Indians allegedly have crores worth Bitcoin locked up in MtGox; we doubt it


mtgox_logoBitcoin owners in Indian allegedly have crores of Rupees worth virtual currency stuck in Japanese Bitcoin exchange Mt Gox, that filed for bankruptcy last week, reports PTI. Mt Gox has decided to file for bankruptcy under Civil Rehabilitation Act after 744,408 Bitcoin were stolen from its wallet over two years.

When it declared bankruptcy, it had listed 127,000 creditors, out of which only 1,000 were from Japan. The report however comes to this figure based on anecdotal evidence alone and some questionable calculation. It’s not clear if there is a way to figure out how many Indians have Bitcoin stuck in Mt Gox or what it would be worth. To begin with, let’s look at who all are affected: the first kind are those who used Mt Gox as a digital wallet and stored their Bitcoin on its servers. Then there are those who were buying and selling Bitcoin for regular currency.

A lot of Bitcoin owners maintain an offline wallet and store only a small portion of the currency in online wallets. So, the first set will be okay to an extent if they also have an offline backup of their wallet. If that’s the case then the chances of massive losses are less. The second group is the one that’s in more trouble as a lot of people have not got funds for transactions they made over the past two months. Which means they don’t have the Bitcoin or the money, putting them in a spot.

What is Mt Gox doing

Mt Gox is currently going through bankruptcy procedures that leaves the company with an option to restructure itself, after clearing off the money owed to creditors. The company is allegedly planning a relaunch late this yer according to a leaked internal document.

It has now set up a call centre that will be operational from today to respond to all inquiries. If you have your money or Bitcoin stuck at the company you need to call +81 3-4588-3921 between 10am and 5pm Japan time Monday-Friday.

How can you recover Bitcoins from Mt Gox?

If you stored your Bitcoin with Mt Gox, then you can follow the standard judicial system for recovering debt from bankrupt companies.

The court will now appoint a supervisor and conduct a explanatory meeting for creditors during which the final date for submitting claims will be announced. The bankruptcy proceedings will start only after this. Once the final date for filing claims with the court passes, Mt Gox will submit the list of claim holders to the court. Based on this information, a rehabilitation plan will be created and submitted for approval during a creditors meeting. Once approved, the plan will be executed.

In other words you need to call the new call centre number set up by Mt Gox to figure out which stage the company is in. If it is trying to compile a list of all creditors, then you should offer them evidence of your claim and may be you’ll get most of what the company owes you if not all of it.

The catch here is that you’ll need to submit your full name and other identifying material to make this claim. So a lot of people who have been using Bitcoin for money laundering might not bother at all as it puts them at risk of being caught. That being the case, there is a chance that the company will be able to pay back most legit users. That however, is just speculation and we’ll need to wait and see what sort of a plan the company comes up with.

Read this to know more about bankruptcy proceedings under Civil Rehabilitation Act in Japan.

Medianama take: Like I mentioned earlier, the whole Mt Gox mess proves that it is organisations that deal with crypto currencies that need to be regulated and not the currency itself. Bitcoin owners were exposed to the risk of theft due to inadequate security protocols followed by the company despite a few breaches in the past.

Mt Gox claimed that it had enough funds to make up for any lost currency a while back, but it looks like the company was juggling funds around to make up for the shortage. All we can hope for at this point is that other exchanges and wallets will focus more on security going forward. We also hope that Bitcoin owners will maintain an offline backups instead of relying on a single online wallet service for this.