Mt. Gox revamp rejected, goes into administration

Japanese-based bitcoin exchange Mt. Gox has had its plans to rebuild the company rejected by a Tokyo court and has been placed into administration.

The exchange had originally filed for bankruptcy protection back in late February but documents published on the company's site Wednesday showed it has been placed into administration and is expected to be ordered to commence bankruptcy proceedings.

"The Tokyo District Court recognized that it would be difficult for the company to carry out the civil rehabilitation proceedings and decided to dismiss the application...and at the same time, issued an order for provisional administration," the document, written by attorney-at-law Nobuaki Kobayashi said, who has now been appointed as the provisional administrator.

"The future outlook is that, although it is subject to the decision by the Tokyo District Court, it is expected that the commencement of bankruptcy proceedings will be ordered."

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This photo illustration shows a man looking at the bitcoin exchange website of Mt. Gox in Tokyo last February.
Yoshikazu Txuno | AFP | Getty Images

The Tokyo-based exchange - which once claimed it handled around 80 percent of all global dollar trades for bitcoin - was an online marketplace where people could buy or sell bitcoins using different currencies. Rather than filing for bankruptcy in late February, the company opted for a Chapter 11-style civil rehabilitation that gives the company time to reorganize its affairs with lawyers treating it as an ongoing concern.

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At the time, it detailed outstanding debts of about 6.5 billion Japanese yen ($63.6 million), 850,000 lost bitcoins and 127,000 empty-handed customers, but added that it was looking to continue doing business so it could start repaying its creditors.

Mt.Gox blamed the bitcoins' disappearance on a bug in the cryptocurrency's framework called "transaction malleability." This means that while users were receiving incomplete transaction messages when using the exchange. In reality, bitcoins may have been illicitly moved by hackers out of their accounts.

Bitcoin has a 'great future' in 2015: Clearstone
Bitcoin has a 'great future' in 2015: Clearstone

Of the 850,000 lost bitcoins, 200,000 have been recovered since the original bankruptcy filing. However, that still leaves $325 million of the cryptocurrency, valued at today's market prices, unaccounted for.

Following the February filing, an investigation has taken place into the missing funds but still requires some more time, according to embattled CEO Mark Karpeles. Writing in another letter published on Mt.Gox's website Wednesday, he said there is currently no prospects for the restart of the business.

"Mt. Gox is continuing the negotiations with sponsor candidates but the concrete selection process has not yet started," he said.

Reports earlier in the week said that Karpeles had refused to travel to the U.S. this week to answer questions regarding its U.S. bankruptcy case with furious foreign investors hoping to recoup some of their losses.

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William Quigley, the managing director at California-based Clearstone Venture Partners is part of a consortium that has expressed an interest in buying Mt. Gox. He told CNBC on Monday that he would look to buy the exchange for the "symbolic amount" of one bitcoin and would fix the security issues and "rehabilitate it."

"Mt. Gox is more than just the assets that it has. Mt. Gox at one point, not that long ago, was the largest bitcoin exchange in the world doing somewhere close to $500 million worth of bitcoin transactions each month. And the company still has a very important role, we believe, in the continuation of bitcoin," he said.

"We need to ensure that there is adequate security and there really wasn't I would say in the bitcoin exchange in Mt. Gox."