Hedge Funds bet on Bitcoins buying claims from MtGox victims

8 years ago - Published in Finance, Fintech Land, Technical Analysis

Four hedge funds from the US and Japan have begun the process of buying or offering to buy claims from former MtGox clients at 15% of the yen value of the claim, in cash. This is 40% lower than the expected eventual repayment from the court (at 25% of the value of the claims), but it might be worth it if you don’t want to wait a year or more as the case is not expected to be settled any time before that. 

The hedge funds are betting on bitcoin gaining value, which it has, considerably since the claims were lodged in the aftermath of Mt Gox’s failure. The hope is to strike a lucrative windfall when the process of distributing payouts to claimants begins.

Once the world’s largest bitcoin exchange, MtGox went bankrupt in February 2014 when it reported the disappearance of 850,000 bitcoins in a cyber attack, worth over $450 million at the time. In 2015, the former CEO of the firm Mark Karpeles was arrested by the Tokyo Metropolitan Police department.
A total of 24,750 creditors have filed claims to date, all of which had been reviewed by the Tokyo court-appointed Trustee in May 2016.
Those bitcoins seem to be essentially the only assets that the company still has, and they may be the only way to settle remaining bankruptcy claims to people who held money and/or bitcoins there.

The value of the claims, when lodged in 2014, were calculated to the corresponding exchange rate at the time, of around $440 per bitcoin. As things stand, the near-25000 claimants will not see over a quarter of the missing bitcoins and cash, which could leave some claimants open to selling their claim.

After gains throughout 2016 the market price of one bitcoin in January surpassed $1,000 for the first time since the Mt Gox collapse, and on Monday was trading just above $1,012.

 

“The peculiarities of the situation — in which creditors may not be paid out for at least another year along with the striking rise in the market price of Bitcoins since the exchange rate was calculated with respect to the claims, means that a fund willing to take the risk of a long wait could be betting on a payout with huge upside,” said Daniel Kelman, an attorney representing some of the claimants.

Kelman has even set up a dedicated website for those interested in the hedge fund option, mygoxclaim.com, which provides links to funds involved.