Leaked Docs Hint BitPoint Sold Gox Trustee’s Bag, Tanking Bitcoin Prices

Leaked records from the offices of Mt. Gox bankruptcy trustee Nobuaki Kobayashi show regular bank transfers in Japanese yen (JPY) from exchange BitPoint in the first half of 2018. Creditor advocate “GoxDox”, which published the records online, says this may confirm the suspicion that Kobayashi was selling large chunks of Gox coins on the open market around that time. If true, the moves possibly tanked the bitcoin price at times it was recovering from its falls at the beginning of that year.

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Did BitPoint Sell Gox Coins on its Exchange?

Kobayashi has never denied selling off BTC and BCH from Gox’s reserves in 2018 to pay creditors, but denied it would have influenced the price in a meaningful way. He responded to accusations of dumping by claiming his office had avoided selling on the open market or through an exchange.

However, he also never revealed exactly how he’d sold the coins.

GoxDox, which leaked previously unknown records associated with the Mt. Gox bankruptcy case in 2014, reactivated this week after a five-year silence by publishing what it says are bank statements from Kobayashi’s office. These records show at least 25 transfers totaling ¥34,346,581,104 JPY ($312 million USD) from Japanese exchange BitPoint, between February and June 2018.

GoxDox alleges that BitPoint was selling Gox’s coins. Since its transfers to Kobayashi’s office likely happened immediately after sales for security reasons, and appear to correspond with BTC price dumps, GoxDox compared amounts with BitPoint trading data and concluded the amounts were being sold off on the open exchange, not off-the-books.

The site says the records it obtained show only a limited period, and that BitPoint’s exchange activity hints it could have sold a lot more.

Though 2018 will always be associated with a “bear market” for bitcoin and crypto-assets in general, BTC actually made serious rebounds along the way. It went from around $7,000 in early February to over $11,000 in late February and again in early March, then from around $6,600 in April to $9,900 in May. Each time, the price slumped again soon after, rising again only in July.

Kraken's Jesse Powell and Ayako Miyaguchi with Kobayashi in 2014
Kraken’s Jesse Powell and Ayako Miyaguchi with Kobayashi in 2014

Selling on Experts’s Advice, or Against It?

Exchange Kraken was initially tasked with overseeing the creditor claims process in 2014. CEO Jesse Powell wrote last year on Reddit that his company had advised Kobayashi to avoid selling BTC, or if need be, sell them via auction or OTC (over-the-counter, or off the public markets). OTC is a legal and frequently-used method whereby asset holders may sell in large amounts privately to a buyer or buyers, to avoid crashing prices.

Kraken, once a favored cryptocurrency business for Japanese government representatives, slowly fell out with authorities there over its lack of access to information from the Gox investigation, and general disagreements over cryptocurrency regulation. The exchange eventually stopped serving Japanese customers altogether in mid-2018, and a statement on its website says it is no longer involved with the Gox claims process.

Law enforcement and government agencies in the U.S. and Australia have conducted public auctions of large amounts of cryptocurrencies in the past, gained by seizing them from criminal enterprises such as Silk Road Marketplace.

Why Sell Gox’s Bitcoins?

There was excitement in Gox creditor circles in late 2017 and throughout 2018. The soaring BTC price meant the bankrupt exchange was technically solvent, thanks to the roughly 200,000 bitcoins left in its wallets (after around 650,000 went missing). Creditors, who are still waiting for some restitution after five years of bankruptcy proceedings, could still wind up receiving all they’d lost in full (at least in fiat terms) or even profiting, should the trustee allow part-payouts in BTC and the price skyrockets again in the future.

Moreover, Bitcoin itself had hard-forked into two substantially valuable assets: bitcoin (BTC) and bitcoin cash (BCH). Even the unloved bitcoin gold (BTG) reached a high of $474 in December 2017, and bitcoin cash itself eventually forked into BCH and bitcoin SV (BSV). Having held bitcoin private keys since 2014, the Japanese trustee had access to at least some of those additional assets.

It was uncertain if Japanese law would allow such a radical adjustment, but in 2018 Kobayashi’s office started a new claims process that allowed creditors to state a preference to receive fiat or BTC.

Mt. Gox creditors at the Tokyo District Court
Mt. Gox creditors at the Tokyo District Court

Years of Questions Over Remaining Gox Funds

GoxDox and some creditors have previously slammed Kobayashi for squandering Mt. Gox’s remaining fiat assets on consultants and a lengthy legal process, including $420,000 in “outsourcing fees” and over ¥19.2 million JPY ($175,000) to Tibanne, the online services firm owned by none other than Mt. Gox CEO Mark Karpeles.

(Note: the payments mentioned above, revealed in 2014, were from Gox’s fiat balances and did not involve the sale of any BTC.)

As of February 2019, no creditor who held accounts with Mt. Gox at the time of its closure in 2019 has had any of their funds returned — at least, none who have admitted it publicly.

Did you lose money in the Mt. Gox collapse? How should governments dispose of large amounts of cryptocurrencies? Let’s hear your thoughts in the comments.


Images via Bitsonline, Jon Southurst

(Excerpt) Read more Here | 2019-02-07 10:00:29
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