November 26th 2014 MtGox Creditors' Meeting & Kraken Press Conference
[Editor’s note – MtGoxProtest.com developed a technical problem just as I finished this article, so to get it out quickly I'm just displaying the article as plain text. I”m too busy to fix right now, sorry! Kolin]
50 angry crypto-nerds, an army of lawyers, boiling hot room… Yes it's the MtGox Creditors’ meeting again!
Much less busy than last time round though, and no media waiting outside before the start. The number of attendees was only 40% that of the last meeting. There were virtually no foreigners there (non-Japanese) except the Tokyo-based regulars.
The meeting itself went very much like the last one except shorter.
With regards to the missing bitcoins, we were told that there is missing customer transaction data and this is blocking the investigation. Deloitte has been doing the investigation and they're currently not sure whether they can solve the mystery of the bitcoins because of the missing data. It seems highly unlikely that the data went missing by accident. As to who might have deleted it, I'll leave that for your imagination to ponder.
The main news was that the bitcoin exchange Kraken is now about to begin helping with the investigation, and also helping with the proof of claims and bankruptcy distribution. I'll get back to that later. If you lose interest in this post before the end, skip to the last couple of paragraphs before leaving.
Other than this, it was very disappointing and more of the same. It doesn't seem that any real progress has been made in the past 4 months – at least nothing which has been reported. As there was little progress in the previous 4 months, that means the whole process looks like it's just stumbled drunkenly over the starting line. There was the same secrecy as there was in the last meeting. Secrecy is sprinkled over everything like an artificial sweetener to hide things we're not going to like, cover up poor progress, avoid answering awkward questions etc. The meetings are supposed to be about giving out information but the feeling is they're about conforming to the requirement for a meeting but with the aim being to give away as little as possible.
Karpeles and his companies are seemingly not giving the $13 million back that they took from MtGox. Karpeles has disagreed that Tibanne owes $7 million, and he also claims it wasn't a loan but it “was not intended to be repaid”. What this means is unclear. If it was a genuine payment for services, it would never have been classed as a loan. I'd say that after accounts were reconciled a few months ago there was $7 million transferred to Tibanne which was inexplicable so it was classed as a loan. Now Karpeles effectively wants that amount to be “forgotten” about! After pressure from Kobayashi to repay he now says he will try to repay it after he raises the funds. He doesn't really have much option other than to say this, but he almost certainly doesn't intend to actually do it. Tibanne has a bitcoin's chance in MtGox of magically raising $7 million from nowhere. And if Karpeles knew a way to raise $7m you can bet he would be doing it in a way whereby he wouldn't have to pay it back to us.
His company Shade 3D which owes $3m has provided a repayment plan which Kobayashi didn't accept, in other words Karpeles would not agree to pay it back in any acceptable way. He may have said something like they'd pay back a tiny sum each year. If they don't produce a better plan they will be forced into bankruptcy by Kobayashi. That's the realistic outcome, but the money has probably already gone.
The Bitcoin Cafe owes around $550,000 but there is a dispute with the amount and now a petition to bankrupt the company has been filed. Basically it's not likely any significant sum of money is recoverable anyway.
Karpeles has a personal “loan” of around $1.2 million from MtGox, and he has not provided a replayment plan. In other words it doesn't seem like he's planning to pay it back. So Kobayashi will take legal action if this continues. How this loan came about is unknown. I'd venture he's been gleefully throwing money around between business and personal accounts and god knows where else, and when the music stopped this is the shortfall which was not accounted for in his other company bank accounts.
Kobayashi was asked to give details of the $100,000 per month payments to Karpeles / Tibanne, and put them on the internet. He said he would take the point into consideration. He was pressed again on it but wouldn't give any commitment. I can't think of a valid reason for this to be hidden from us, and apparently neither can Kobayashi.
I asked in possibly the worst Japanese ever why Karpeles/Tibanne was being commissioned vast sums to help when they had already proven their incompetence, and why they couldn't bring in an expert instead. Kobayashi said they don't know where the information is so even if they had an expert they would be stuck. I think that basically means we're being held to ransom because the data is in a mess. I would say Karpeles knows the information is needed to get through the bankruptcy process, so he can squeeze whatever ridiculous sums he likes for it. Any pretence that he has any sorrow for the creditors' loss and wants to pay us back is now looking about as genuine as a goxcoin.
Kobayashi also said they don't think it's weird to be getting help from Karpeles. I'd say that given the allegations of massive fraud, it is rather weird! Imagine Madoff doing the investigation into his own ponzi scheme. The fact is that the data should have been signed over to a 3rd party at the very beginning, around the same time Karpeles should have been fitted with a shiny new pair of handcuffs.
Karpeles was asked why he wouldn't give the money back which he “borrowed”. He said he wouldn't answer. Asked why he wouldn't answer, he said he didn't want to answer.
Kobayashi got a grilling on why he was accepting that Tibanne and MtGox were separate entities. The point was made that MtGox never really existed as a separate company because it had no employees, and basically that it was just an artificial extension of Tibanne. Kobayashi said that they regard them as separate companies and we might think it's illegal to keep the companies separate but it isn't. Very poor answer.
After the creditors meeting I went to the press conference for the Kraken deal. It turned out that Kraken is not just giving some consulting help but is actually being handed over some serious responsibility. The fact that this press conference was even set up showed this. Their task is to try to track the bitcoins, but also to help with bankruptcy payouts and proof of claims.
Deloitte is currently handling the bitcoin tracing and Kraken is meeting them tomorrow to discuss the situation. Maybe the task will eventually get fully handed over to Kraken or maybe they will work together somehow.
I ended up going for dinner with Jesse Powell the CEO of Kraken and his team, along with Daniel Kelman from Bitocean, Roger Ver (who did a runner after we sat down), J Maurice aka Wiz, and some others with less rap-sounding names.
I was very impressed with Jesse's attitude, he seems very down-to-earth and genuine (and the others at Kraken also). I asked him if it would be made public how much they were getting paid, but it turns out Kraken actually effectively paid MtGox $300,000 for the privelege of helping them! This is a world away from how things have been going so far – which is MtGox throwing around the largest sums of cash possible at people who don't necessarily seem a natural fit for the task, and hoping everything will somehow work out. We now have quite a trusted name in the bitcoin industry, and he has said he is willing to be open with the investigation in terms of collaborating with others in the bitcoin world. But of course he can only be as open as Kobayashi allows him to be, and we don't know yet what he will allow.
Kraken have actually been talking with Kobayashi for 8 months now, giving occasional advice, and they've just got to the point of making a deal. They say they want to get the bitcoins returned ASAP, faster than has been planned.
Anyway I've got to get some sleep now. I've dedicated less space to the Kraken part than it deserved. If I have time tomorrow to add anything then I will. It's a very positive and exciting development that they are now on board and that they seem to have a lot of control. So to sum up the meeting overall, I’d say it was bittersweet.