Controversy over GoxCoins Proposal for Restructuring MtGox

There are community suspicions that MtGox may have been behind a restructuring proposal which has seemingly originated from a 3rd party source, in what could be an astroturf campaign to gain acceptance.

We’ve been contacted by multiple creditors who are worried about the supposedly neutral proposal to continue MtGox trading, authored by a group called Humint.

This post on Reddit points to the document:
http://www.reddit.com/r/Bitcoin/comments/1zj1rm/humintis_proposal_for_mtgox_recovery/
The comments to this show the immediate community reaction. Many creditors feel that this document is suspicious and is not in their interests.

The plan would effectively mean that people’s bitcoins would be converted to another tradable currency, “GoxCoins”, which would have a much more ephemeral value. If stolen bitcoins were officially recovered, owners of the GoxCoins would share their value via dividends. This is an interesting idea but our concerns about it are very considerable:

  • The bitcoin debt of MtGox would be magically wiped clean, allowing the company off the hook to continue trading, and resetting everyone’s bitcoin balance to 0. The responsibility for the bitcoin loss would be shifted to the creditors.
  • Bitcoin creditors would lose out on their fair share of the fiat cash reserves currently left in the company, so it’s likely they would end up losing even more money. This plan seems to strongly favour fiat holders, but the document spins it like it’s a good thing for coin holders.
  • Whoever is behind the missing bitcoins, be it someone/people external or internal to the company, would be able to become the legal owner of much of their value, because they could buy up the GoxCoins at a very low rate before allowing the bitcoins to be found. This could be used as a handy method of laundering.
  • If someone on the inside of MtGox had an idea of if/when they might be found (which clearly they would more than the creditors, even if there was no foul play) they could ‘play’ the creditors. Those with access to the records and the most knowledge of what happened, eg Karpeles, could end up the big winners.

Our opinion is that creditors deserve to fairly share the value of any recovery of coins. By trading their rights away in the form of GoxCoins against people who potentially have more knowledge of their value, they could be at a serious disadvantage.

So why the suspicion of this new plan?

This “GoxCoins” controversy is reminiscent of the furore over the famous restructuring document leaked 2 weeks ago by TwoBitIdiot. That document was suspected to have been secretly authored by Mandalah, a consulting business closely tied with MtGox and Tibanne who were said to be tightly integrated into the running of the company. One source told us:

“Mandalah has its tentacles really really deep inside that company. And they pretty much run the show.”

Despite the sinister tone of this quote, Mandalah were said to have come up with some good ideas and plans to improve the customer experience and transparency of MtGox – something which was badly needed.

This article on CoinDesk exposes links between that original document and Mandalah:

http://www.coindesk.com/leaked-mt-gox-document-linked-consulting-firm-mandalah/

This new GoxCoin document appears to have similar roots. An internet “whois” query on the Humint.is website domain shows that it is in fact owned by Mandalah. Michael Keferl (of Mandalah) who worked closely with Karpeles is listed as one of the authors of the GoxCoin document, though there is no disclosure of his links with MtGox.

One creditor summed up his concerns:

“I think it basically boils down to an attempt by Mark to cheat himself out of Bitcoin liabilities.”

One insider who was formerly close to MtGox has been investigating developments with growing alarm. He told us that he has been hit by multiple legal threats from Karpeles to silence him.
Here he gives his theory on the situation:

“Now the question is: Why would Mandalah, a contractor that is close to Tibanne, make a petition to Mark Karpeles?

A much more likely case: This was an idea by Tibanne in order to rid itself of the BTC debt. Mandalah was to execute the plan in order to make it look like the community is making the proposal. Mark can then accept the proposal under the pretense that this is what the community wanted. This is the working theory in ##mtgox-chat on Freenode IRC.

This would mean that:

(1) Tibanne wants to create its own alternate currency to get rid of its BTC liabilities easily

(2) They ordered Mandalah to create a website for it and do publicity so it looks like it is a community effort

(3) Tibanne effectively wants to make its users work for getting their money back, by advertising a relaunched MtGox website and GoxCoin.

It would have been perfect if Tibanne had its way: Mark simply owns some of these Goxcoins, and uses them to pool the debt and give people liquidity. Then Mark buys it all up for pennies. Next, a bunch of BTC are magially found and/or recovered. Because Mark holds a large amount of these Goxcoin, the discovery of bitcoins means that he is able to reap huge profits.

While writing this, the whois for http://humint.is was changed. Mandalah/Tibanne were obviously not pleased we found out about their little scheme. They were lurking in the ##mtgox-chat room while the investigation was taking place.

By the time you read this, the page contents may already have been removed or altered further.”

 

Update:  A signatory of the document Adam B Levine claims to have come up with the plan and has put a lot of time into responding to the comments on the Reddit page. However, seemingly users remain unconvinced. Michael Keferl has been removed from the signatories list. CoinSearcher, who was the very first MtGox protester and who briefly came to Tokyo from Australia a month ago to protest, worries that if there was any coin seizure by the authorities and gag order, this method could be used by an insider to gain control of those coins once they were returned. His request for a definitive statement from all those involved in the document that they know of no seizure has gone unanswered.

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