Some 10 years after its collapse, the Mt Gox cryptocurrency saga is still playing out in slow motion, with many twists and turns

It looks like customers of Mt Gox will finally receive a payout of sorts, as the Japanese receiver of the bankrupted cryptocurrency exchange prepares to distribute 140,000 Bitcoin to creditors.

Lawyer Nobuaki Kobayashi, the trustee for the Japanese civil rehabilitation process Mt Gox was placed in, said the payments to creditors will start at the beginning of next month. 

How things ended up this way is a wild Internet tale. To start with it’s worth remembering the exchange began as a trading post for collectible Magic: The gathering game cards before pivoting to cryptocurrency in 2010 and becoming a hugely popular site where people deposited millions of dollars.

Four years later, under the management of Mark Karpelès after Jed McCaleb, the developer of the eDonkey file sharing program sold out,  Mt Gox went bust with 740,000 Bitcoin stolen. Well, almost 200,000 were found in an “old digital wallet” so the loss to customers was 640,000 BTC, which is still massive, and a reflection of how popular Mt Gox was at the time it failed.

At the time, Bitcoin wasn’t valued anywhere near as high as it is today. Bitcoin exchange rates fluctuate wildly, and the thought of up to 140,000 units of the cryptocurrency coming onto the market spooked speculators. Nevertheless, as of writing one Bitcoin is trading at over NZ$100,000 each so that’s a good chunk’o’change as the expression goes.

Legally, the tortuous process since the bankruptcy for Mt Gox can’t have been great to stomach for customers that kept cryptocurrency at the exchange. Karpelès received a suspended sentence for tampering with financial records, and hasn't served any time in prison. His LinkedIn profile says he’s the chief technology officer of Shells.com, a cloud desktop company, and the chief executive officer of Karpeles Labs in Tokyo.

There is an indirect New Zealand connection in the Mt Gox story. In 2020, the Police said it had restrained $140 million from a shell company called Canton Business Corporation. It was the largest ever seizure of funds by the Police, which were working with the United States Inland Revenue Service to unwind another fraudulent cryptocurrency venture run by Russian Alexander Vinnik, BTC-E, based in the US.

Vinnik was arrested in 2017 and eventually extradited to the US for running an alleged US$4 billion money laundering operation, in cahoots with Russia’s infamous FSB security service. The Russian is said to have laundered some of the Bitcoin taken from Mt Gox through BTC-e. Vinnik’s case is another lengthy one, and he pleaded guilty in May this year to money laundering.

There have been absolutely tons more cryptocurrency hacks, scams, rugpulls, frauds or whatever you want to call them since Mt Gox went under in 2014. 

Once you have read what happened - and there are gaps in the account waiting to be filled in, which will probably make the saga even more remarkable - you’re left wondering what has been learnt from the story of Mt Gox. Recent scandals such as the FTX fraud and the US authorities going after the largest crypto exchange in the world, Binance, with its founder Changpeng Zhao receiving a prison sentence, albeit light, suggest that the cryptocurrency circus will continue.