Tokyo Court Shifted Mt. Gox From Bankruptcy to Civil Rehabilitation

At 5:00 p.m. Japan time on June 22, 2018, the Tokyo District Court ordered the commencement of civil rehabilitation proceedings for Mt. Gox. The order stayed the failed bitcoin exchange’s bankruptcy case and appointed attorney Nobuaki Kobayashi as civil rehabilitation trustee, leaving him with exclusive authority to administer and dispose of the company’s assets under court supervision.

The development changed the legal framework governing one of Bitcoin’s largest unresolved failures. It did not reopen the exchange, approve repayments or determine what each creditor would receive. It created a process in which a rehabilitation plan could modify claims and set a payment structure, subject to creditor approval and court confirmation.

Why the legal switch mattered

Some Mt. Gox creditors had petitioned for civil rehabilitation on November 24, 2017. Under the bankruptcy framework described by the trustee, non-monetary claims were converted into monetary claims using their value when bankruptcy began. Under civil rehabilitation, the June 22 notice said claims seeking the return of bitcoin would not be converted into monetary claims at the commencement of the new proceeding.

That distinction preserved bitcoin claims as non-monetary claims within the rehabilitation case. It also meant Bitcoin creditors’ voting rights on a proposed plan would be calculated using bitcoin’s value at the start of rehabilitation.

The notice did not say creditors were guaranteed payment in bitcoin, nor did it specify a recovery rate. Any distribution method still depended on a plan that had not been written, voted on or confirmed on June 22. Contemporaneous descriptions of possible bitcoin distributions were therefore interpretations of the new flexibility, not an ordered payout.

A new claims process began

The court’s initial schedule set September 26, 2018 for a meeting on the status of Mt. Gox’s property and October 22, 2018 as the deadline for proofs of rehabilitation claims. A proposed rehabilitation plan was initially due February 14, 2019. The trustee expressly warned that the timetable could change as proceedings progressed.

Even creditors who had filed in the bankruptcy case were asked to file again. People who had not filed a bankruptcy proof of claim, or had filed after the earlier claims-review date of May 25, 2016, could submit claims in rehabilitation. The trustee cautioned that failure to meet the new deadline could cause a creditor to lose rights.

For cryptocurrencies created through Bitcoin chain splits, the trustee said the working plan was not to require separate filings. Instead, a filed Bitcoin claim was expected to be treated as including proportional claims for other forked assets. Further details remained pending.

What remained unresolved

A rehabilitation plan still required a resolution by rehabilitation creditors and a confirming order from the court. If the plan were rejected or otherwise failed to win approval, the trustee’s June 22 explanation said rehabilitation would end and bankruptcy would resume.

The notice also disclosed, without giving quantities in that document, that some bitcoin and bitcoin cash had been sold after the tenth bankruptcy creditors’ meeting to secure cash for creditor interests. It did not establish that all remaining cryptocurrency would be retained, distributed in kind or protected from later sale.

The June 22 order was consequently a procedural turning point, not a settlement. It gave creditors a route that could recognize Bitcoin claims without automatically fixing them at the old bankruptcy valuation and allowed a negotiated payment plan. But claim acceptance, asset valuation, distribution form, timing and recovery percentages were all unsettled on June 22, 2018.