{"id":15338,"date":"2017-11-18T15:31:29","date_gmt":"2017-11-18T23:31:29","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=15338"},"modified":"2022-07-15T15:03:55","modified_gmt":"2022-07-15T14:03:55","slug":"ceo-will-make-almost-billion-bankruptcy","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/ceo-will-make-almost-billion-bankruptcy\/","title":{"rendered":"The CEO Who Will Make Almost a Billion from Bankruptcy"},"content":{"rendered":"

Bitcoin<\/a> is having quite a year. It has far exceeded everyone\u2019s expectations as it surges in value and makes inroads into the traditional financial system. All of this Bitcoin-related activity has caused a cryptocurrency euphoria. While many people are understandably thrilled with Bitcoin\u2019s ascension, few are as happy as Mark Karpel\u00e9s.<\/p>\n

Here\u2019s why.<\/h2>\n

In 2014, Karpel\u00e9s was the CEO of Mt. Gox, a Bitcoin exchange based in Japan. In its heyday, Mt. Gox was a behemoth in the cryptocurrency space. According to The Wall Street Journal, Karpel\u00e9s\u2019 firm \u201cwas the biggest trading platform for Bitcoin.\u201d It handled more than 70% of all Bitcoin trading, and it was securing millions of dollars worth of Bitcoin for its customers.<\/p>\n

That\u2019s when everything fell apart.<\/p>\n

According to Mt. Gox management, a security flaw in their system was exploited, and hackers were able to steal Bitcoin. Karpel\u00e9s blamed the attack on an issue with \u201ctransaction malleability,\u201d but the results were catastrophic. 850,000 Bitcoins were stolen, and the exchange suddenly lacked resources to stay afloat.<\/p>\n

\"\"
Mt. Gox was located in Tokyo's famous Shibuya district, otherwise known as “Bit Valley.”<\/figcaption><\/figure>\n

After weeks of DDoS attacks made the platform virtually unusable, Mt. Gox immediately shut down and account holders lost all access to their currencies held on the exchange. As a result, Mt. Gox\u2019s downfall came quickly. In February 2014, Mt. Gox declared bankruptcy, and the financial data was frozen.<\/p>\n

In February 2014, Bitcoin was still valued at less than $1,000. Of course, Bitcoin holders using the Mt. Gox exchange were upset, and the lawsuits began to pile up.<\/p>\n

Then a miracle happened.<\/h2>\n

Mt. Gox found some of the lost Bitcoins. As a part of the bankruptcy process, Mt. Gox's digital wallets were scanned and almost 200,000 Bitcoins were discovered.<\/p>\n

The Mt. Gox bankruptcy trial is a unique coalescence of events. First, cryptocurrencies are a relatively new iteration of traditional fiat currencies, so there is a limited number of judicial cases to set a legal precedent. More obviously, Bitcoin\u2019s value has exploded since bankruptcy proceedings began.<\/p>\n

At its current value, Bitcoin is more than 8 times more valuable today than it was when bankruptcy proceedings began. As Ars Technica reports,<\/p>\n

\u201cAt current rates, 750,000 Bitcoins are worth nearly $5 billion.\u201d<\/p><\/blockquote>\n

Because Bitcoin\u2019s value is increasing so rapidly and the bankruptcy hearings are proceeding so slowly, that value is actually increasing by the day.<\/p>\n

This almost sounds like good news. The excess value from the located Bitcoins could allow every Mt. Gox user who lost assets when the exchange collapsed to be compensated for the loss.<\/p>\n

Here\u2019s the problem.<\/h2>\n

Some of the recovered Bitcoin belong to platform users, but some also belonged to Karpel\u00e9s, so only a fraction can actually be recovered through bankruptcy proceedings. In addition, bankruptcy proceedings freeze an asset\u2019s value at the time of declaration. Typically, the implications for this rule are not as profound because assets rarely accrue value as rapidly as bitcoin has.<\/p>\n

\"\"
Mt. Gox's bankrupty proceedings will repay creditors in Japanese Yen at a price around $400USD per Bitcoin (the price set by the court) and it has been reported this will leave Karpel\u00e9s\u00a0with the bulk of the wealth left over from the difference after the creditors are repaid and the market price today, leaving Karples with nearly a billion US dollars (based upon Bitcoin prices around $7500).<\/figcaption><\/figure>\n

In short, in the end, Karpel\u00e9s could financially benefit from this disaster.<\/p>\n

Publicly, Karpel\u00e9s has said all of the right things. He\u2019s expressed frustration with the hack and has lamented that the Mt. Gox platform was forced to close because of it. He maintains that he is innocent of any wrongdoing, and has pleaded so in court. This summer, Karpel\u00e9s speaking in Japanese, told a panel of judges, \u201cI swear to God that I am innocent.\u201d<\/p>\n

Karpel\u00e9s asserted that the \u201c\u2018proposition\u2019 that he could stand to gain a lot is “based on laws.\u201d Technically, he\u2019s right. Nobody could have predicted the extent of Bitcoin\u2019s ascension, and laws are laws. Still, it\u2019s difficult to recognize that a failed CEO could be compensated so well when so many people lost a tremendous amount of wealth under his leadership.<\/p>\n

It\u2019s also a reminder that laws and procedures will need to adapt to changing methodologies and technologies in the cryptocurrency market.<\/p>\n","protected":false},"excerpt":{"rendered":"

Bitcoin is having quite a year. It has far exceeded everyone\u2019s expectations as it surges in value and makes inroads into the traditional financial system. All of this Bitcoin-related activity has caused a cryptocurrency euphoria. While many people are understandably thrilled with Bitcoin\u2019s ascension, few are as happy as Mark Karpel\u00e9s. Here\u2019s why. In 2014, […]<\/p>\n","protected":false},"author":5,"featured_media":15538,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[77901,107],"tags":[],"post_folder":[],"acf":[],"yoast_head":"\nThe CEO Who Will Make Almost a Billion from Bankruptcy<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/cryptoslate.com\/ceo-will-make-almost-billion-bankruptcy\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The CEO Who Will Make Almost a Billion from Bankruptcy\" \/>\n<meta property=\"og:description\" content=\"Bitcoin is having quite a year. It has far exceeded everyone\u2019s expectations as it surges in value and makes inroads into the traditional financial system. 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