Digital currency exchange Mt. Gox files for U.S. bankruptcy protection

The company claims $63.9 million in liabilities and $37.7 million in assets

Following a data breach that claimed roughly seven percent of the world’s bitcoins from its servers, digital currency exchange Mt. Gox has filed for U.S. bankruptcy protection.

In the federal court filing, Mt. Gox CEO Mark Karpeles claimed that the company held approximately $63.9 million in liabilities and approximately $37.7 million in assets following the breach. As a result, Mt. Gox can file for bankruptcy protection under Chapter 15 of the bankruptcy code, which provides help to parties with interests “involving more than one country.”

Based in Tokyo, Mt. Gox had previously applied for bankruptcy protection in Japan. According to the U.S. court papers, that application was accepted in Tokyo District Court on Feb. 28.

Karpeles claims that the 744,408 bitcoins — or approximately $480 million at the time of the theft — were stolen from the system as the result of a flaw in the exchange’s servers.

“The cause of the theft or disappearance is the subject of intensive investigation by me and others,” Karpeles wrote in court documents. “[A]s of the present time I believe it was caused or related to a defect or ‘bug’ in the bitcoin software algorithm, which was exploited by one or more persons who had ‘hacked’ the bitcoin network.”

The CEO also said that bankruptcy protection is necessary for the currency that has received so much governmental attention to be able to properly thrive.

Karpeles said bankruptcy protection would “allow Mt. Gox a necessary breathing period for it to focus on its restructuring efforts without the distraction that would result if certain litigation currently pending in the United States were allowed to proceed.”

 

For more on Bitcoin’s intersection with the legal world, check out these IC articles:

Debate about bitcoin regulation goes global

Bitcoin exchange Mt. Gox files for bankruptcy following data breach

New York official to introduce virtual currency regulation

‘Coinye’ virtual currency shuts down over trademark infringement suit

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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