The collapse of Japan’s Mt. Gox Bitcoin exchange is spilling into US Bankruptcy Court as the company scrambles for legal cover after losing digital currency worth $473 million.
Mt. Gox’s bankruptcy filing in Dallas late Sunday supplements a similar petition in Japan last month. The US case was brought under Chapter 15 of the bankruptcy code, which provides a haven for foreign companies seeking to reorganize their finances.
Mt. Gox’s downfall provided fresh ammunition for skeptics who question the security and staying power of a digital currency created six years ago as an alternative to government-controlled monetary systems that rely on banks.
Once the world’s largest Bitcoin exchange, Mt. Gox froze users’ accounts last month and then shut down after acknowledging it couldn’t account for 850,000 bitcoins. It blamed most of the losses on hackers. The missing currency represents about 7 percent of all bitcoins.
Mt. Gox is opening a US bankruptcy case in an attempt to delay a recent federal lawsuit filed on behalf of all US residents. The complaint, brought by an Illinois resident, alleges the exchange engaged in fraud and other misconduct. The suit is seeking class-action status.
If the Illinois case proceeds, Mt. Gox attorneys contend, that would drain the company’s finances and divert management’s attention during a critical time.
Mt. Gox’s bankruptcy papers list liabilities of about $64 million and assets of $38 million.