practice, any assets realized are taken by the insolvency practitioner as the 1st one on that priority scale. They do work to eat up those funds. They stop work once there is no more funds. Funds are rarely paid back to unsecured creditors.

Wilhelm

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Quote from: nuff on April 21, 2014, 02:54:11 AM

Quote from: Wilhelm on April 20, 2014, 06:13:52 PM

A liquidator cannot buy BTC since his job is to pay all fiat debts. BTC isn't a currency in many countries.
So a BTC debt possibly has a lower (or zero) priority when liquidating.
Owning a BTC in Gox would be like having bought a product and payed upfront, you simply will never receive the product or your money.

Except that this 'product' also has the same characteristics that of a currency. It's fungible, has a price value and accepted by vendors in exchange for services and goods. They (the liquidators) will still need to find a way to deal with these 'product' that's worth about a hundred million dollars at least.

The fact that BTC is not officially recognized as a currency may be the big stumbling block for the legislators. Because it's not recognized as a currency, they can't redistribute those btc back as btc, they need to liquidate those btc to fiat, and only then can compensation take place, in the form of fiat as defined in bankruptcy laws. You always get a fire sale whenever a company goes down, the liquidators would want to as quickly as possible liquidate any assets they're able to get their hands on to pay back creditors.

This whole fiasco is unprecedented where there hasn't been any legal provision written yet to tell legislators what to do with this 'product'. What follows should be interesting, how the Japanese will handle this.

+1

We have international law on a new digital product/currency. This might be a good thing for bitcoin since countries now have to acknowledge bitcoin and take a stance on bitcoin and write up legislation or agreements to handle it.

I also beleive that converting BTC to fiat might be perceived as trading or speculation an I also believe a liquidator may not speculate and thus trade.
If any converting is to be done the BTC must be auctioned to pay off all first in line fiat debts.
Then they get into the next mess and that is the price of bitcoin since many debts are in bitcoin, if any money is left they will probably have to come to an agreement with all people holding bitcoin accounts.

Quote from: johnny211 on April 20, 2014, 08:58:09 PM

Quote from: Wilhelm on April 20, 2014, 06:13:52 PM

A liquidator cannot buy BTC since his job is to pay all fiat debts. BTC isn't a currency in many countries.
So a BTC debt possibly has a lower (or zero) priority when liquidating.
Owning a BTC in Gox would be like having bought a product and payed upfront, you simply will never receive the product or your money.

Excluding BTC debt Gox is still solvent, they just need to close their USD 30M short. Why is the liquidator even involved? None of this makes any sense.

1) "Insolvency is the inability of a debtor to pay their debt."
2) "The state of having liabilities that are greater than assets"

It is obvious that 1 applies.
Since Gox is shut down and doesn't have a real office what assets or income do they have? A few servers, corporate car, printer, desk stapler? (most of these cost money to run)

How can you say they are still solvent?

nuff

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Activity: 266

Merit: 250

Quote from: Wilhelm on April 20, 2014, 06:13:52 PM

A liquidator cannot buy BTC since his job is to pay all fiat debts. BTC isn't a currency in many countries.
So a BTC debt possibly has a lower (or zero) priority when liquidating.
Owning a BTC in Gox would be like having bought a product and payed upfront, you simply will never receive the product or your money.

Except that this 'product' also has the same characteristics that of a currency. It's fungible, has a price value and accepted by vendors in exchange for services and goods. They (the liquidators) will still need to find a way to deal with these 'product' that's worth about a hundred million dollars at least.

The fact that BTC is not officially recognized as a currency may be the big stumbling block for the legislators. Because it's not recognized as a currency, they can't redistribute those btc back as btc, they need to liquidate those btc to fiat, and only then can compensation take place, in the form of fiat as defined in bankruptcy laws. You always get a fire sale whenever a company goes down, the liquidators would want to as quickly as possible liquidate any assets they're able to get their hands on to pay back creditors.

This whole fiasco is unprecedented where there hasn't been any legal provision written yet to tell legislators what to do with this 'product'. What follows should be interesting, how the Japanese will handle this.

cosmofly

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You should worry more about US Gov coins those are likely to sell soon they even said they plan to sell, ppl forget about those coins.

johnny211

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Quote from: Wilhelm on April 20, 2014, 06:13:52 PM

A liquidator cannot buy BTC since his job is to pay all fiat debts. BTC isn't a currency in many countries.
So a BTC debt possibly has a lower (or zero) priority when liquidating.
Owning a BTC in Gox would be like having bought a product and payed upfront, you simply will never receive the product or your money.

Excluding BTC debt Gox is still solvent, they just need to close their USD 30M short. Why is the liquidator even involved? None of this makes any sense.

joehal

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Quote from: Wilhelm on April 20, 2014, 06:13:52 PM

Owning a BTC in Gox would be like having bought a product and payed upfront, you simply will never receive the product or your money.

Yes but the liquidator and judge's role is to impart justice and set things right. How is wasting the btc holders money, right ?

Wilhelm

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Quote from: johnny211 on April 20, 2014, 04:10:01 PM

Quote from: esse83 on April 20, 2014, 03:08:53 PM

Seems like almost everyone assumes that the 200k btc is the property of MtGox. Not sure why though. If not they cant liquidate it.

Probably because the court seemingly authorized the statement regarding the 200k BTC.

BTW, does anyone know why the liquidator would convert the BTC to fiat? Assuming 50% of the fiat and 75% of the BTC is lost, a pro-rata payout in kind would still screw the BTC creditors harder than corresponding fiat creditors. It would actually make more sense to buy BTC for some 30% of the remaining fiat and then doing something like a 35% pro-rata distribution. Converting all to fiat equals horrible capital destruction, is that really how liquidation should be done? Maybe I'm naive, but isn't the liquidator supposed to equitably protect the interests of the creditors? Pretty much all of GOX's debt should be account balances, so why screw the holders like this?

A liquidator cannot buy BTC since his job is to pay all fiat debts. BTC isn't a currency in many countries.
So a BTC debt possibly has a lower (or zero) priority when liquidating.
Owning a BTC in Gox would be like having bought a product and payed upfront, you simply will never receive the product or your money.

johnny211

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Quote from: esse83 on April 20, 2014, 03:08:53 PM

Seems like almost everyone assumes that the 200k btc is the property of MtGox. Not sure why though. If not they cant liquidate it.

Probably because the court seemingly authorized the statement regarding the 200k BTC.

BTW, does anyone know why the liquidator would convert the BTC to fiat? Assuming 50% of the fiat and 75% of the BTC is lost, a pro-rata payout in kind would still screw the BTC creditors harder than corresponding fiat creditors. It would actually make more sense to buy BTC for some 30% of the remaining fiat and then doing something like a 35% pro-rata distribution. Converting all to fiat equals horrible capital destruction, is that really how liquidation should be done? Maybe I'm naive, but isn't the liquidator supposed to equitably protect the interests of the creditors? Pretty much all of GOX's debt should be account balances, so why screw the holders like this?

esse83

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Seems like almost everyone assumes that the 200k btc is the property of MtGox. Not sure why though. If not they cant liquidate it.

joehal

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Quote from: Jr65 on April 20, 2014, 11:17:23 AM

Wrong! The 200,000 BTC will be sold at a huge discount and customers will get either $0 or pennies on the dollar. "The Associated Press" is already forecasting that customers will get nothing.

Is it possible to sue the liquidators if somehow they'll "misplace" the bitcoins or by incompetence they'll sell the btc for much much lower than they are worth ?

GigaCoin

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Giga

its going to be a while before those coins are sold (if ever), not sure why people think this will happen overnight!

there's still a lot of legal mumbo jumbo remaining

Jr65

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Wrong! The 200,000 BTC will be sold at a huge discount and customers will get either $0 or pennies on the dollar. "The Associated Press" is already forecasting that customers will get nothing.

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