Bitcoin marketplace Mt Gox given bankruptcy protection lifeline

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by Michael Moore| 18 June 2014

Ruling helps secure US assets and could yet lead to sale of Tokyo-based online exchange.

Troubled Bitcoin exchange Mt Gox has received approval to go into Chapter 15 bankruptcy proceedings in the United States as it looks to protect its remaining assets.

The ruling from Judge Stacey Jernigan of the U.S. Bankruptcy Court in Dallas comes as Mt Gox awaits approval of a settlement with its US customers and the sale of the business, and prevents creditors who sued the company from seizing any US-based assets (including servers) or pressing for evidence.

The Tokyo-based exchange can also chase down any funds it needs to repay its debts and, if necessary, file lawsuits of its own. It will also mean that courts in Japan, where Mt Gox's parent company resides and has also filed for bankruptcy, will be able to gain more control over the case, including any proposed restructuring plans.

Formerly the world's leading Bitcoin marketplace, Mt Gox was hit by a mysterious hacking attack earlier this year which resulted in 850,000 bitcoins, worth around $500m at current rates, being stolen. Although 200,000 of these bitcoins were subsequently recovered in an old wallet, Mt Gox was forced to close following the attack, with thousands of users also filing a class action lawsuit against the company.

The company originally filed for Chapter 15 bankruptcy protection in March to prevent U.S. customers who participated in this lawsuit from being able to seize its assets in the country, as well as blocking demands for evidence and access to Mt Gox executives.

The lawsuit has since been settled by the company and the plaintiffs, and is awaiting final approval from a federal court in Chicago, with U.S. and Canadian customers set to split the 200,000 bitcoins held by Mt. Gox and share in a 16.5% stake in the company when it is sold.

The company has also attracted interest from a variety of investors, including Sunlot holdings, which offered to buy Mt Gox for the symbolic sum of one Bitcoin.

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