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Crypto Law/Level IV · Holders' traps/4.1 Custody/Lesson 2

Exchange collapse: Mt. Gox

The first great exchange failure shows how missing coins, a foreign insolvency court and a choice of procedure can decide what customers get back, and how long it takes.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Mt. Gox creditors who have not finished the trustee’s procedures can still do so free through the official claim system; the current repayment deadline is 31 October 2027 (Japan time), and missed steps can forfeit payment.
  2. Prevention costs nothing: record the legal entity and country named in each platform’s terms, because Japanese bankruptcy converted coin claims to money at 2014 values while civil rehabilitation kept them in kind; foreign procedures and language then govern.
  3. Keep your own deposit, balance and correspondence records, plus working login and identity documents, outside the platform; a claim filed years later depends on proof you saved, and verification steps cannot be skipped.
  4. A recovery received years later is taxed under your own country’s rules on the facts (US: compare it with the basis and any loss already deducted); report it in the year received even though it arrives as coins.

MaterialsThe Mt. Gox rehabilitation trustee’s announcements page (mtgox.com), especially the notices of 22 June 2018, 5 July 2024 and 16 October 2026A timeline sheet you build yourself: dates of deposit, last withdrawal, freeze and any claim filing for each platform you useLesson 4.1.1 on what an exchange account is, for the legal background

Wonder

  1. How did one exchange lose hundreds of thousands of bitcoins?
  2. Why did customers wait about ten years for their first repayments?
  3. Did it matter that the case was in Japan rather than the US?

Explore

  1. Mt. Gox was a bitcoin exchange based in Tokyo that launched in July 2010 and grew into one of the largest places to trade bitcoin. On 7 February 2014 it halted bitcoin withdrawals; on 24 February it suspended trading and its website went dark. On 28 February 2014 it filed for bankruptcy protection in the Tokyo District Court, and it filed for recognition under Chapter 15 of the US Bankruptcy Code in March. It reported that roughly 850,000 bitcoins, belonging to customers and to the company, were missing. On 20 March 2014 it said it had found about 200,000 in an old wallet.
  2. Where the coins went became a criminal matter in several countries. US prosecutors linked funds from the Mt. Gox thefts to BTC-e, an exchange run by the Russian national Alexander Vinnik, who was arrested in Greece in 2017. Vinnik pleaded guilty in a US court in May 2024 to conspiracy to commit money laundering and was released to Russia in a prisoner exchange in February 2025. In Japan, Mt. Gox’s chief executive, Mark Karpelès, was convicted on 14 March 2019 of falsifying data and given a suspended sentence of 30 months, while being acquitted of embezzlement and aggravated breach of trust.
  3. The legal turn that shaped recoveries was procedural. In Japanese bankruptcy, the trustee explained, non-monetary claims are converted into money claims valued at the start of the proceedings, here 2014, when bitcoin was worth far less than later. The trustee sold some bitcoin and bitcoin cash between December 2017 and February 2018. On 24 November 2017 some creditors petitioned for civil rehabilitation instead, a different procedure under Japan’s Civil Rehabilitation Act. On 22 June 2018 the court ordered rehabilitation proceedings to begin and stayed the bankruptcy. As a result, claims for bitcoin were no longer converted into money claims.
  4. A rehabilitation plan followed. The Tokyo District Court issued its confirmation decision on 20 October 2021, and it became final and binding on 16 November 2021. The plan offered creditors a base repayment, an early lump-sum repayment and an intermediate repayment, payable in bitcoin, bitcoin cash or fiat money, after creditors registered how and where to be paid. On 5 July 2024 the trustee made the first repayments in bitcoin and bitcoin cash through designated exchanges. That was more than ten years after withdrawals stopped. Creditors had to keep their claim-system logins, verify identities and accounts, and follow notices issued in Japanese with English translations ‘for reference purposes only’.
  5. The process is still not finished. The trustee has extended the repayment deadline several times. In a notice dated 16 October 2026, he said the repayments were largely completed for creditors who had finished the required procedures. Many others had not received payment, either because they had not completed the procedures or because of issues during the process. With the court’s permission, he moved the deadline from 31 October 2026 to 31 October 2027 (Japan time). For a holder, the trap is plain: in an insolvency, the steps to claim, the deadlines and the language of the proceedings belong to the court handling the case, not to you.
  6. Mt. Gox also shows why the jurisdiction of your platform matters (lesson 1.1.4). The same missing coins could have been valued at 2014 prices or returned in kind, depending on a procedural choice under Japanese law that creditors had to fight for. How a recovery received years later is taxed depends on your country and facts (lesson 2.3.3). A practical check: for each platform you use, note the legal entity and country named in its terms, and keep your own records of balances, deposits and correspondence, because a claim process years later may depend on proof you saved.

Key facts

  • Mt. Gox halted bitcoin withdrawals on 7 February 2014 and filed in the Tokyo District Court on 28 February 2014.
  • Mt. Gox reported about 850,000 bitcoins missing and later said it had found about 200,000 in an old wallet.
  • The Tokyo District Court ordered civil rehabilitation proceedings for Mt. Gox on 22 June 2018, staying the bankruptcy proceedings.
  • Under Japanese bankruptcy, non-monetary claims are converted into money claims valued at the start of the proceedings, while in this civil rehabilitation bitcoin claims were not converted.
  • The Mt. Gox trustee made the first repayments in bitcoin and bitcoin cash on 5 July 2024.
  • On 16 October 2026 the trustee extended the repayment deadline from 31 October 2026 to 31 October 2027.

Exercise nine, six, three, one

9CollectList up to 9 facts you would need to prove a claim if a platform you use failed, such as your username, registered email, balances on a given date, deposit records and the legal entity you contracted with.
6ClusterSort them into 6 categories: identity proof, account access, balance evidence, transaction history, contract and jurisdiction details, and items you do not currently have.
3DistillReduce the 6 categories to 3 groups: records you hold safely outside the platform, records only the platform holds, and records you could not produce today.
1CrystallizeWrite 1 sentence on what the Mt. Gox procedural switch from bankruptcy to civil rehabilitation meant for customers owed bitcoin.

Fact check

Dates, figures and claims checked against the published sources listed below.

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