Mt. Gox bankruptcy still unpaid after eight years, how will FTX's 16 times funding gap impact the market?

In 2014, Mt. Gox was hacked, leading to the longest bear market in history. FTX's financial shortfall is 16 times greater than Mt. Gox's. How will the market react?

Bankruptcy Process of Mt. Gox

Mt. Gox, headquartered in Tokyo, started operating as a Bitcoin exchange in 2010, previously known as a platform for trading game cards. At its peak, it accounted for nearly 80% of global Bitcoin trading volume.

On February 24, 2014, Mt. Gox was hacked, leading to the suspension of trading and the shutdown of the website, resulting in a loss of approximately 850,000 bitcoins. The company claimed to have recovered 200,000 bitcoins later, but 650,000 BTC were still missing.

At that time, the price of BTC was around $600, resulting in a total loss of about $473 million.

Subsequently, on 2/28, Mt. Gox filed for bankruptcy, and CEO Mark Karpelès was accused of charges such as fraud, embezzlement, and data manipulation. Over the years, no agreement on compensation with creditors was reached:

• 2019: The Tokyo court ruled that Mt. Gox must deliver 141,686 bitcoins it holds to a trustee, and negotiated with creditors to choose a compensation plan.

• 2021: On 10/21, a creditors' meeting was held, with 99% of creditors voting to approve "compensating users with 90% of their BTC holdings."

As of today, compensation has not yet been carried out. The official compensation system only collects information such as repayment addresses from creditors, and the registration deadline is set for 1/10 next year.

What about FTX?

According to previous reports, FTX is currently facing a funding shortfall of up to $8 billion. SBF stated that without cash injection, FTX will need to file for bankruptcy.

Based on current market prices, $8 billion is equivalent to 48,000 bitcoins, a scale similar to Mt. Gox, but the funding gap is 16 times larger than at that time.

The key lies in the complex, multi-year process, as mentioned by the founder of BitMEX. It's almost ten years since the bankruptcy of Mt. Gox, and creditors have still not received any compensation.

3/
FTX customer deposits will only see recovery in a bankruptcy court, and that will take many years to sort out. Mt Gox creditors still haven't received funds and it's been almost a decade.

— Arthur Hayes (@CryptoHayes) November 9, 2022

Mt. Gox Contributing to the Longest Bear Market in History

If one unfortunately bought Bitcoin at the high point of $1,224 in December 2013 and held it purely, it would have taken until around March 2017 to break even, with a maximum decline of approximately 84.14%.

The good news is, according to the leaked SBF letter to employees, FTX is about to undergo financing. Whether it will apply for bankruptcy protection like Mt. Gox could be crucial next week.