February News

February has brought two big pieces of news. 1 important, 1 trivial.

Trivial first. Gox Rising / Gox Recovery have suggested a plan to pay to restart Mt Gox and give a share to creditors. That all sounds great on the surface, but the devil will be in the detail, which has been deafening by it’s absence.

If they want to buy Mt Gox and restart it. This is a conversation they will need to have with the Trustee, who will do a cautious job of assessing their offer on our behalf and make the decision. End of story.

They say there should be a legal entity that exists post-CR to act as a net to collect any recoveries that might turn up in the future, and distribute them fairly among all BTC creditors. We agree, but we say this entity should be creditor run and creditor owned. Gox Recovery is proposing an ICO to demark ownership, essentially inserting themselves into the value-chain without bringing any real benefit to creditors, but there are some very obvious statutory roadblocks that they seem to be naively missing. I believe they haven’t had any legal advice on the feasibility of their plan from Japanese counsel, and I’m confident it’s a non-starter.

Brock Pierce claims to have bought equity in Mt Gox, but this is in no way substantiated by any documentation he has presented, and his refusal to backtrack from this claim has created a lot of animosity towards Gox Rising/Recovery, to the point where I think it will be very difficult for them to gain creditor trust in any proposal they suggest.

Now for the important stuff that’s happened this month.

Court documents have revealed that CoinLab have posted a claim for $16bn. This would effectively absorb the lion’s share of Mt Gox assets leaving creditors with almost nothing. It has been rejected by the Trustee. It is likely to now enter “assessment”, a process similar to arbitration. If it’s not settled after that which is unlikely, CoinLab could chose to litigate their claim. This may delay the distribution process for several years.

CoinLab’s US law firm are a contingency based firm, (no win, no fee) and they took on this case because they believe that some of its aspects can be won. There is a liquidation clause in the contract, written in black and white which both parties signed. This is for $50m. Secondly there was also an agreement that a percentage of fees from US exchange users would go to CoinLab, but these were never paid. Then there are the more “speculative” aspects of the claim. Namely that Peter Vessenes decided that he wanted to set up the first US bitcoin exchange, and by partnering with Gox he missed the chance so he’s owed what he missed out on.

The first two hinge on CoinLab having done enough to be regulatorily compliant at the time to run an exchange in the US. The trustees expert witness report says no. CoinLab’s expert opinion says yes.

The assessment process costs CoinLab nothing to pursue. But the litigation should carry a court deposit fee. If they carry all the claim ($16b) through to litigation they should have to deposit around $15m, which many suspect CoinLab is too broke to pay. They may at that stage drop some of the more fanciful elements of their case to make the court deposit more affordable.

Third parties have told me they are preparing to launch US action against Vessenes, CoinLab and their lawyers but I’m yet to hear of anyone propose credible grounds.

Finally, the trustee delayed the schedule for filing a CR plan by 2 months, taking the date to just after the next creditors meeting.