Mt. Gox Starts Repaying Bitcoin a Decade After Collapse: Creditors Begin Receiving $9 Billion

The trustee of Mt. Gox, the Tokyo-based bitcoin exchange that collapsed into bankruptcy a decade ago, said on Friday, July 5, 2024, that the company has begun making repayments in bitcoin and bitcoin cash to some of its creditors. The announcement marks the first concrete step in returning roughly $9 billion worth of cryptocurrency to customers who waited 10 years for their money.

A decade-long wait ends

The trustee's statement added that repayments to other users of the hacked exchange would be "promptly made" once they meet certain conditions, including completing account verification and subscribing to one of the designated digital-asset exchanges through which the bankruptcy estate is facilitating disbursements in digital tokens. "We ask eligible rehabilitation creditors to wait for a while," the statement said.

Mt. Gox was once the world's largest crypto trading venue. It filed for bankruptcy in Japan in February 2014 after a series of heists in which up to 950,000 bitcoin — worth more than $58 billion at today's prices — vanished. The exchange blamed the disappearance on a bug in the cryptocurrency's framework: while users were receiving incomplete transaction messages, coins may in fact have been illicitly moved by hackers out of their accounts.

After the bankruptcy, 140,000 of the missing bitcoin were recovered. At the time of the collapse bitcoin traded at roughly $600; by early July 2024 it was worth more than $54,000 — an increase of almost 9,000%. Measured in today's prices, that is why the repayment is worth about $9 billion to creditors. The collapse and the start of the payouts were reported in detail by CNBC.

Wallets on the move ahead of the payouts

On-chain data showed the estate preparing for the disbursements. According to Arkham Intelligence, Mt. Gox moved billions of dollars in bitcoin out of its crypto wallets on Thursday and Friday, ahead of the repayment announcement. More than 47,000 bitcoin worth $2.7 billion left an offline wallet associated with the exchange.

A portion of the funds, worth $84.9 million, was sent to the Japanese crypto exchange Bitbank, one of the platforms listed as supporting repayments to Mt. Gox users. A further $63.6 million in bitcoin went to an unknown counterparty that Arkham Intelligence described as "likely a listed repayments exchange." The Mt. Gox wallets still hold 138,985 bitcoin, worth around $7.5 billion at current prices, meaning billions of dollars of cryptocurrency remain to be paid out.

What the repayments mean for the bitcoin price

Bitcoin fell nearly 6% in the 24 hours around the announcement as traders weighed the prospect of long-dormant coins re-entering the market. Analysts expect the repayment plan to trigger heavy but short-lived selling, followed by further price gains later in 2024 and in early 2025. The key expectations circulating in the market:

• John Glover, chief investment officer of crypto lending firm Ledn and a former managing director at Barclays, expects many creditors to cash out and lock in gains: "Some will clearly choose to take the money and run."
• JPMorgan analysts wrote in June that if most liquidations by Mt. Gox creditors take place in July, crypto prices would come under pressure in July but start rebounding from August onwards.
• Jacob Joseph, research analyst at CCData, notes that a healthy part of the creditors are likely to take a 10% haircut on their holdings to receive the repayment early, and that not all holdings will be liquidated on the open market.
• James Butterfill, head of research at CoinShares, argues that the billions of dollars of bitcoin traded on trusted exchanges every day show liquidity is sufficient to absorb the sales over the summer months.

The scale helps: the total sum owed to creditors — some 140,000 bitcoin — accounts for roughly 0.7% of the 19.7 million bitcoin currently in circulation. Analysts say that even though the payouts are likely to affect prices, there is enough liquidity available to cushion the blow of any intense sell-off.

Why it matters

The start of the Mt. Gox repayments closes one of the longest-running chapters in cryptocurrency history and tests how mature the market has become. A decade ago the exchange's failure shook confidence in digital assets; today the same coins return to a market deep enough to absorb them. Whether creditors sell or hold will decide how loud the echo of 2014 sounds in the second half of 2024.