Mt. Gox files for Chapter 15 bankruptcy protection in US

The Bitcoin exchange has already filed for bankruptcy on its home turf of Japan. Meanwhile, hackers deface the blog of Mt. Gox's CEO, alleging fraud.

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Bitcoin

Mt. Gox, the controversial Bitcoin exchange that saw its service hacked and cryptocurrency stolen from its users, has filed for bankruptcy protection in the United States.

The company on Sunday filed for Chapter 15 bankruptcy protection in the US, Market Watch reported, citing court filings. Chapter 15 bankruptcy protection is designed for insolvent companies operating internationally. It was instituted in 2009 to provide companies in other countries the benefits of the US court system.

Mt. Gox has been the focus of controversy, most recently following its admission that a security hole left the service open to a hack that led to hundreds of thousands of bitcoins -- hundreds of millions of dollars worth -- being stolen from the exchange. Because of the encryption technology involved with the digital currency, it may well be impossible for the stolen bitcoins to be restored to their owners' accounts.

On Sunday, hackers hijacked the Reddit account and personal blog of Mt. Gox CEO Mark Karpeles and left messages alleging fraud, charging that the exchange kept some of the bitcoins that had been reported stolen.

At its height, Japan-based Mt. Gox was one of the most popular Bitcoin exchanges. It filed for bankruptcy protection in Japan last month.

US Sen. Joe Manchin (D-W. Va.) has called for a ban on Bitcoin, calling it "highly unstable and disruptive to our economy" and an aid to "illicit activity."

Even amid the controversy, the Bitcoin economy has been flourishing, as the currency gets accepted in an increasing -- albeit still small -- number of places, and as Bitcoin ATMs have begun to pop up here and there.

Under the Chapter 15 rules, Mt. Gox can use US courts for its bankruptcy protection hearings. US bankruptcy judges will also rule on the court proceedings. However, in most cases, foreign cases are given a priority and the US courts typically follow rulings made elsewhere.

 

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