Mt. Gox, once the largest Bitcoin exchange in the day faced a catastrophic collapse in 2014, sending shockwaves through the cryptocurrency world. The exchange, based in Tokyo, Japan, was handling around 70% of all Bitcoin transactions globally at its peak. However, its downfall exposed serious issues in the management and security of cryptocurrency exchanges.

The Mt. Gox, originally a platform for trading Magic, -The Gathering cards, transitioned into a Bitcoin exchange in 2010. Its name, derived from "Magic -The Gathering Online eXchange," reflected its roots. Over the years, Mt. Gox gained dominance, contributing significantly to the early growth of the Bitcoin market.

One of the pivotal events was the hacking of Mt. Gox in 2011, where attackers gained unauthorized access to the exchange's wallets and manipulated the Bitcoin price. Despite this, Mt. Gox continued to operate, but trust in the platform began to weaken as users started reporting difficulties withdrawing their funds. Mt. Gox's troubles were significantly increased by its failure to address these concerns transparently. The exchange also faced legal challenges and regulatory issues, adding to the mounting pressure.

The crisis reached its peak in early 2014 when Mt. Gox suddenly halted withdrawals, citing technical issues. Rumors and speculations intensified, causing panic among users. In late February 2014, Mt. Gox filed for bankruptcy protection in Japan, acknowledging the loss of 850,000 bitcoins — approximately 7% of all bitcoins in existence at that time — worth around $450 million. The reason given was a supposed hacking attack, even though the circumstances surrounding the loss was unclear.

Legal Proceedings and Investigations started. Japanese authorities arrested the exchange's CEO, Mark Karpeles, accusing him of embezzlement and falsifying financial records. Karpeles denied any wrongdoing, claiming the missing bitcoins were due to a flaw in the exchange's software known as "transaction malleability."

Investigations sought to uncover the truth behind the missing bitcoins and determine whether the collapse was a result of criminal activities, mismanagement, or a combination of both. The process was complex, involving collaboration between Japanese authorities and international law enforcement agencies.

After the bankruptcy filing, Mt. Gox entered into civil rehabilitation proceedings in 2018, a legal process designed to facilitate the reimbursement of creditors. This marked a departure from traditional bankruptcy proceedings and aimed to provide a fairer distribution of remaining assets to those affected.

Some received a portion of their claims back, and discussions were ongoing about the future distribution of assets but nothing concrete was heard or seen till late 2023, when some victims of the exchange took to their Reddit accounts that they've started receiving payments, in PayPal as well as other means.

What does this mean for the once defunk exchange? Nothing actually for now. Repayments to creditors are set to be paid out in several tranches, including the base repayment, the early lump-sum repayment, and the intermediate repayment. Mt. Gox assigns each claim "voting rights" which helps standardize the amount between fiat and crypto creditors in yen. The yen amount of each claim is determined by multiplying the price of creditors' Bitcoin holdings by a later spot price to ensure they are paid out fairly for the assets that were left stuck on the exchange in 2014.

One of the first instances of the new Mt. Gox repayments surfaced on Dec. 21, when a pseudonymous Japanese X platform user said they had received their Mt. Gox claims through bank transfer, which was credited to their account as Japanese Yen. The Kobayashi email said that the trustee planned to start the first repayments to creditors in cash in 2023, adding that he expects to continue the repayments in 2024. Kobayashi Nobuaki -the person in charge of the exchange estate, did not provide the specific timing of repayments to individual rehabilitation creditors.

Two months earlier on Sept. 21, the Mt. God trustee had pushed back the repayment deadline from Oct. 31, 2023, to the same date in 2024 — however, noted that for rehabilitation creditors who had already provided the necessary information, some repayments could be made "as early as the end of last year of 2023” which was what happened.

This was all what happened with the first biggest exchange that added more regulatory scrutiny to the crypto currency space, because after this happened, Governments attention turned here and gave the difficulties Bitcoin had faced all through the years to this point. Now you know exactly what happened to a binance look alike in terms of being the biggest in the space, I guess that's what the regulatory bodies are fighting not to repeat itself? That's a story for another day haha.

As always, your favorite cryptojournalist, Clever Abaribote. Until next time.

Sources : photo credit

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