Bitcoin, released to the world in 2009 by a person or people called Satoshi Nakamoto, is not backed by a central bank or a government and is seen as an alternative payment system. In February 2013, Bitcoin went into the mainstream as a monetary crisis threatened to bankrupt Cyprus, seen as a safer bet. Early adopters of Bitcoin have been richly rewarded as the price has soared – in one case, a young Norwegian bought a house from an $850,000 windfall on a US$22 investment.
Mt. Gox bitcoin exchange to liquidate after bankruptcy protection rejected
The Mt. Gox bitcoin exchange in Tokyo is heading for liquidation after a court rejected its bankruptcy protection application.
Mt. Gox said yesterday the Tokyo District Court decided the company, which was a trading platform and storehouse for the bitcoin virtual currency, would not be able to resurrect itself under a business rehabilitation process filed for in February.
An administrator will try to sell the company's assets, and many creditors, including those who had bitcoins with the exchange, are unlikely to get any money back.
CEO Mark Karpeles was also likely to be investigated for liability in the collapse of the Tokyo-based firm, the provisional administrator, lawyer Nobuaki Kobayashi, said.
After Mt. Gox went offline in February, Karpeles said 850,000 bitcoins worth several hundred million dollars were unaccounted for, blaming a weakness in the exchange's systems.
Later, Mt. Gox found 200,000 of the bitcoins, changing the estimate for the lost virtual currency to 650,000 bitcoins, although the exact amount is still under investigation.
Mt Gox. has suggested the bitcoins were stolen.
The company has not been able to confirm the bitcoin balances of its users. Bitcoins were created in 2009 by a mysterious figure or group known as Satoshi Nakamoto and are used for transactions across borders without third parties such as banks. They have also become an investment craze.
Mt. Gox said that bankruptcy proceedings were likely to start in the United States along with the action in Japan, but the timing was still unclear.
It said there might be a buyer for its business but that was still undecided.
Private credit research firm Teikoku Databank put Mt. Gox's liabilities at about 6.5 billion yen (HK$493m).
The Mt. Gox mess has been a setback for the currency's image because its boosters have promoted bitcoin's cryptography as protecting it from counterfeiting and theft. But bitcoin proponents have insisted that Mt. Gox is an isolated case.
Japanese legal experts say it would be difficult to prosecute Mt. Gox because its business falls outside the boundaries of existing regulations.
US federal law enforcement agencies are scrutinising whether bitcoins are being used increasingly in criminal activity such as the now-defunct Silk Road illegal drug marketplace.
Additonal reporting by Reuters, Agence France-Presse