Curriculum·S209 The Centralized Exchange in Depth·about 30 min
Counterparty risk, seriously
By the end of this lesson you can
- →Separate the four counterparty exposures and identify which are negotiable
- →Assess a venue on what is observable rather than on what is asserted
- →Compute an exposure limit from a stated tolerance and apply it per venue
- →Explain why the observation problem is structural and what follows from that
Sophomore · enrolled learners
This lesson opens with Ten years, and the decision to compensate.
- What happened
- Mt. Gox applied for civil rehabilitation in Tokyo on 28 February 2014 and announced that about 850,000 BTC had disappeared, roughly 750,000 of them deposited by users and 100,000 its own, valued at about $473M at the time; in March it found about 200,000 BTC in an old-format wallet. The court dismissed that application and ordered bankruptcy in April 2014, a creditors' petition moved the case into civil rehabilitation in June 2018, and creditors approved a rehabilitation plan in October 2021. The trustee did not begin repaying in bitcoin until 5 July 2024, more than ten years after the collapse, and has since moved the repayment deadline repeatedly, most recently to 31 October 2027. Set against that, after the 10 October 2025 crash Binance announced the next day that it would compensate users whose collateral had repriced during a 40-minute window, including liquidation fees. Neither outcome was a term any customer had agreed to in advance, and in neither did customers set the timing or the terms: in one a court-supervised process did, in which creditors could file claims and vote on a plan, and in the other the venue decided alone.
- The decision point
- The two cases differ enormously in speed and in outcome, and they are the same exposure. One venue's process took a decade under Japanese insolvency law; another's took a day and was discretionary. What a customer holds in both cases is a claim whose resolution is decided elsewhere, and the range of outcomes from a-day-and-generous to a-decade-and-partial is the actual width of the exposure.
- Recorded loss
- $473,000,000
What you will be able to answer
- →Name the four counterparty exposures.
- →Why is the observation problem structural?
- →What is the only control you fully hold?
- →What is the width of the exposure?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.mtgox.com/img/pdf/20140228-announcement_eng.pdf
- https://www.mtgox.com/img/pdf/20140320-btc-announce.pdf
- https://phys.org/news/2014-03-japanese-bitcoin-exchange-bankruptcy-case.html
- https://www.mtgox.com/img/pdf/20140723_report_en.pdf
- https://www.mtgox.com/img/pdf/20180622_announcement_en.pdf
- https://www.mtgox.com/img/pdf/20211020_announcement_en.pdf
- https://www.mtgox.com/img/pdf/20240705_01_announcement_en.pdf
- https://www.mtgox.com/img/pdf/20261016_b3a13e0f-55f6-4653-913b-be80762390e8_announcement_en.pdf
- https://www.binance.com/en/support/announcement/detail/0989d6c7f32545bfb019e3249eaabc3f
- https://www.coindesk.com/markets/2025/10/12/binance-to-compensate-users-affected-by-crash-in-wbeth-bnsol-and-ethena-s-usde
- https://www.arnoldporter.com/en/perspectives/advisories/2023/01/read-before-you-click-accept
- https://www.cftc.gov/media/8226/enfsinghcomplaint022823/download
Confidence high·Volatility high·Reviewed 2026-10-22·Owner unassigned
Contested
Mt. Gox figures are from the company's and trustee's own notices: about 850,000 BTC disappeared (750,000 users', 100,000 its own) per the 28 February 2014 announcement, about 200,000 BTC found in an old-format wallet per the 20 March 2014 announcement, and keys to about 202,106 BTC secured per the trustee's July 2014 report. The $473M valuation is the Associated Press figure for the time of filing. Press accounts vary: NBC News, for example, gave up to 950,000 BTC missing and 140,000 recovered. Quote the company's figures with attribution. The repayment deadline is a moving date; re-check it at review.
An earlier version said customers had no standing in either process. Mt. Gox creditors filed claims and approved the rehabilitation plan by vote in October 2021, so the accurate statement is that customers set neither the timing nor the terms.
F107-04 introduces counterparty risk at Freshman level and owns the proof-of-reserves treatment. This lesson adds the discretion and duration analysis and the per-venue limit method. Keep the split.
The two cases compared here occurred under different legal regimes, at different scales, and with different causes. They are used to establish the width of the outcome range, not to suggest either is representative.