yes

it is true! I mean, it should happen soon, after so much waitings.

When I was young I used to left some money between the pages of books to find it later. It was a nice sentiment when something valuable is found where it isn't expected. I am sure I wasn't the only one who did it. I saw it also in movies or in other books reading.

But, what should you do when it's happening to you? And we are not talking about some 10 $ bill, but maybe...10 000 ?

Oh, how can be this possible? By recovering hopeless long gone investments.

Indeed, I don't know why it took so long, but sooner or later, the people who had some crypto in Mt Gox exchange will get back (at least a part of their) investments and most probably, with a high return. Why? I'll tell you a little bit later.

First, let's have a little refresh of

what is Mt Gox for Crypto world

The name came from a game: Magic: The Gathering and was created by Jed McCaleb (yes, the one who also was involved in the creation of Ripple (XRP) and Stellar (XLM) as a platform for exchanging the rare and valuable cards between players. The success was huge and he also saw in Bitcoin a new way of extending it's operations. He was right and after the appearance of Bitcoin quotings in 18 jul, 2010, the popularity of the exchange exploded.

Later, he sold the most part of the business to a french programmer and Bitcoin lover - Mark Karpelés. He also made the fame of Mt Gox even bigger and by having the possibility of instant withdraw, was seen as the most trustworthy exchange. Mt Gox had 70% of the total volumes of traded Bitcoin. Mark worked hard and tried to make this exchange as big as it can, but he also had the role of Project Manager, Security Chief, Finance and all important roles. Because of this, many important security issues could wait long time until he succeeded to handle them.

Even more, he started a Bitcoin cafe chain for making Bitcoin more popular by accepting it as a payment in his cafes. Good plan, but not when he was the only who managed the Exchange and this new business. So, his time was even less for what a CEO should do.

As you could expect, problems got bigger, so, in June, 2011 - the Exchange was hacked. The company was forced to take offline the website and claim for help all around the globe. Some of the most (actual) important actors who responded even from USA were - Jesse Powell (the actual Co-founder of Kraken exchange) and Roger Ver (the Bictoin Cash promoter).They work hard during the week to make the website online again, but, strangely, Mark Karpeles took his weekend off and let the volunteers and his employees to work without him. Even Monday he spent his time with non important things, so the team made all the hard part of restoring the exchange.

This was a clear sign of decadence. And it continued to grow by feeding with mistakes.

Even if one of the security measures was to move the majority of the coins in a "cold wallet" (not available online), somehow, a hacker got the un-encrypted private keys of the hot wallet of Mt Gox. Next step:

 By taking advantage of the shared keypool of the compromised data file, the hacker was able to reuse addresses, masking the thefts as legitimate transactions.

The servers of Mt Gox interpreted the leak as genuine deposits to other accounts, and due to the way they were coded, proceeded to top-up the depleted hot wallet with steady infusions from the coins held in cold storage. Thus like a well with a hole in its bottom, Mt Gox slowly lost all its reserves in a continuous trickle, until nothing was left.

This was a brilliant move, but also a risky one: somebody could notice the cold wallet was continuously diminishing. But it didn't happen. The whole reserve of the exchange was emptied by mid of 2013. We are not sure at what point Mark was aware of the hack, but hi was hiding it from the public until february, 2014 - eight months later!

Of course, he tried to save the situation - he lied, he asked for help from new investors, even created Willy bot - a software trading bot for making automated transactions, manipulating the market and mark some benefits.

The Willy Bot was responsible in a great part for the Bitcoin bubble of 2013-14.

This is how it was discovered:

The Willy bot was long suspected by trading veterans on the platform. Its existence – and affiliation with the exchange itself – was all but confirmed on 7th January, 2014. On that day, the Gox trading API was suspended for a short window of close to 90 minutes. No one throughout the world was able to execute trades during the period – except for our very own Willy bot.

The program continued to buy increments of Bitcoin, faithfully sticking to its algorithm even through the downtime.

This revealed to the investigators what was really happening. After studying the most transactions involved and linked to it, estimations are that some of 30-50% from the total transactions of Mt Gox were made by Willy.

On 7 February 2014, Mt Gox froze all Bitcoin withdrawals. Even now, they refused to give a real reason. The company claimed to have found some vulnerabilities in the Bitcoin protocol itself, stating that it was pausing withdrawals “to obtain a clear technical view”. 

Protests were taken place and after more than two weeks of pressure, the exchange suspended all tradings.

on 28 February, Mt Gox filed for bankruptcy. Leaked documents revealed the severity of the issue; 744,408 bitcoins belonging to customers had been ‘lost’, along with 100,000 belonging to the company itself. And so Mt Gox was declared insolvent.

Of course, Mark was arrested for more accusations, but before this, he discovered something that turn this case in something unexpected and bizarre:

First part: the discovery

In March of 2014, Mark discovered at his home, where it was spending his arrest, a digital wallet with 200 000 BTC who escaped from being drained by the hacker. Skipping the part with more accusations and suspicious to Mark, you need to know that, in the meantime - the price of Bitcoin skyrocketed to almost 20 k in december, 2017 (and now, again) and made the assets of Mt Gox worth now 4 billion - ten times more than in feb 2014!!

Second part: the deception

but, it was a catch:

Under Japanese bankruptcy code, the value of creditors’ claims were capped at what they were worth back when the company went insolvent; ie. $483 per Bitcoin.

Needless to say, the already despondent creditors were devastated. But the punchline was still coming; the surplus of the sale would accrue to the shareholders of Mt Gox. Which, at a holding of 88%, primarily meant Mark Karpelés.

funny tragic!!!

Third part: the hope

 While most creditors lacked the resources to do anything about it, Richard Folsom wasn’t your everyday Bitcoin depositor. As an American who had worked for Bain & Co. in Tokyo before founding one of the first private equity shops in Japan, Folsom had both the knowhow and the financial chops to challenge the decision in court.

He roped in Nishimura & Asahi, the biggest law firm in Japan, to get the investors their due. Shin Fukuoka, the partner leading the effort, formulated a plan: What if Mt. Gox wasn’t technically bankrupt anymore?

And so the November of 2017 saw them filing a petition for the civil rehabilitation of Mt Gox in court, putting aside the current bankruptcy process.

Fourth part: intermezzo

In the meantime, Kim Nilsson continued to trace the 650 000 BTC lost and after years of work, he succeeded to find the person who did it: Alexander Vinnik - a russian IT specialist. It was arrested, of course, but they found out that all BTC were converted in FIAT for a total of 20 million because of high volatility.

Fifth part: next step

The actual mechanism of releasing the funds, however, remained elusive for a long, long time. Many depositors, losing hope of ever seeing their funds returned to them, sold their claims at a loss to others, such as Thomas Braziel, managing partner of hedge fund B.E. Capital Management, who purchased $1 million in creditors’ claims at a discount.

On 22 June 2018, the lawyers of Nishimura & Asahi had their civil rehabilitation petition accepted by Tokyo District Court. The bankruptcy proceedings in Mt. Gox case were halted and the process of finding the right way of distributing 170 000 BTC and 170 000 BCH has started. That means now over 1,2 billion USD - more than 3 times the value of the total amount hacked in 2014!

The sixth part:

The day of 15 December 2020 should represent the one when the claims for funds had in the hacked exchange should find their fair response. I hope everybody will be satisfied, even some years had passed.

Conclusion:

1. The bigger you are, the higher you climb, more destructive the fall.

2. No one is 100% secure - keep your minimum amount on exchanges.

3. Invest only the money you afford to lose.

Cheers!