Troubled Japan-based bitcoin exchange Mt. Gox has filed for Chapter 15 bankruptcy protection, an ancillary form of bankruptcy that will complement its primary Tokyo District Court claim issued on 28th February.
US Chapter 15 bankruptcy provides specific protections in cases of cross-border insolvency, and is based on UN model law. Both Japan and the US have adopted Chapter 15 bankruptcy in an effort to better protect the interests of shareholders and maximize the value of debtor assets in cross-border bankruptcies.
At the time of its filing, Mt. Gox claimed an outstanding debt of ¥6.5bn ($63.6m), and indicated that 850,000 bitcoins had been lost or stolen from its exchange.
This is just the latest development in the ongoing legal case against Mt. Gox. Shortly after its original Japan filing, a US class action suit was mounted by Colorado-based Edelson law firm, which specializes in technology cases. The lawsuit is seeking damages, alleging that Mt. Gox was negligent for failing to provide adequate security to its customers.
Edelson did not respond to comments requesting more information on how this filing could affect its case.
What is Chapter 15 bankruptcy?
Upon qualifying for Chapter 15 protection in the US, certain relief could become available to Mt. Gox, including the granting of an “automatic stay” that would prevent creditors from seizing its US assets, though Mt. Gox would have to request such an arrangement in writing. The presiding bankruptcy judge would have the final say on granting the relief.
For more information on Chapter 15 bankruptcy filings, read a full overview here.
Next steps
Following the filing, a recognition hearing will typically be held within 30 days to determine whether the case is a “foreign main” or “foreign non-main” proceeding, distinctions that would affect the handling of the case. Mt. Gox may not necessarily have protection in the interim period before the hearing.
After the determination is made at the hearing, Mt. Gox would be able to carry out its main purpose in filing, which can include liquidating assets, approving its sale or assigning its leases in the US.
Mt. Gox indicated recently in a post on its website that it planned to restructure and restore the business in order to increase repayments to its creditors.