MtGox trustee seeks amendments in Chapter 15 bankruptcy case

Maria Nikolova

The changes Nobuaki Kobayashi seeks relate to the stay of the Japanese Bankruptcy Proceeding and the start of the Second Civil Rehabilitation Proceeding.

MtGox’s Chapter 15 bankruptcy case continues at the Texas Northern Bankruptcy Court, with Nobuaki Kobayashi, in his capacities as bankruptcy trustee and foreign representative of MtGox Co., Ltd., a/k/a MtGox KK, filing a set of documents earlier this week, asking for amendments to be made to documents in the case.

The purpose of Chapter 15 of the US Bankruptcy Code is to provide effective mechanisms for dealing with insolvency cases concerning debtors, assets, and parties involving more than one country. Typically, a Chapter 15 case is ancillary to a main proceeding launched in another country, typically the debtor’s home country.

In this case, the Chapter 15 proceedings at the Texas Northern Bankruptcy Court (3:14-bk-31229) are ancillary to the proceedings related to the ill-fated Bitcoin exchange in Japan. Let’s recall that the US case was launched on March 9, 2014.

Earlier this week, Nobuaki Kobayashi submitted a motion for modification of recognition, pursuant to Bankruptcy Code Section 1517(d) and MtGox’s second amended verified petition, recognizing the Second Civil Rehabilitation Proceeding as a foreign main proceeding as defined in Bankruptcy Code Section 1502(4) pursuant to Bankruptcy Code Section 1517, and granting Petitioner other and further relief under Chapter 15.

Kobayashi seeks to reconcile the change in the nature of MtGox’s Japanese insolvency proceedings that occurred on June 22, 2018 from bankruptcy proceedings to rehabilitation proceedings. To do so, he requests entry of an Order:

  1. modifying the First Recognition Order to remove “foreign main proceeding” recognition of the Japanese Bankruptcy Proceeding, which has been stayed and is no longer the operative foreign main proceeding;

  2. recognizing the Second Civil Rehabilitation Proceeding as a foreign main proceeding pursuant to Bankruptcy Code Section 1517 and Petitioner, solely in his capacity as trustee of the Second Civil Rehabilitation Proceeding, as foreign representative of the Debtor in this Chapter 15 case;

  3. granting such other and further relief as is just and proper.

Kobayashi believes that the relief requested protects interested parties and creditors worldwide who rely on and monitor this case as the ancillary U.S. case with respect to MtGox’s Japanese insolvency proceedings.

Under Japanese laws, while the main purpose of civil rehabilitation proceedings is to ensure the rehabilitation of debtors’ business or economic life, in this specific rehabilitation case of MtGox, the ultimate goals of the Second Civil Rehabilitation Proceeding are to realize the Debtor’s assets and distribute them to creditors, wherever located, in a fair and equitable manner through a civil rehabilitation plan acceptable to creditors and in accordance with applicable Japanese law, Kobayashi explains.

He notes that continuing the injunction of certain stayed litigation against MtGox in the United States, in conjunction with the protections afforded by the Second Civil Rehabilitation Proceedings, is essential.

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