In early 2013, Peter Vessenes was in his Seattle office working on a deal to obtain the North American customer operations of the world\u2019s largest Bitcoin exchange at the time, Mt. Gox, when his phone rang.<\/p>\n
\u201cWe had caller ID back in that era, believe it or not,\u201d Vessenes said in an interview. \u201cAnd my caller ID says \u2018SEC Enforcement Division\u2019 and I was like \u2018oh s–t!\u2019\u201d The team working on the deal had already run into trouble getting a look at the books, and now the main U.S. securities regulator was asking him if he\u2019d heard of the Tokyo-based exchange. The SEC was working on a enforcement action and wanted him to testify in the case.<\/p>\n
\u201cAs soon as we heard Gox was in an SEC enforcement, I was pretty sure we were done,\u201d Vessenes said.<\/p>\n
He wasn\u2019t wrong. The deal fell through and Mt. Gox imploded in scandal. It quickly went bankrupt, leaving behind a horde of creditors across the globe.<\/p>\n
Eight years later, a major step in the bankruptcy proceedings that have ensnared Mt. Gox and its users after the market imploded in 2014 took place earlier this month. A deal, brokered in part by Vessenes, was announced to allow creditors to get some of their money back before the case is decided.<\/p>\n
Many of the Bitcoin lost or stolen from Mt. Gox have since been found, and the Japanese bankruptcy trustee Nobuaki Kobayashi is working to reimburse creditors. CoinLab Inc., which Vessenes co-founded, is working with MGIFLP, a unit of Fortress Investment Group LLC, to allow creditors to consider an offer of as much as 90% of the remaining Bitcoin tied up in the bankruptcy.<\/p>\n
Not all the Bitcoin held by Mt. Gox when it went bankrupt is available for recovery. For each digital token locked up in the bankruptcy that has a claim on it, the estate has only 0.23 coin to give out, according to a CoinLab spokesman. There are many more claims on Mt. Gox Bitcoin than the amount of the cryptocurrency held by the trust.<\/p>\n
CoinLab has a $16 billion claim against Mt. Gox in the bankruptcy.<\/p>\n
Yet as Bitcoin hit its all-time high of $41,981 on Jan. 8, the history of Mt. Gox seems even more important, as the loss of over 850,000 Bitcoin in 2014 was perhaps the closest the digital currency came to dying. It all started with Magic, the card playing game that had gone online to offer a way for users to trade its cards over the internet. That\u2019s when in 2007 Jed McCaleb, a developer who\u2019d created the file-sharing network eDonkey, bought the domain for Magic the Gathering Online Exchange, or Mt. Gox for short.<\/p>\n
McCaleb\u2019s attention turned to Bitcoin a few years later, after its creation in 2009. He realized the methods for buying and selling weren\u2019t very good and decided to convert Mt. Gox into one of the first exchanges for the digital asset. In 2010, Vessenes contacted McCaleb about joining his effort to make Mt. Gox the world\u2019s biggest Bitcoin market. After closing eDonkey, McCaleb had moved to Costa Rica to surf and to raise his family. While Vessenes wanted to do business with McCaleb, he also wanted to meet him in person first.<\/p>\n
\u201cI took maybe my most expensive plane ride\u201d to Costa Rica, Vessenes said, referring to a flight that cost him 1,500 Bitcoin at the time, an airline ticket worth about $47.8 million at the current Bitcoin price.<\/p>\n
After sleeping on the floor of McCaleb\u2019s house on a futon, the two ended up not seeing eye-to-eye on Mt. Gox, and Vessenes hitchhiked the 200 miles back to the airport.<\/p>\n
In 2011, McCaleb sold Mt. Gox to a Frenchman named Mark Karpeles. \u201cHe had to give me half of the first six months\u2019 revenue then I continued to own 12% of it,\u201d McCaleb said in an interview. McCaleb no longer has any stake in Mt. Gox.<\/p>\n
Back in the U.S., Vessenes was still convinced that Mt. Gox was a once-in-a-lifetime investment. He\u2019d co-founded CoinLab in 2012 and counted early Bitcoin pioneers such as Roger Ver and Barry Silbert as investors. Ver actually lived just down the street from Mt. Gox in Tokyo, and in the summer of 2012 CoinLab had a deal to buy Mt. Gox outright from Karpeles for about $10 million, Vessenes said.<\/p>\n
\u201cWe were ready to go,\u201d he said. Then \u201cI got cold-shouldered.\u201d The deal morphed into CoinLab taking over operations for Mt. Gox customers in the U.S., Canada and Mexico, yet Vessenes said his team weren\u2019t given proper access to the books to ensure everything was as it should be at the exchange.<\/p>\n
At this point, Mt. Gox was handling 80% of Bitcoin transactions in the world, he said. Soon after the deal was announced in 2013, CoinLab sued Mt. Gox for breaching its terms. About a year later, the loss or theft of the 850,000 Bitcoin on Mt. Gox was disclosed.<\/p>\n
In 2019, the Tokyo District Court found Karpeles guilty of tampering with financial records and received a 2 1\/2 year suspended sentence where he won\u2019t serve jail time unless he commits another violation within four years.<\/p>\n
\u201cIt could\u2019ve been a trillion-dollar company,\u201d Vessenes said. \u201cIt\u2019s so sad.\u201d The current $16 billion CoinLab claim against Mt. Gox is based on what the company thinks their portion of Mt. Gox would be worth if it had been managed well, he said.<\/p>\n
The CoinLab lawsuit filed in 2013 is the one that continues to this day. Part of the reason for the years-long case is that it involves international jurisdictions. It took six months to serve Karpeles with the lawsuit, where the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents had to be employed, Vessenes said. It then took a year to arrange depositions, he said.<\/p>\n
Vessenes, whose first purchases of Bitcoin on Mt. Gox were for about 5 cents, hasn\u2019t soured on digital currency. \u201cI really honestly think it\u2019s day one,\u201d he said. \u201cThe impact of crypto is still underplayed. It still isn\u2019t given a fair shake at how transformative it is.\u201d<\/p>\n