TOKYO (Reuters) - When Mt. Gox, the world’s largest bitcoin trading exchange, collapsed in early 2014, more than 24,000 customers around the world lost access to hundreds of millions of dollars’ worth of cryptocurrency and cash.

FILE PHOTO: Mark Karpeles (R), chief executive of defunct bitcoin exchange Mt Gox, attends a news conference after a trial on charges of embezzlement in Tokyo, Japan July 11, 2017. REUTERS/Toru Hanai/File Photo

More than three years later, with the price of bitcoin skyrocketing to more than $7,000, not a single customer has recouped a single cent, crypto or otherwise. It’s not clear when they will. The failed exchange has become stuck in a morass of litigation – a Russian doll of bankruptcies in Japan and New Zealand, four in all, plus lawsuits in the United States and competing claims from creditors.

And although the Mt. Gox bankruptcy trustee recovered digital currency now worth more than $1.6 billion, under Japanese law the exchange’s customers likely will recover only a fraction of that.

Kim Nilsson, a Swedish software developer who had more than a dozen bitcoins at Mt. Gox, isn’t optimistic of a payout soon. “It’s a legal twilight zone,” he says. “I wouldn’t be surprised if it took several years more.”

The court-appointed trustee in Mt. Gox’s bankruptcy, Nobuaki Kobayashi, did not respond to questions from Reuters about the payout process.

There are few better examples of the dangers of investing in cryptocurrencies than Mt. Gox. As Reuters reported in September, cryptocurrency exchanges – where digital coins are bought, sold and stored – are largely unregulated and have become magnets for fraud and deception. At least 10 of them have closed, often after thefts, leaving customers without their funds.

In all, more than 980,000 bitcoins have been stolen from exchanges since 2011 – two-thirds of those from Mt. Gox. Today, all of the stolen coins would be worth more than $6 billion, Reuters has calculated.

Mt. Gox is one of the few collapsed exchanges that ended up in bankruptcy court; some just vanished. But the problem for Mt. Gox’s thousands of creditors is that under Japanese bankruptcy law, their claims were valued at the market price of bitcoin in April 2014 just before the Tokyo District Court ordered the exchange be liquidated. At that time, one bitcoin was worth $483. On the basis of the April 2014 value, the claims ultimately approved were fixed at 45.6 billion Japanese yen, currently about $400 million.

Based on the current price of bitcoin, Mt. Gox’s bankruptcy trustee is sitting on enough cash to repay creditors whose claims have been approved more than three times that amount, according to Reuters’ calculation.

But that likely won’t happen, according to two Japanese bankruptcy attorneys. In Japan, by law any funds left over in a bankrupt company’s estate after creditors have been paid go to shareholders. Mt. Gox is 88 percent owned by a Japanese company called Tibanne. And Mark Karpeles, a 32-year-old French software engineer and Mt. Gox’s former chief executive, owns 100 percent of Tibanne.

Karpeles is currently on trial in Tokyo, accused of embezzling money from Mt. Gox and manipulating its data, as well as breach of trust. He has pleaded not guilty to the charges, some of which carry sentences of up to 10 years. He served nearly a year in jail following his arrest in August 2015.

Many creditors are livid at the prospect of a payout for Karpeles, whom they blame for Mt. Gox’s failure. “If the government just took all of it, that would be less offensive than if they just gave it to Mark,” said Aaron Gutman, a software developer who had about 464 bitcoins at Mt. Gox, which are now worth about $3 million.

Added Henry Dienn, a 61-year-old entrepreneur in Japan who had 175 bitcoins at Mt. Gox: “Some of the people say, ‘I’d rather see the money burned.’”

In a three-hour interview, Karpeles told Reuters he doesn’t want the money. The main reason: He expects he would be inundated with lawsuits. He says he already is facing about a half dozen.

“I don’t want to be the beneficiary of this,” he said. “I don’t really need money. I work, I get by.”

Karpeles also told Reuters he has been exploring a way to resurrect Mt. Gox under new management and ownership - at an estimated cost of $245 million.

Among the factors complicating the liquidation process is a U.S. tech company called CoinLab. It agreed to partner with Mt. Gox in 2012, and is pursuing claims in a Japanese court totaling about $170 million against both Mt. Gox and Tibanne.

Through a spokesperson, Peter Vessenes, CoinLab’s former CEO who had signed the agreement with Mt. Gox, declined to answer any questions, including whether CoinLab is still in business.

CoinLab has been struck off the corporate registry in Washington state. In Delaware, state records and interviews show its registration status is “void” and it owes more than $400,000 in unpaid taxes.

Karpeles, who is required to attend various bankruptcy hearings and is forbidden from leaving Japan, said Mt. Gox’s claimants will be lucky to be paid anything before 2020 - the year Tokyo is set to host the summer Olympics.

On paper, Karpeles, who himself is in personal bankruptcy, stands to gain most of the surplus. But he would not get it all. Some of the excess would be allocated to Tibanne, and another part would likely go to the owner of a 12 percent stake in Mt. Gox. Who that is remains in question.

FELINE FIRM

The Mt. Gox exchange was first launched by Jed McCaleb, an American software engineer, in 2010. The domain previously had been used to trade cards in an online game.

McCaleb told Reuters in an interview that he decided he wanted to work on other projects, and transferred the exchange to Karpeles in February 2011 for free. The only conditions were that Karpeles had to share the exchange’s revenues with McCaleb for six months, not hold him legally responsible for any problems and give him a 12 percent stake. Mt. Gox became part of Tibanne, which Karpeles had formed in 2009 as a web hosting and development business. He named the company after his cat.

Karpeles said when he took over Mt. Gox, it had about 3,000 customers. As bitcoin grew in popularity among tech aficionados and investors, the exchange prospered. By 2013, it had nearly 1.1 million active accounts from 239 countries and handled upwards of 90 percent of global bitcoin trading. It generated about $40 million in fees in its last year, Karpeles said.

About 30 percent of its customers were from America, he said. Karpeles feared he was going to run into regulatory trouble there because Mt. Gox wasn’t licensed to transmit money. In November 2012, Karpeles signed an exclusive agreement with CoinLab, a Seattle-based bitcoin project incubator, to service the exchange’s U.S. and Canadian customers.

The partnership quickly soured. In a federal lawsuit filed in Washington state in May 2013, CoinLab argued that Mt. Gox and Tibanne had breached the contract by continuing to serve North American customers directly and failing to transfer their accounts to CoinLab. It demanded damages of at least $75 million.

In counterclaims filed later that year, Mt. Gox and Tibanne argued that Mt. Gox had not provided access to customer accounts because they alleged CoinLab was not properly registered or licensed to do business. They also alleged that CoinLab had not returned $5.3 million in Mt. Gox customer deposits. CoinLab said in a court filing it had complied with all relevant laws and had registered to provide bitcoin exchange services with the U.S. Treasury Department’s FinCEN bureau. The case is on hold as a result of a petition filed by the trustee in Mt. Gox’s bankruptcy, Kobayashi.

Roger Ver, who is known as “Bitcoin Jesus” for his longtime evangelism for the digital currency, personifies the complexity of the Mt. Gox bankruptcy. He was an early investor in CoinLab and was also a Mt. Gox customer with 577 bitcoins in his account when it shut down.

Ver told Reuters he urged CoinLab’s former CEO, Vessenes, to withdraw the lawsuit against Mt. Gox and Tibanne because he considered the suit “frivolous.” He did not elaborate.

Ver was also a customer of Bitcoinica, a New Zealand bitcoin exchange where he said he stored nearly 25,000 bitcoins. It collapsed in 2012 following thefts of tens of thousands of bitcoins that year. Bitcoinica had kept customer deposits at Mt. Gox, so the New Zealand exchange became yet another creditor in the Japanese bankruptcy. The Bitcoinica bankruptcy estate’s claims in the Mt. Gox case are valued at 3.29 billion Japanese yen, or about $29 million.

Mt. Gox was repeatedly robbed of bitcoins between 2011 and 2014 by unknown thieves who stole at least 650,000 bitcoins. They are now worth about $4 billion.

On Feb. 7, 2014, Mt. Gox said it had detected “unusual activity” on its bitcoin wallets and halted withdrawals. The price of bitcoins on Mt. Gox plunged.

Later that month, Mt. Gox halted all trading and filed for bankruptcy protection at Tokyo District Court. At first, the exchange said that nearly all of the bitcoins in its possession – about 850,000 – were missing. But it later located 202,185 bitcoins in storage and on its system.

Mt. Gox founder McCaleb said that in April 2014, before the court-ordered liquidation, he signed an agreement to sell his 12 percent stake to Sunlot Holdings, a Cyprus-registered company, for one bitcoin. Sunlot at the time was trying to purchase most of Mt. Gox and resurrect it, but the plan fell through.

McCaleb said he never received the bitcoin. “It’s unclear to me whether the sale was actually completed,” McCaleb said. “It’s in this weird gray zone.”

A spokesman for John Betts, who was part of the Sunlot investment group, declined to comment on the status of the sale.

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This past summer, U.S. authorities announced they had found at least one person involved with the Mt. Gox hacks.

In July, a U.S. grand jury indicted Alexander Vinnik, a 37-year-old Russian, accusing him of operating an unlicensed money-service business, money laundering and other crimes. In its indictment, the government alleged Vinnik had received funds from the Mt. Gox hacks and laundered them through online exchanges including BTC-e, an exchange he operated, and Tradehill, a now-defunct San Francisco-based exchange. He remains in jail in Greece and is seeking to have his case heard in Russia, not the United States.

Alexandros Lykourezos, an Athens attorney who represents Vinnik, said his client rejects all of the indictment’s allegations. “He says he has nothing to do with the Mt. Gox incident,” the attorney said.

MULTIPLE BANKRUPTCIES

Mt. Gox initially filed for a form of bankruptcy that allowed the exchange to be sold, and briefly considered offers from potential buyers, including Sunlot. But a deal never happened.

On April 24, 2014, the Tokyo District Court ordered Mt. Gox to be liquidated. Kobayashi, a veteran Japanese bankruptcy lawyer, was appointed trustee.

Kobayashi filed a petition with a U.S. bankruptcy court that led to CoinLab’s 2013 lawsuit against Mt. Gox being put on hold. He began conducting meetings to brief creditors several times a year, and posting reports online about the progress of the bankruptcy in both Japanese and English.

As he sought to protect Mt. Gox’s estate, Kobayashi created bankruptcies within bankruptcies. He asked the Tokyo District Court to put Tibanne, Mt. Gox’s parent company, into bankruptcy on the grounds that he had been unable to get Tibanne to repay debts to Mt. Gox, according to a trustee report to creditors. The trustee also put Karpeles into personal bankruptcy.

Different trustees were appointed to handle those cases. Kobayashi filed claims against both Tibanne and Karpeles.

Kobayashi set up an online system for filing claims; 24,750 former Mt. Gox customers ultimately sought compensation. He valued bitcoin claims at $483 per digital coin, the market price on the day before the liquidation order, and converted that value into Japanese yen.

“Those of us who were burned by this are now permanently locked into that depressed price,” said Gutman, the software developer and Mt. Gox creditor.

According to Kobayashi’s most recent status report on the Mt. Gox bankruptcy, dated Sept. 27, as trustee he has received 163.7 million yen, or about $1.4 million, in fees since his appointment.

Kobayashi also recently reached a settlement with the U.S. government. He recouped for the estate $2.6 million - half the funds U.S. authorities seized from Mt. Gox in 2013 for operating in the United States without a license. The United States got to keep the other $2.6 million. No creditors have benefited.

Among the claims the trustee needs to evaluate is the one from CoinLab, the U.S. bitcoin tech firm that sued Mt. Gox and Tibanne in 2013 in the United States. With its lawsuit put on hold, it filed a claim for about 8.7 billion yen, or about $75 million, in the Mt. Gox bankruptcy, a court filing in Japan shows. It also filed a claim in Tibanne’s bankruptcy case for about 10.8 billion Japanese yen, or $95 million, according to a person familiar with the matter. The Tibanne case records are not public so Reuters was unable to determine the basis for this claim.

In interviews, Karpeles and several creditors, including Ver, blamed Vessenes, CoinLab’s former chief executive, for holding up compensation to Mt. Gox’s former customers. Records in the Mt. Gox case show the trustee rejected CoinLab’s claims but the company petitioned for a reassessment, which Karpeles and some creditors say has caused delays. According to Japanese bankruptcy lawyers, claimants are unlikely to be paid until disputes over large claims are settled.

A spokesperson for Vessenes, ex-CEO of CoinLab, said he was unable to comment on ongoing litigation.

CRACKS APPEAR AMONGST CREDITORS

With the price of bitcoin soaring in 2017 – it’s up more than seven-fold this year – some Mt. Gox customers are hoping the bankruptcy trustee will revalue their claims. But disputes have emerged over the best way to convince him to do that.

Some want to form a creditors’ committee to increase leverage. That involves getting a majority of the creditors – more than 12,000 – to support the plan, according to Japanese bankruptcy law.

Japanese bankruptcy lawyers told Reuters that creditor committees are rare in insolvency cases. The court also would need to recognize the committee, they said.

One creditor supporting a committee is Kolin Burges, a British software developer and cryptocurrency investor who had 311 bitcoins at Mt. Gox, about two-thirds of his savings. He said he recognized the difficulty of getting so many creditors to sign up and of convincing the court that the group fairly represents all creditors.

“It’s going to be a tough task,” he said.

Daniel Kelman, an American lawyer in Taiwan who had 44.5 bitcoin - today worth about $310,000 - stored with Mt. Gox, predicts further disputes. “People are going to fight over the value of claims,” he said. “For sure.”

There’s also the issue of paying shareholders in Mt. Gox and Tibanne, rather than creditors.

Like Karpeles, McCaleb, Mt. Gox’s founder, told Reuters that he didn’t “want to make money” from the bankruptcy. McCaleb said he would give “as much as possible” from any money he received to creditors – minus any legal costs or taxes.

“The people that are more hurt by the whole Mt. Gox fiasco are more deserving,” he said. “It seems kind of silly that Mark or I would get it.”

Meanwhile, Mt. Gox’s bitcoin assets keep climbing in value. In August, bitcoin’s underlying software code split, creating a clone called “bitcoin cash.” In addition to the 202,185 bitcoins that it already had, the Mt. Gox estate now owns an equal number of bitcoin cash digital coins. Those are now worth about $200 million, while the bitcoins are worth about $1.4 billion.

In his latest status report on Mt. Gox, Kobayashi said he wished to proceed with distributing the assets “as soon as possible,” but that the timing and method “have not yet been determined.”