TOKYO, April 16 (UPI) -- Mt. Gox agreed with a Tokyo court to take the first steps towards liquidation, after giving up its attempt to rebuild the company under bankruptcy protection.
Tokyo District Court scrapped Mt. Gox's application for rehabilitation and the company expects the order for bankruptcy liquidation to be issued. The court ordered that the company's asset management be transferred from Mark Karpelès, the exchange's chief executive officer, to a court-appointed provisional administrator, Nobuaki Kobayashi.
"The Tokyo District Court recognized it would be difficult for the company to implement civil rehabilitation proceedings," the exchange said in a news release. "It is expected that the commencement of bankruptcy proceedings will be ordered."
The court is expected to make its decision public in a few weeks and a court spokeswoman refused to comment on the development.
Mt. Gox filed for bankruptcy in February after admitting to losing 850,000 bitcoin, worth half a billion dollars. The loss led to the collapse of the biggest Bitcoin exchange, with the company blaming a security vulnerabilities in the crypto-currency's software for the loss. The company later said it had recovered 200,000 bitcoins.
Creditors will be unhappy with the move to liquidate the company, because a switch to liquidation means creditors will get back less of their investment. If a company is being rehabilitated with bankruptcy protection, chances are revenues can be used to repay creditors. Whereas in liquidation proceedings, credits will only get a portion of the company's assets.
A person close to the exchange said that there were buyers potentially interested in buying the exchange and creditors could get back their investments from the new owners. But bankruptcy lawyers in Tokyo said that this was highly unlikely.
In the meanwhile, Karpeles has said that he will not appear before a U.S. court to testify in person. Lawyers for Karpeles said they he was "not willing" to go the United States and was looking to obtain legal advice before making any appearance at a U.S. court.
Mt. Gox's CEO has received a order from the Financial Crimes Enforcement Network, part of the US Department of Treasury, which had demanded he attend a hearing in Washington this Friday.
[The Wall Street Journal]