Mt. Gox collapse evident to some investors

If you knew what to look for there were signs that Mt. Gox was having financial difficulties before the recent filing. In fact, according to Reuters, one customer sued the biggest bitcoin exchange to get their funds returned before the collapse of the company. Experts close to the case argue that this case highlighted some of the red flags.

Marko Simovic, a New York resident, filed a civil action in Tokyo District Court before Christmas hoping to recover more than $105,000 and $14,000 in interest he had on deposited with the company, according to court records. Simovic requested the funds be taken out of his account as early as July 1 and was credited with $935,000 in cash. Simovic has worked with other bitcoin operations in the past and is currently a software developer. He did not have any comments about his pending case.

Mt. Gox provided information about Simovic’s claim through a brief filed by law firm Baker & McKenzie. According to their brief, Marko Simovic did not follow their online procedures for withdrawal of his funds which specify that the funds could only be withdrawn over a two month period. Mt. Gox filed the brief on February 28th, three weeks before they filed bankruptcy. The brief was submitted with the court.

Information about the Simovic case was provided to the United Bankruptcy Court this week. Mt. Gox also filed for bankruptcy in Tokyo saying it had lost bitcoins and cash worth more than half a billion dollars to hackers.

Marko Simovic predicted Mt. Gox financial collapse

 

According to Marko Simovic, he believed Mt. Gox could be under financial pressure and decided he needed to liquidate his bitcoin funds. To avoid losing money with Mt. Gox, he started converting his cash to bitcoin and then sold his bitcoins on Bitstamp, which is another company in the bitcoin market. With this strategy he was able to recover an estimated $833,000. The remainder of his investment remains in his Mt. Gox account.

In Marko Simovic’s brief he noted, “Rather than leave my money at Mt. Gox as required by their expensive, extremely slow and uncertain withdrawal procedure, I decided to move the funds as soon as possible. This was the only way I could get my money back quickly. Moreover, I was concerned there might be a run on Mt. Gox.”

Marko Simovic’s lawyer also raised some concerns that Mt. Gox was not following investment and banking laws, according to a letter he sent on September 11 to Mt. Gox’s chief marketing officer Gonzague Gay-Bouchery. This letter was made public this week as part of the pending bankruptcy in Japan. According to the letter, they believed Mt Gox might have been doing illegal activities such as receiving deposits and engaging in currency exchange services even though they are unlicensed to provide these services.

According to Reuters, “No one could be reached at Mt. Gox or Baker & McKenzie for comment. The FSA declined to say whether it had spoken to Mt. Gox.” Experts note the Mt. Gox bankruptcy case highlights some of the difficulties with regulating “crypto currencies.”

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Beth

Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.