Mt. Gox Gives Up Plan for Revival as Karpeles Cedes Control

Mt. Gox Co., the bitcoin exchange that collapsed in February, gave up on a plan to revive itself, dealing a setback to creditors seeking the recovery of hundreds of millions of dollars in the virtual currency.

“There are no prospects for the restart of the business,” Chief Executive Officer Mark Karpeles said in a statement on the company’s website. The Tokyo District Court dismissed the application for civil rehabilitation today and appointed an administrator of the company’s assets in place of Karpeles.

Mt. Gox, based in Tokyo, filed for bankruptcy protection on Feb. 28, saying it lost 850,000 bitcoins then worth about $500 million. It has since recovered about 200,000. The collapse roiled the bitcoin market, which has also faced recent hurdles such as China banning banks from dealing in the digital assets and the U.S. government’s decision to tax them.

“The liquidation track is probably cleaner than trying to divvy up liabilities between current owners and potential buyers,” said Nicholas Colas, chief market strategist at ConvergEx Group. “Especially potential legal liabilities.”

The administrator, lawyer Nobuaki Kobayashi, said in a separate statement that the court will probably order the start of bankruptcy proceedings. How the company is treated will be decided by taking into account factors including whether there is any candidate to buy the business, Kobayashi said.

World’s Largest

The bitcoin exchange, once the world’s largest, said in its Feb. 28 filing that its debt exceeded assets by 2.7 billion yen ($26 million) and about 2.8 billion yen was also missing from its bank accounts.

Any investigation of the liability of Karpeles will be conducted as part of the bankruptcy proceedings, Kobayashi said in the statement.

“The dismissal of the application for commencement of a civil rehabilitation procedure will create great inconvenience and concerns to our creditors for which we apologize,” Karpeles said.

Exchanges including London-base Bitstamp Ltd. helped fill the void left by Mt. Gox, with some seeking to lure customers with promises of better security and more experience handling transactions. New York-based SecondMarket Inc., a marketplace for illiquid assets, has announced an exchange for transactions of at least 25 bitcoins.

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