The big bombshell from the creditors’ meeting is that it was officially announced that the creditors’ 200,000 bitcoins are going to be sold off and a maximum of approx $473 per bitcoin will be paid back to the creditors. The rest will go to the owners of MtGox, effectively Mark Karpeles and Jed McCaleb.

This is something we all knew was an issue but to hear a direct acknowledgement that that’s the official course of action was a surprise. It means most of the value of our bitcoins will probably be lost, and the Japanese authorities are not going to try to do anything to stop it. This is a full-scale bankruptcy disaster.

Mark Karpeles has claimed he doesn’t want the money due to the lawsuits which would inevitably target him, but when asked to make a statement on Reddit saying he would give the creditors the money back, he did not respond.

This is an important point. He cannot continue to cultivate his new “nice guy” image and claim he doesn’t want the creditors’ money, while at the same time avoiding stating that he will give the money back. It’s one or the other and he now has to make a choice.

Why is the trustee doing this?

For the trustee, this is the safest option. This whole situation is very complicated, and if he was to take another course of action it would be difficult to find and manage a solution which pleased everyone. If he tried anything unorthodox, he’d be likely to attract complaints from somewhere.

Decisions made in the Japanese legal system tend to err towards equality rather than efficiency, so it might be considered better to give everyone a bad solution than to give most people a good solution but have some others complaining about it.

For example, if he was to attempt to re-evaluate the bitcoins at their current value it may draw complaints from the trustee of Tibanne’s bankruptcy. Tibanne’s trustee is obviously going to try to suck as much money out of MtGox as he can, and the nature of his job means he may not be allowed to take morals into consideration. So if a motion is filed which would pass the value of the bitcoins to the MtGox creditors rather than to Tibanne he’d be likely to complain about that and there’s a good chance the court would take the “safe” decision and refuse the bitcoin evaluation change.

What is very noteworthy is that in this creditors’ meeting the trustee kept stressing “this is the law” and similar things. Basically saying he’s sticking as close to the vanilla bankruptcy route as possible and not acknowledging that there may be other possibilities. He has made decisions before which stray from the vanilla path, such as not selling off the bitcoins at the start of the bankruptcy. But it looks like he’s clamping down now.

Can something be done to fix this?

Absolutely, yes it can. This is now down to the creditors to fix, so it’s time to get busy!

The two main angles are legal and political.

From a legal point of view, this problem may or may not be solvable. Creditors need to try as many ways as possible and we need to coordinate efforts as much as possible.

From a political point of view, this is most definitely solvable. The laws which have caused this disaster were written when the world was different, and they can be updated. In my next post “The Next MtGox is Now just Around the Corner”, I will argue why it’s only a matter of time before the laws do get updated. How fast it happens is down to political will, and that in turn is down to us creditors.

What do we do now?

D O N T P A N I C

The next step is clear. We have to create the biggest creditor group possible. Let’s make the biggest group in Japanese history. This will give us strong leverage both inside and outside the bankruptcy. I’ve already been working on this. Expect to see more details and an announcement soon.

Just throwing a few things out there:

We also need to start creating structures of organisation instead of everyone running around panicing and doing their own thing in isolation. So as well as a creditor group, we need people cooperating on legal solutions.

The media will be indispensable to us and they love a good bankruptcy. This requires careful planning.

This is now my day job and I’m going to be following this up with regular updates. I’ll try to be more active on Reddit too.