An article reviewing the ins and outs of the Mentougou incident

Author: Chen Xiaohei

Produced by: Ostrich Blockchain

In the crypto market, when it comes to exchange thefts, the most well-known is the coin loss incident that occurred at the Mentougou Exchange. After all, as one of the earliest platforms to provide Bitcoin trading services, its status between 2011 and 2013 far exceeded that of the current three major exchanges. More than 80% of the world's Bitcoin transactions take place at this exchange in Tokyo, Japan.

850,000 Bitcoins evaporated

The good times did not last long, and Mentougou began to deteriorate since the beginning of 2014.

In February 2014, thousands of posts about "withdrawal delays" circulated online in a short period of time. Subsequently, the Mentougou Exchange closed its official website, issued an announcement to close trading, and filed for bankruptcy, claiming that about 850,000 bitcoins were lost, of which 750,000 belonged to customers.

Six years of rights protection but no compensation

In March 2014, the Mentougou Exchange announced that it had found 200,000 bitcoins in an old wallet, which was worth celebrating. This at least showed that the exchange had a certain amount of capital to compensate some of the victims of the lost coin incident.

In fact, after the Mentougou incident, many users of Mentougou began the arduous road of defending their rights. Some users went to the Mentougou Exchange to complain, and some users went to the Tokyo Court to sue Mark Karpeles, the head of the exchange at the time of the incident.

Perhaps out of a change of heart, the Mentougou Stock Exchange contacted some of the victims of the incident and asked them to apply to become creditors. However, what is almost despairing is that six years have passed in the blink of an eye, from the confirmation of the debt to the creditors' meeting, and then to the change from civil bankruptcy procedure to civil regeneration procedure, but no compensation has been received.

The reason for the lost coins remains a mystery

In 2014, a document circulated online revealed the direct cause of the collapse of the Mentougou Exchange: about 850,000 bitcoins were lost due to a hacker attack. Most of the victims of the incident said they could not accept this reason, believing that the loss of bitcoins was the result of the internal staff of the Mentougou Exchange deliberately shorting bitcoins.

In 2015, the Tokyo police responsible for investigating the matter stated that at most only 1% of the bitcoins were stolen by hackers, and the rest of the coins were caused by "unauthorized operation" of the system. The police also suspected that Mark Karpeles, the head of the exchange at the time of the incident, was the operator of the system.

Mark Karpeles later admitted to the police that he was the operator of the system. As a result, he was arrested by the Japanese police for the Mentougou incident. He was accused of embezzling and misappropriating funds from the Mentougou Exchange and manipulating the data of his own account in the Mentougou Exchange.

However, since there has never been any strong evidence to prove that Mark Karpeles was "embezzling", he was released on bail in July 2016.

After being released from prison, Mark Karpeles said that he would compensate the victims for the shortfall in their accounts according to the price of Bitcoin at the time of the "theft". Due to the huge difference in the price of Bitcoin in 2014 and 2016, the victims did not buy it and continued to go to the local court to defend their rights.

In the end, the local court ruled that the bankruptcy protection applied by Mentougou was invalid and that Bitcoin worth $1 billion must be returned to all victims. However, this ruling was not effectively implemented.

The compensation plan was finally finalized

Last year, the long-delayed liquidation and compensation plan for the Mentougou incident was finally submitted to the Tokyo District Court.

According to this compensation plan, creditors will receive a combination of assets including yen, bitcoin and bitcoin cash in accordance with the principle of yen denominated. Since the stolen assets cannot be recovered, the Mentougou Exchange can only compensate about 23.6% of the assets. In addition, creditors can choose to accept a one-time compensation in advance, but the compensation rate is only 21%; if they do not accept it, creditors may have to wait for a long time, and the final compensation may be more or less.

This year, the vote on the proposed liquidation compensation plan for the Mentougou incident came to an end. After years of tug-of-war, most creditors expressed their approval of the compensation plan.

Source: Mentougou Exchange official website

Just this month, the Mentougou Exchange announced that the liquidation compensation plan has been finally approved by the trusteeship committee and is legally binding. For victims who have been waiting for many years, this plan to compensate victims with 150,000 bitcoins is good news. After all, it means that a key step in the compensation process has been completed.

The Mentougou incident may be difficult to end

Although the key steps of the compensation process have been completed, it still takes a long time to communicate with creditors on repayment details such as specific time, procedures and amount according to the approved compensation plan.

Source: Twitter

In this regard, creditors who have long given up hope of receiving compensation even said that it would not be surprising even if the currency was paid in 2024. This shows that the Mentougou incident may not be completely resolved until next year or the year after.

Only time will tell what the final result will be and when we can get compensation.