MtGox Posts Court Documents – Claims Customer Bitcoins & Fiat Missing

Further to its announcement yesterday that it had applied for a Procedure of Civil Rehabilitation as part of its Bankruptcy

Further to its announcement yesterday that it had applied for a Procedure of Civil Rehabilitation as part of its Bankruptcy filing last week, MtGox has posted on its website details of its court filing.  Accepted by the Tokyo District Court, according to terms of the civil rehabilitation MtGox has entered into was is referred to as a ‘preservative order’ where they are prohibited from paying debts or transferring assets as the order stated”

“Further, MtGox Co., Ltd is under several”orders issued by the Court : a preservative order prohibiting it from paying its debts, transferring its assets or establishing security over its assets, an order establishing a comprehensive prohibition of forced attachment of its assets by its creditors and a supervisory order ordering supervision by a supervisory committee”

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In addition, the court order provided an update on MtGox’s financial situations, stating that the first had assets of ¥3.84B ($377M) versus liabilities of ¥6.5B ($638M).  The company refrained from 100% stating that the reason of the shortfall between assets and liabilities, only saying “The increase of current liabilities may be linked to a loss of bitcoins and customer funds. These are now investigated by an expert and all efforts are made to discover the truth.” (Bold, our emphasis)

Explaining the loss of bitcoin, the court document attributed the problem on a “bug in the bitcoin system” and added that “we discovered that there was a possibility that bitcoins had been illicitly moved through the abuse of this bug.”  According to MtGox, 750,000 customer owned bitcoins as well as 100,000 owned by the firm disappeared.  Based on the findings, MtGox explained that the believed there is “a high probability that these bitcoins were stolen” and that they have an expert who is currently investigating the matter.

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In addition, and perhaps more alarming was that MtGox also reported that as of February 24th, the company reported to have found imbalances between cash held at financial institutions and deposit figures of its customers; at an approximate value of ¥2.8B ($275M).  The firm didn’t provide any explanation for the shortfall of funds other than stating “We are investigating the causes of these problems. Since there are probably a variety of causes including hacking by third parties, we need to investigate a huge amount of transaction reports in order to establish the truth.”

MtGox blamed their current closure of business on the losses of bitcoins and customer funds stating “Once we discovered that bitcoins had disappeared and the discrepancies between cash funds and deposit balances, we judged that it would be difficult to continue our activities normally and we therefore closed our site at noon on the 25th (Japan time).”

Among other items of the court document was a statement saying “In order to increase repayments to our creditors, it is necessary to explore the possibility of having MtGox Co., Ltd. continue its business. This is why the civil rehabilitation procedure has been chosen.”  Thus relating that matters outlined in the mysterious ‘crisis document’ that came to float last week do appear to have merit and that MtGox continues to be holding onto the possibility of continuing as a existing bitcoin exchange.

For customers, MtGox stated that the call center to handle enquiries was slated to go live today.

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