Kraken chosen to help with Mt. Gox liquidation, investigation

Bitcoin exchange Kraken has been selected to support the investigation into the collapsed Tokyo-based Mt. Gox exchange.

Ayako Miyaguchi, the head of Kraken’s Japanese operations, told the Wall Street Journal that the partnership between San Francisco-based Payward Inc., which operates Kraken, and Mt. Gox was approved by a Tokyo bankruptcy court this week.

Mt. Gox creditors are likely to welcome the news, said the Wall Street Journal. The newspaper reported that creditors have been dissatisfied with the work of Nobuaki Kobayashi, the court-appointed trustee in command of Mt. Gox’s liquidation, arguing that his lack of knowledge about Bitcoin would likely cause a lag in the process and produce a less-favorable outcome for them. According to the New York Times, Kobayashi previously suggested that the remaining Bitcoins – of which there are hundreds of thousands – could be converted into dollars before being returned, but many creditors resisted over concerns that exchanging all that Bitcoin into dollars would depress Bitcoin’s value.

In a company blog post about its involvement, Kraken said that duties it may be asked to carry out include:

• Aiding in the investigation of possible lost or stolen Bitcoin;
• Aiding in the creation of a system to file and investigate claims;
• Helping to distribute Bitcoin and/or fiat assets to creditors;
• And exchanging Bitcoin to fiat currency when needed.

Several media outlets reporting on the development noted Kraken’s strong reputation and abilities as reasons for it being selected to help with the Mt. Gox investigation and liquidation. Kobayashi told the Wall Street Journal that he chose Payward due to Kraken’s demonstrated operating history, and because its system, according to Kraken, has never been breached by hackers. The New York Times said the selection of Kraken is notable as it is not one of the largest Bitcoin exchanges, but it has fostered a reputation for taking a careful approach that has kept it in good standing among regulators. The Telegraph reported that documents show that several companies were considered, but Kraken personnel were thought to have the necessary skill to support the investigation and distribute any coins to creditors.

Reuters reported that Kraken will not be compensated for its duties; however, it could garner new clients as former Mt. Gox account holders sign up to receive future distributions from the liquidation.

“Provided the trustee decides to distribute bitcoin, creditors may be asked to create a Kraken account, if they do not already have one, to establish a secure, efficient and cost-effective platform for the distribution of bitcoin,” said Kraken in its blog. The company also encouraged claimants wishing to open a Kraken account to do so now in order to avoid any potential delays due to the large increase in new registrations and/or verifications.

According to Reuters, Miyaguchi told reporters that Kraken hopes “to revive bitcoin’s reputation and create a healthy market for it, ultimately leading to profit for us.”

Noting in a Tokyo news conference that the trustee would have the final decision on payment in Bitcoin, Jesse Powell, Kraken’s chief executive, said “allowing the creditors to go on without reinvestment, I think, would be very wrong,” adding, “We’ve got to have the money that was locked up for the last 10 months returned as soon as possible.”

According to the New York Times, when asked if Mt. Gox would be revived, Powell said, “There are no assets, no brand. There is nothing to speak of to revive.”

The Wall Street Journal reported that to cement the deal, Kraken agreed to provide 30 million yen to be distributed at the end of the liquidation process. Miyaguchi said the company will provide funds to support the liquidation, but it will not seek to rehabilitate Mt. Gox or purchase any of its assets.

“The outcome of the MtGox bankruptcy proceedings will deeply affect the Bitcoin community as a whole,” said Powell in the Kraken blog post. “We’ve decided to volunteer our resources and expertise in an attempt to minimize damage to creditors, restore faith in the Bitcoin community, and demonstrate trusted leadership in the industry.”

In October, Kraken announced it would be operating in Japan by the end of that month. Powell said at the time that Kraken would offer a more secure service than did Mt. Gox, noting that customers would have the option to deposit cash in a local bank for yen-dominated trading.