On April 16, Mt. Gox’s civil rehabilitation proceeding in Tokyo (something similar to a U.S. Chapter 11) was dismissed and the initial stages of a bankruptcy liquidation under Japanese law began. An Interim Administrator (Nobuaki Kobaysahi) has been named until the Japanese court decides whether the liquidation will begin and whether a different Administrator replaces the Interim Administrator. How this situation came to be is an interesting tale.

The U.S. Bankruptcy Judge ordered Mark Karpeles to appear in Texas on April 17 to give testimony under oath since he signed all of the documents commencing that case. The Treasury Department’s Financial Crimes Enforcement Network summoned him to appear in Washington DC on April 18 to give testimony under oath. Mr. Karpeles apparently did not want to come to the United States for fear that he would be exposed to the criminal justice system. Mt. Gox’s U.S. Bankruptcy attorneys advised the bankruptcy court of that fact on April 14 and sought to delay the scheduled deposition until a later date.

At the hearing on April 16 on the request for the deposition to be delayed, Mt. Gox’s attorneys indicated that Mr. Karpeles’s decision to not come to the U.S. was the catalyst for the actions in Tokyo. Since there was a concern that the U.S. Chapter 15 case might be dismissed if he remained in control of the company and did not travel to Dallas to testify in connection with the Chapter 15 case, the decision was reportedly made that his remaining in control, not testifying and the company remaining in Chapter 15 were mutually exclusive. Having decided not to testify, the decision was apparently made that him being out of control would allow the Chapter 15 case to continue. Thus far, the decision seems to have worked.

At the hearing on April 16, the U.S. Bankruptcy Judge set the next hearing for April 24 to discuss the status of the case and strongly suggested that the Interim Administrator plan to attend by telephone – with a translator if necessary – to discuss the next steps in the Chapter 15 case. Her intent on directly engaging with Mr. Kobayashi was strong enough for her to indicate that the April 24 court date would be moved to a date when he could participate, if necessary. The judge also deferred Mr. Karpeles’s requirement to be in Dallas for testimony until a date to be determined at some time after April 24. In the vernacular, he’s off the hook but not out of the woods on the requirement to give testimony.

Undoubtedly, Mr. Karpeles’s surrender of control with the commencement of a liquidation process in Tokyo after abandoning the Civil Rehabilitation process reflects a sea-change in the case. Until Mr. Kobayashi decides the company’s next move, including whether the exchange is capable of being sold to one of the interested bidders reported to be circling what is left of the company, parties should not expect any dramatic actions in the Chapter 15 case.