Topic: MtGox Bitcoin Cash (Read 1522 times)

The original poster brings up a good point about Bitcoin Cash -- if the Mt. Gox estate indeed has about 202k BTC on hand, the value of an equal amount of BCH would be significant and could theoretically be used to help repay creditors during the bankruptcy proceedings. Whether this actually happens or not is another matter; as other posters have mentioned, the attorneys involved in bankruptcies and receiverships of this sort tend to deduct hefty amounts for fees before distributing money to creditors, so they may just keep quiet about the BCH and pocket the extra funds along with other fees.

At any rate it will be interesting to see what happens with this case. I am actually one of the creditors here who happened to have about 900 USD (but no BTC) still in my Mt. Gox account at the time of the crash. I have been through all of the procedures required to file a claim and have had the claim approved according to their records. I have not received any distribution of funds or settlements, however. I will report back here if I actually receive anything.

Sorry for the late response, I have been under the weather as of recently, and wanted to spend some time researching before responding.

The relevant section of the US Chapter 7 bankruptcy code refers to "property" being distributed to creditors, not "dollars" nor "cash" ect.. I understand that "property" of a debtor is usually sold by the bankruptcy trustee in a Chapter 7 bankruptcy because bondholders (and other types of creditors) have little use for the building that used to be a company's headquarters (and other similar assets) -- also a company may have many creditors but their assets cannot be easily divided, but have many creditors. For example a car dealership going through Chapter 7 bankruptcy may have 100 cars as their only assets, but have 1,000 creditors; a 1/10^th ownership stake in a single car will be of little value to a creditor (or most anyone really), but 1/1000^th of the liquidation price of 100 cars would have more value to the creditors. As you are aware, it is trivial to split up ownership of 1 BTC (or ~202k BTC), and if bitcoin is distributed via a deposit into creditors' kraken account, then things like transaction fees will not need to be accounted for.

A distribution of BTC to Gox creditors may work somewhat similar to a Section 363 sale (statute) via trading BTC for claims against the Gox estate. This is not quite an applies-to-apples comparison, however I believe the principal is the same.   

IIRC, at the time MtGox shut down, it was disclosed that their hot wallet was ~empty and Gox was "tricked" into ~emptying their cold storage, however not long after ceasing operations, a cold storage wallet that was "forgotten"/"lost" was subsequently found, and this wallet contained roughly this amount.


See my comments above about the specific wording of the US bankruptcy law.

A more common scenario is that a bank fails because of (credit losses), depositors up to $100,000 (as of about a decade ago, $250,000) are repaid in full, and depositors who have USD in excess of FDIC insurance limits will become unsecured creditors for amounts in excess of their FDIC insurance limits.

Most banks do not have sufficient "dollars" to honor withdrawals for all their depositors, but rather have physical cash in their various branches to handle the day-to-day cash withdrawal requests, have USD 'credits' on deposit at the Federal Reserve to allow the bank to pay checks deposited at other banks, and for a cushion, and own other assets (loans due to the bank), which make up the majority of a bank's assets.

The USD 'credits' at the Federal Reserve are treated a "real" dollars because the US economy and the banking system values these as "real" dollars. Similarly, the BTC economy has sufficient faith in private keys that can sign unspent outputs on the blockchain with the most work that follow Bitcoin consensus rules (I think I got that right), so that having a transaction confirmed to an address whose private keys are controlled by the receiver are just as good (better) than controlling the private keys to 13VgsHAKzGS6qh9dRtEETpycKvzRQHHsLY if someone wanted to own 0.01055688  BTC.
 
The law somewhat already addresses this. For example, say I was purchasing property from you located at 123 Elm Street, in Cook county. If I were to purchase title insurance, the title company would look at the Cook county public records to make sure when you purchased the property that the grantor that signed the deed to you matched the grantee on the previous deed, that the grantor that signed the prior deed matches the grantee listed on the second prior deed, and so on for an amount of time that will vary based on the jurisdiction the property is located in. However if you had purchased this property at a foreclosure sale, then the grantor on the deed to you will not match the grantee on the previous deed, however the foreclosure would resolve this discrepancy (this is a broad simplification of how this works, however it conveys the overall point). The value of your property is not derived from your ability to sign the deed, but is rather derived from the property itself.

Another example would be if you agreed to buy 1 BTC from me at an agreed upon price, with the condition that I send 1 BTC to the address you specify - if I send 1 BTC to your address, but you fail to send me the agreed upon USD, then you would likely be guilty of larceny (depending on the specific circumstances).     
I seem to have made a mistake in this example because the 'r' value is from the person who generates the signature, not the person who generates the unsigned transaction.

My exwife is a class action securities attorney, They are just as much thieves and the mt gox scumbags. They make up hours worked and bill assistants at 300 hr. The lawyers themselves commit massive fraud. her former partner is in jail cause he got caught. They are the bottom of the barrel of humanity

i dont understand,
you mean Bitcoin Cash isnt in assets for bankruptcy?

i think because priv key is "owned" by law, yes

That seems unlikely.  Perhaps I'm mistaken about that though.


Well, this is certainly interesting:
"The bitcoins held by the bankrupt entity are not included in the assets set forth above.In addition, the amount of bitcoins managed by the bankruptcy estate as of March 5, 2017 is 202,185.36428254 BTC."


That is my understanding as well.  It is part of why I expect that claims won't be paid in BTC.


That is a recent decision made AFTER my previous post.


Exactly my point.  There are no physical dollars to back up the dollars your bank statement says you have.  If there were a run on the bank and the bank was somehow NOT FDIC insured, then the bank would end up in bankruptcy.  As such, their assets would be liquidated to pay claims.  Since there are no actual dollars, there would be nothing to liquidate and nothing to pay with (aside from other assets such as the equipment).
 

Certainly, but the intellectual property of the private key is the only actual asset.  What can be done with that private key is secondary.  Like I said, the law hasn't really caught up with the technology and it creates some very interesting situations.


Why wouldn't Alice simply refuse to use a weak 'r' value in her signature?

really, few guys think about mtgox addresses with BCH
this BCH can used for bankrupt and refound people i think

You are really a genius!
can't wait to ANN thread to publish an ICO for [MBC]MtGox Bitcoin Cash. 

I want to say that I have read creditors can receive a BTC payout under certain circumstances. According to this Kraken blog post, they may assist in distributing BTC to creditors.

After a little bit of research, I have been unable to find anything solid that supports that creditors can receive payouts in BTC. However I would argue this would make sense as selling that amount of BTC would result in significant losses due to slippage (more on this below) -- for example, there are bids on the bitfinex order book for a total of ~43,000 BTC, and over half of these are for less than $10/btc, while the MtGox estate owns over 200,000 BTC.  

Here is a report by the bankruptcy trustee that has a listing of the assets, liabilities and approved bankruptcy claims of the MtGox estate.

I am not familiar with bankruptcy law in Japan either, however it is probably a safe assumption to say that the bankruptcy trustee needs to act as a ficuciary (the source primarily uses Delaware law, however it should apply elsewhere in broad terms).

The trustee has a duty to return as much money (up to the amount owed) to creditors as possible. If it is economically viable to recover money they should do so. I would note that in order for the trustee to recover any money held as altcoin forks, they will need to hire consultants, purchase equipment perform work themselves, among other potential expenses, and if these expenses outnumber a discounted (to account for things like slippage, and that these kinds of altcoins frequently have a very volatile price) estimated recovery amount, then the trustee should not attempt to recover funds via this altcoin fork. You could probably personally check for these kinds of altcoins systemically, however the bankruptcy does not need to use this kind of efficiency.    

See my above comment about the bankruptcy trustee being a fiduciary. It is an almost certainty for it to be economically viable for the bankruptcy trustee recover the BCH.

It is my understanding all account holders are unsecured creditors and that someone holding 100 million jpy worth of BTC would be treated the same as someone holding 100 million jpy worth of USD in terms of the jpy (equivalent) amount of money they will receive. it is my understanding that those who held BTC in their MtGox account do not have a claim against BTC owned against MtGox, but rather have a claim against all of MtGox's assets that are not otherwise encumbered (by a mortgage for example).

Well I don't think Coinbase is a fiduciary, so that is a little bit different. However Coinbase notified their customers they would not support Bitcoin Cash ahead of time, and that customers should withdraw their bitcoin from their Coinbase account if they wish to receive their Bitcoin Cash -- I understand that Coinbase processed millions (I suspect billions) of dollars worth of bitcoin withdrawals in the days/weeks preceding the fork. On the other hand, MtGox creditors did not have the option to move any portion of the BTC held by the bankruptcy trustee to another trustee, or anything similar. As mentioned previously, it is the trustee's duty to maximize the recovery of creditors.

Somewhat of a applies-to-applies example would be someone who owns land that, after the owner files for bankruptcy, turns out to have a potential oil reserve underneath it. If it is economically viable to do so, the trustee would drill for this oil (or more likely sell the rights to do so) in order to repay creditors, however if the relevant facts cause someone to conclude that drilling for oil would be a money loosing proposition, then the oil reserve would likely be ignored.

I also believe that Coinbase is actually going to credit account holders Bitcoin Cash for the amount of bitcoin held in their accounts as of the fork.

To say that "bitcoins" do not exist is really more of a technical statement than a legal one. You could make the argument that USD in your bank account does not exist because there is not corresponding physical dollars (anywhere) to backup the dollars your bank statement says you have.

It would probably not be feasible to sell actual possession of private keys from one person to another as this is essentially accepting a 0/unconfirmed transaction on the part of both the buyer and the seller. If Alice were to sell the private key to address 1bitcoin... to Bob, if both are subject to the jurisdiction of the same court, and both have sufficient assets to satisfy any judgment then the transaction has the potential to end poorly. Alice could agree to provide Bob with the private key to 1bitcoin... at 2:00 PM GMT on August 4, and that as of the block immidiately prior to this time, this address will have 0.3 BTC (etc.), and that Alice will not broadcast any transactions signed by this private key, in exchange for $500.00. If Alice were to provide Bob with this private key, and a transaction were to be broadcast to the network at 2:00:02 PM GMT that spends the entire .3 BTC to a never-before-used Bitcoin address, then it would be impossible to know which party broadcast this transaction; the case would get litigated and neither side would be able to prove the other party broadcast the transaction.

One way to resolve the above problem would be sell agency ownership of the private key in which Alice agrees to sign any message/transaction provided by Bob with the private key to 1bitcoin..., to not sign any message/transaction not provided by Bob, but would retain sole possession of the Private key. However even this could be somewhat risky because of the risk that Bob asks Alice to sign a transaction with a weak "r" value (intentionally) as this would expose the private key to Bob. This might be a way for the bankruptcy trustee to gain value for forks similar to Bitcoin Cash (but that have little value) once the bitcoin and bitcoin cash have been moved/liquidated/distributed.

Yeah, any coins they have recovered are still evidence at this point. As we saw with Silk Road, they dont convert these, they actually auction these off to potential investors. They cant spend any of this before the case is closed. But more importantly than that, I believe this case is being handled by Japanese authorities. Im not sure of the minute details of Japanese bankruptcy law, but if its anything like the States, corporate creditors will be paid first, then legal fees. If there is anything left, there will be a proportional distribution of fiat many, many years after they settle this. They will not redistribute bitcoin, I promise you this.

In such case nothing can be done, but are they allowed to mess with evidence while the case is open? As far as I know the law any valuables obtained during the investigation have to be kept in their original form. The coins weren't redistributed so the case is still open. I know that when a company goes bankrupt assets are being sold, but they owe BTC and USD, so I'd treat these two separately, but I understand if it was easier for them to add it all together and just calculate the loss in USD.

This is an interesting conondrum.  Someone better tell them they holding more than just btc now with those keys, as who ever holds them probably is not even that clued up on the matter.

they could have sold it in 2014-2017 and now only hold fiat. meaning any changes to btc are no longer applicable because everything is now fiat based and the lawyers are just eating the fiat until a small % is left

Sorry, but I don't see any similarities here. We know that Gox owes money to the victims and funds are being held by the law firm. This is an exceptional situation, because the value of these funds are now worth 20% more thanks to BCC. The problem is BCC appears on the private keys, so if the firm moves BTC (for instance to redistribute it to the victims) it will still control BCC, unless they will give control of the keys to another company that will handle the whole process, which would be reasonable, since we shouldn't expect the lawyers will learn how to use a BCC wallet and start trading it on behalf of their clients.

I don't know if this is normal practice in "the West", but in Southeast Asia in at least two countries I've experienced, this happens:

When people are facing bankruptcy as a result of defaulting on bank loans or even credit card payments, it can happen that the bank forcibly deducts salaries paid into the bank account to help pay off debts. If, for some reason, some amount of cash enters into the account, it is also held. Customers can't access their funds until they agree to some sort of repayment.

It's a similar sort of situation, just situations switched.

What about default interest? If they were at fault and evicted you unlawfully you are owed much more than it would seem. The eviction coud cause some additional losses, like you not being able to get additional income from renting a room to someone. If you are able to prove that apartment was generating income for you and that stopped when they kicked you out, you are owed that money with interest.

I would bet that every bitcoins had already been sold. All of the people that have claims to the lost, their btcs are already have their btcs value counted in JPY, at fixed price that was settled few months after the Mtgox crash.

Ofcourse people will not get more of their value in JPY than 5%. If people would want their claims in bitcoins IMHO bitcoins would have to be bought.

put it this way.

if you got illegally evicted from an apartment. and ended up being owed say $3k for certain purposes.
if it then took 4 years to recover the amount. you cannot then say you want $1m simply because what used to be a apartment is now a large complex valued at significantly more.

you only get what was owed at the time.. minus costs of the lawyers that eat into what you are owed.

so if you are owed 10btc.. its not going to be %of 10btc + %of 10bch
its just % of 10btc


they may try to play silly maths like if it worked out they could pay out lets say 5% btc or 25%btc
they will play it to say 4%btc 1%bch=5%btc
they will play it to say 20%btc 5%bch=25%btc

just to pretend they are helping their clients

I hadn't heard that the conversion had happened yet?  I thought that the plan was to liquidate the assets into local fiat (JPY) and then distribute accordingly, but that most of the sales of assets hadn't happened yet.


Are they legally required to acknowledge, access, and sell EVERY possible altcoin that can be accessed with the same private keys? Even though they only ever agreed to hold BTC?  I don't know much about bankruptcy law, and even less about bankruptcy law in Japan, but lets say I find every existing altcoin that shares the same ECDSA signature system as Bitcoin...  Then lets say I acquire some of those altcoins, and send them to addresses that match MtGox addresses.  Is the law firm legally required to check all keys against all possible altcoins on the day of conversion to JPY to determine if they have access to any of those altcoins?


Perhaps.  That depends on what the law requires of them.  An issue here is that it is likely that laws have not yet caught up with technology. As such, the law probably isn't prepared to handle the concept of assets coming into existence from nowhere with no requirements to inform asset holders of the existence of the asset.

What we would "want" to happen, or what we "think" is "fair" or "reasonable" doesn't really matter when laws get involved and determinations are made by following the words that were written decades ago.  


They could be, but here in the U.S. Coinbase seems to be taking a stand of "we don't acknowledge the existence of that asset."  If they can do that, why can't the MtGox bankruptcy process?

Furthermore, technically, should the "bitcoins" (which don't actually "exist" anywhere) be the "asset", or should the assets be the private keys that the law firm holds?  In that case, they could sell the private keys, and leave it up to the buyer to determine how much they want to pay (in auction obviously) and what coins they want to access with those keys?  That seems like the safer and more accurate way for the law to handle it, but I doubt they will.

It is my understanding that all of MtGox's debts were converted to JPY (at exchange rate), and that MtGox's assets will be distributed to creditors at presumably the current exchange rate at the time of distribution. So a creditor who is owed 100k jpy will get 25k jpy worth of assets (assuming a 25% payout/recovery for all unsecured creditors).

Provided that Btc has not been sold and/or transferred the estate would presumably own BCH in an equal amount of the BTC it owns.

Considering the value of the BCH, the law firm should know about the BCH and would likely have problems if they don't.

In theory, the BCH will be commingled with other assets of the estate and will be distributed accordingly.

law firms dont spend years fighting for the best compensation package for customers. they spend time charging labour for silly notices, memos and other correspondence. charging exaggerated 'investigation/research' costs..

so dont expect anything better than pennies on the dollar whether coin split or not..

in short
if they found extra value (the split).. soon they will find some admin charges to eat up that new value before the case is settled

EG if they had a figure in mind of 5% repayment before the split was even considered/ known.
after the split they will change things and say something like it would have been 4% pre split but the luck of the split happening has given a bonus to everyone to get 5%. just to make it sound like people are getting a deserved split bonus.. but reality is those lawyers now get more to keep

dont knitpick me saying 5%. its not an official figure. its just a random number i chose for demo purposes only