As there is a lot of confusion surrounding how the MtGox civil rehabilitation distribution will happen, here is an attempt to share my understanding of things, and an interactive calculator for estimating your possible payouts.
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Warning: This unofficial guide is based on a best-effort understanding
of the process and estimates of the total assets and liabilities of the estate.
I am not a lawyer and this is neither legal advice nor
financial advice. If you are a creditor, it is solely your own responsibility
to educate yourself and make informed decisions about your claim, and
consulting with legal professionals if needed.
10 second summary version:
- There will be an upcoming vote on this civil rehabilitation plan. Vote yes.
- You will get a choice: wait until the end of the process or ask for an early payout.
- Early payout: faster, risk-free guaranteed payouts at 90%+ of maximum.
- Waiting: several more years, will probably receive a bit more, but possibly less.
The process explained
There's been a great many twists and turns in the MtGox post-collapse saga, with many legal obstacles and attempted workarounds. The civil-rehabilitation-turned-bankruptcy-turned-civil-rehabilitation case is an unprecedented case for Japan, with a number of complicating factors, such as:
- Creditor claims in a novel asset.
- An unusually high assets-to-liabilities ratio, with a very large amount of assets.
- Largely refraining from liquidating (bitcoin) assets.
- An extreme value appreciation in those assets, while the legal claim valuation remains fixed.
- Tens of thousands of creditors spread out all over the world, who largely don't speak Japanese or have any relevant experience with the legal process.
As a consequence, it's no wonder that the claim handling and planned distribution process is rather convoluted, with several aspects that at first glance might appear arbitrary or unfair, but there is generally a good reason why everything looks the way it does—usually due to legal requirements, or as a workaround to legal restrictions that were causing problems for creditors.
Between 2014–2018, MtGox was in bankruptcy proceedings. If you were a creditor in these proceedings, you filed a claim and your bitcoins were valued at the exchange rate at the time, 50,058.12 JPY per BTC. All claims in these proceedings are legally required to be valued in JPY.
The approximately 200,000 BTC held by the bankruptcy estate meanwhile kept appreciating in value, eventually overtaking the total legal claim value of all creditors and creating a "surplus" which would have been paid out to shareholders instead of creditors. To avoid this, creditors and the trustee worked to convert the bankruptcy into civil rehabilitation proceedings instead.
As the process restarted in mid-2018, claims were re-filed with new valuations, with 1 BTC valued at 749,318.83 JPY. Additionally, by this time Bitcoin Cash had forked away from Bitcoin and were claimable in the civil rehabilitation, at a valuation of 97,481.19 JPY. Since then the market rate for Bitcoin has continued to greatly increase, but thanks to the increased flexibility of the civil rehabilitation process we are not heading towards another "surplus" situation; all of the estate's assets are going to be distributed to creditors.
Zombie claims
Due to legal quirks, there are a lot more claims in the civil rehabilitation than there were during the bankruptcy. In addition to everyone that has filed civil rehabilitation claims, the trustee is also recognizing certain unclaimed customer accounts and will reserve and hold their payouts for years in case their owners attempt to pursue these claims in the future. There are two types of these "zombie claims": people who filed bankruptcy claims but failed to file a civil rehabilitation claim, and accounts that were unclaimed in either process. The claims list from 2019 reported the current claims as:
| CR claim? | BK claim? | Claim prefix | Count | BTC Amount |
|---|---|---|---|---|
| ✔️ | ✔️ | X/Y | ~18,000 | ~770,000 BTC |
| ✔️ | ❌ | X/Y | ~5,500 | ~35,000 BTC |
| ❌ | ✔️ | Z1 | ~6,700 | ~45,000 BTC |
| ❌ | ❌ | Z2 | ~82,500 | ~90,000 BTC |
Unfortunately, even if no one claims these zombie funds, they will eventually go to the Japanese government rather than being redistributed to other "real" creditors. The Z1 category of zombie claims are at this point impossible to avoid, but creditor groups filed an objection to all Z2 claims hoping to get them dropped. The trustee previously attempted to contact all Z2 account holders and has admitted anyone who responded within some deadline (so far some 6,500 claims), but for remaining claims the objection has a good chance of standing, which would see those claims dropped.
Determined vs undetermined claims
After you filed your claim, the trustee either approved or rejected your claimed amounts (or approved only a partial amount). If you agreed with the trustee's decision, your claim is now considered determined and final. If you were rejected and filed an objection, your claim remains undetermined and disputed. A disputed claim becomes determined once the dispute is resolved and its proper amount is decided by the court.
Currently, there are about 860,000 BTC/BCH and 8.8B JPY in determined claims, and about 130,000 BTC/BCH and 50B JPY in undetermined claims. Of the latter, CoinLab is responsible for almost the entire undetermined fiat amount, while other creditors are attempting to get large BTC amounts approved. Disputes thus far have largely resolved in favor of the trustee, with only a few thousand BTC added to determined claims.
Realistically, the best case scenario for current creditors is therefore if none of the remaining undetermined claims are approved (including CoinLab), leaving the total claim amount at the current determined claim amount. To get a better payout than that would require extraordinary events such as the recovery of significant additional assets, which at this point is not likely.
Priority payments
As a prerequisite for the conversion to civil rehabilitation, the trustee needed to guarantee that no bankruptcy creditor would ever receive worse results than under bankruptcy—including fiat creditors who were set to receive a full 100% payout under the "surplus" situation—as otherwise those creditors might raise objections. Therefore, any creditor who had a fiat bankruptcy claim will receive the full value of that claim. This includes Z1 zombie claims.
The paid out amount will be the bankruptcy valuation of the fiat claims, plus delay damages for the time period until the start of civil rehabilitation (at 6% per year, adding up to about 25.9%). This payout counts towards your civil rehabilitation fiat claim payouts, and will typically exceed the size of your civil rehabilitation claim (thanks to the delay damages), i.e. you'll have no remaining fiat claims for the rest of the distribution process.
(Note that there will be no delay damages paid out on civil rehabilitation claims.)
The trustee also reserved a buffer of what bankruptcy creditors would have received for their crypto claims (50,058.12 JPY per BTC) by selling a portion of MtGox's remaining bitcoins in order to guard against a possible future drop in market value. The estate currently holds 141,686 BTC and 142,846 BCH, plus about 68 billion JPY worth of fiat.
A note on claim valuation
As mentioned above, your claims of each currency are converted into JPY at a valuation fixed at the start of the civil rehabilitation process. Distribution meanwhile will happen in JPY, BTC and BCH. For simplicity's sake when estimating your claim, let's group all of your fiat currency claims into a single JPY denominated "fiat" claim. Similarly, you can group your combined BTC and BCH claims into a single JPY denominated "crypto" claim.
The valuation used is the source of many misconceptions, e.g. that it somehow limits potential payouts to BTC creditors. The confusion is understandable considering what happened during the bankruptcy process and given that the BTC valuation is again several times lower than the current market value (though the BCH valuation is now higher than the current market value), but in actuality the current situation is quite different.
It can perhaps help to think of the claim valuations not as actual JPY but instead as an arbitrary unit of measurement of the relative sizes of claims; "goxyen" if you will. All assets and claims are valued and denominated in these goxyen at fixed valuations; it is the unit of account for the estate. In other words, it is the goxyen asset amounts that will be proportionally divided between the goxyen claim amounts.
Only at distribution time once you awarded a certain prorated goxyen amount for each of your claims does this amount get translated back into actual assets. For fiat claims, this is simple: 1 goxyen = 1 JPY. For BTC/BCH claims, their fixed valuation is used in reverse: 749,318.83 goxyen = 1 BTC and 97,481.19 goxyen = 1 BCH.
Recall however that the trustee sold bitcoins? As a result of this sale and the general imbalance of assets in the estate, your BTC/BCH claims will actually be paid out as a combination of JPY and BTC/BCH. The proportion of your claim paid out as fiat depends on the exact assets/liabilities remaining, but is estimated to be around 30% of the goxyen valuation.
The artificial valuation does affect the proportions between fiat and BTC/BCH claims and thus how much fiat you'll get for your BTC/BCH claim, but it's important to note is that all remaining BTC/BCH assets will be paid out to BTC/BCH creditors, so no matter the valuation there's no longer any "lost" windfall unless something extreme happens.
Small sum payments
Given how many creditors there are in the MtGox case, the logistics of the distribution process is a massive task that will incur significant expense. In order to somewhat simplify it, the trustee will make small sum payments where the first 200,000 goxyen of every creditor's claims will be paid out in full. Your fiat claim is counted first, and then any remainder counts towards your BTC/BCH claim.
Like the priority payments, the small sum payments will be deducted from your remaining claim amounts. As a result, the smallest claims will be left at 0 after this payout and will not participate in the remaining distribution process.
For crypto claims, the small sum payment is prorated between your BTC and BCH claim according to their goxyen valuation. For example, a small sum payment going entirely towards a 1 BTC/BCH claim (= 749,318.83 + 97,481.19 goxyen) will result in 177,976.57 goxyen being subtracted from your BTC claim and 23,023.43 goxyen being subtracted from your BCH claim and paid out at the same crypto/fiat ratio as other claims (see "Crypto or fiat payouts" section).
Creditors who qualify for a priority payment will typically have no remaining fiat claim, and their small sum payment will thus count entirely towards their crypto claims (if any).
Prorated payments
The priority payment and small sum payment are collectively referred to as the base payments, and will expend some of MtGox's assets but also reduce the amount of liabilities (claims). The remaining assets at this point will be distributed proportionally between remaining claims (i.e. prorated), with the ratio of remaining post-base payment assets to liabilities as the final payment rate. In other words, everyone is awarded the same percentage of their remaining claims.
Again, it is the claim valuations (i.e. goxyen) that are prorated, and that you won't receive your entire prorated goxyen amount as BTC/BCH but rather as a combination of fiat and BTC/BCH. To estimate the actual BTC/BCH amounts you can expect to receive you will need to run through the entire claim calculation.
CoinLab and Fortress / MGIF
As previously mentioned, CoinLab is suing the MtGox estate for a large amount of money; they are currently suing for a 50B JPY claim, but they originally filed for (and are threatening to once again demand if successful in court) a truly ludicrous 1.69 trillion yen (16 billion USD). This threat has been holding up the distribution process, seemingly as a deliberate strategy to hold other creditors' claims hostage as leverage.
While the MtGox trustee is first and foremost arguing that the court should strike down CoinLab's claim entirely, he is also asking the court to make an early determination that CoinLab is not legally allowed to reinflate their claim like they're threatening. If successful, this would cap CoinLab's claim at 50B JPY and would allow the trustee to begin distributing any other assets no longer within reach of CoinLab's sticky fingers.
(When suing for a claim in Japan, you are required to put up a security deposit of part of the claimed amount, precisely to prevent people from demanding ludicrous amounts. This is presumably the reason CoinLab sued for a lower amount of "only" 50B JPY, as they wouldn't be able to afford the deposit for a 1.69T JPY claim. This restriction would be toothless if you can simply reinflate your claim if it starts looking like you have a chance of winning.)
To break the stalemate, Fortress / MtGox Investment Fund LLP (MGIF), a claims buyer which is now one of the largest MtGox creditors, entered three-way negotiations with CoinLab and the trustee to try to unblock the distribution process. An agreement subsequently reached between the parties will allow early distribution of a significant portion of assets, though the trustee demanded guarantees for creditors that CoinLab only agreed to after MGIF essentially paid CoinLab $11M USD out of their own pocket.
Early lump-sum payments
Normally, creditors will have to wait until the end of the entire civil rehabilitation process to receive their payouts (which thanks to CoinLab can easily take another 3–5 years, though the trustee will try to perform interim distributions). The proposed civil rehabilitation plan offers creditors an alternative: receive a single early lump-sum payment at a fixed 21% payout rate instead (in addition to the priority payment and small sum payment).
The 21% rate is calculated by the trustee to be a realistic estimate of the real final payment rate with a small buffer. The best-case estimate for the final payment rate (if the trustee wins every single dispute and nothing unexpected happens) is something like 23.6%, with realistic estimates being lower depending on how many additional claims are accepted. The early payment includes both fiat and BTC/BCH, same as the final payment.
In other words, the early lump-sum payment offers at least 90% of what you can realistically hope to get by staying in until the end, except you get paid much sooner. (Though again, the trustee is hoping to be able to perform interim distributions even for creditors who wish to stay on and wait for final payment.)
This early payout will almost certainly be an attractive option to many creditors, but let's look over the implementation and implications in a bit more detail.
To limit the risk to creditors who don't opt for early payment, the final payment rate at the end of the process is calculated as if there was no early payment for anyone. In other words, the final payment rate is a hypothetical calculation of what it was supposed to be, including assets and liabilities that are no longer there.
This means that if enough additional claims are admitted so that the final payment rate drops below 21%, there won't actually be enough assets left in the estate to pay all creditors that rate, since the 21% paid out in early payments turned out to be too high. If this happens, creditors who received early payment still keep their 21%. Instead, MGIF and CoinLab have agreed to subordinate their claims, meaning that the trustee first pays out all remaining normal creditors at the final payment rate, then CoinLab, and lastly MGIF, as long as remaining assets last. This effectively makes up for "overpaying" the creditors that opted for early payments.
If instead the outcomes of remaining claim disputes are favorable and the calculated final payment rate is higher than 21%, creditors who received early payments still only keep their 21%. This leaves a surplus of the difference for those claims, which gets paid out to MGIF as compensation for the risk taken by being subordinated in the previous scenario.
The current realistic best-case payment rate (in which the trustee wins all disputes and no additional claims get approved) is about 23.6%. To reach a higher rate than this would require the recovery of additional assets, which is considered unlikely.
As such asset recoveries are considered exceptional events, the idea is that any recovered assets should be distributed fairly between creditors and not disproportionally benefit MGIF. To achieve this, the prorated final payment amount (which also forms the basis for MGIF's risk compensation) is capped at 23.6%, with any assets above that treated as a special surplus paid out to creditors with an additional distribution instead.
The type of distribution depends on how high the standard final payment rate would be. If enough assets are recovered to push it above 23.6% but no higher than 24.6%, the surplus is divided proportionally between all creditors that remain for final payment (i.e. everyone except creditors that opted for early payment).
If on the other hand significant assets were to be recovered pushing the payment rate above 24.6%, the entire amount exceeding 23.6% will instead be divided between all creditors, including those that opted for early payment.
Presumably the reason for the two different distribution types is that performing an additional distribution to early creditors is a costly affair, and if the recovered amount is small it could be mostly or entirely eaten up by this cost overhead.
Again, the above scenarios of significant asset recoveries should be considered very unlikely, and are mainly included in the plan for completeness. If you believe this can happen though, know that if enough additional assets are recovered you will benefit from them even if you opted for early payment.
In other words, in addition to guaranteeing creditors 21% of their claim (in goxyen), the early payment option is additionally guaranteed to be at most 3.6 percentage points lower than the final payouts, making it a very low-risk option if this worst-case haircut is acceptable.
Speaking of completeness, there are a few additional rules for these payouts providing both the trustee and MGIF with some flexibility for extreme cases. MGIF can for example provide a substitute fiat collateral instead and receive normal payouts along with everyone else. This post is already more than long enough though, so let's ignore these corner cases for now (I'll maybe revisit them at a later date).
Crypto or fiat payouts
After you have been awarded a base payment and a prorated percentage of your remaining claim (21% if you opted for early payment, otherwise the final payment rate), you are left with simple awarded amounts of goxyen for BTC, BCH and JPY respectively. The last step is to translate these from goxyen back into actual payout amounts, and to receive them via your preferred payout method.
As mentioned previously, you will receive your BTC/BCH claims as a combination of fiat and BTC/BCH, the exact ratio of which will be determined so that the final payment expends all remaining BTC/BCH assets repaying remaining BTC/BCH claims. As such the ratio can only be estimated in advance (most likely something like 30% fiat). Rest assured though, all BTC/BCH assets are being distributed; this is just the accounting method to make sure all the fiat assets get distributed as well.
As the early lump-sum payment is also paid out in both fiat and BTC/BCH, it will use a ratio estimated by the trustee. As such it can differ from the final payment, as we can't perfectly predict what will happen with remaining assets and liabilities, but the trustee will make a best-effort estimate.
(Similarly, the trustee will have to estimate the payment rate and ratio for any interim distributions for remaining creditors, so they can vary but the trustee will try to adjust to make the final amounts as fair and equal as possible.)
Once you have a specific amount of goxyen to receive as BTC/BCH for your awarded BTC/BCH claim, the amount is finally translated back to BTC/BCH using the fixed valuation rate; you get 1 real BTC for every awarded 749,318.83 goxyen of your BTC claim.
You will as part of the process be asked whether you want to receive any BTC/BCH claims as BTC/BCH or as fiat. Regardless of which you choose, the calculation is the same up to this point.
If you opt for BTC/BCH payouts, you will need to register with a designated exchange (the trustee will provide a list), the trustee will transfer coins in bulk to the exchange, and your exchange account will be credited with your awarded BTC/BCH amount.
Otherwise, the trustee will liquidate the coins for you at current market value, and you will receive the proceeds together with any fiat claim payout via bank transfer. (You cannot receive fiat payouts to an exchange account.)
Summary
Done! A simple explanation of the distribution process in only 3,000 words or so. (Don't worry, it's complicated for everyone else too.)
Let's summarize the main steps again:
- Your claims in each currency is converted into "goxyen" at fixed valuations.
- If you had a bankruptcy fiat claim, you're awarded the entire bankruptcy valuation of that claim plus 25.9% delay damages in full in goxyen.
- Of your remaining combined fiat and crypto claims, you're awarded the first 200,000 goxyen in full, starting with fiat.
- If you choose early payment, you get 21% of your remaining claim amounts awarded as goxyen.
- Otherwise, you wait until the end of the process for the final payment rate. (There may be interim distributions while you wait.)
- Of your awarded BTC/BCH claims, some of the amount will be repaid in JPY (30% or so), so your actual awarded BTC/BCH will be lower than the nominal payout rate.
- You can receive your awarded BTC/BCH at a designated exchange, alternatively the trustee will sell the coins for you and send you the resulting cash instead.
How do I choose?
Should you choose early payment or wait for final payment? Both are valid choices and only you can determine which is right for you.
While there is a decent chance that the final payment rate will be higher than the early payment's 21%, you might not be at a point in life where you can afford to wait a long time, or feel that the opportunity cost of waiting is too significant. If you believe the BTC price will keep increasing for example, maybe you want to invest the fiat part of your payout back into BTC as soon as possible. If you were previously considering selling your claim to one of the private claims buyers, this early payment is a vastly superior option.
There is also the risk that the final payment can be lower than expected, maybe even catastrophically so. The outcomes of the legal disputes can't be confidently predicted, so there might be a significant increase in claims, possibly even from a CoinLab victory. In such a scenario, you will have waited several more years only to receive less than the creditors who opted for early payments.
The trustee has indicated that more information will be proveded before you have to choose, such as information about any planned interim distributions, and there will no doubt be a lot of shared information and discussion between creditors as well. For some of the best and most informed discussions, I recommend joining MtGoxLegal if you haven't already.
What happens next?
First of all, the court has to approve the submitted rehabilitation plan proposal. This should hopefully happen without incident.
Next, creditors have to vote on the plan. In order for the rehabilitation plan to be be accepted, over 50% of cast votes must be in favor, but they must also represent over 50% of all determined claim value (in goxyen). The latter requires hundreds of the largest creditors to vote in favor of the plan, and while this will probably happen, with large creditor groups ready to organize and rally everyone to vote in favor. Remember, the only alternative on the table is to return to bankruptcy, which means less money for everyone.
To reiterate: when it's time to vote, you should absolutely vote YES for the civil rehabilitation plan, or we all risk losing everything we fought for over the last several years!
The court may however worry that the vote may fail due to the difficulty reaching the large number of creditors spread out all over the world, and out of caution set the voting period to a very long time (e.g. a whole year). This would be unfortunate as it would cause another significant delay before payouts can happen, and as such creditors are asking the court to set a shorter voting period.