Detailed info on BitGold bankruptcy and liquidation

solargoldsolargold Posts: 115 Copper ✭✭
edited January 2016 in About Goldmoney
Where can we find further information on the redemption process in the event of a BitGold bankruptcy?

I am aware of the BitGold support article, "Ownership, Safety, and Security of Your Gold", and I do note that there is a section at the end "What happens if BitGold goes out of business?". While this article is very helpful, I think that more detailed, comprehensive information is required considering the amount of gold that users could end up holding in their accounts.

My first question was going to be how is the gold actually physically allocated. But while it doesn't state it in the aforementioned support article, @Melanie explains in a forum post that our gold is allocated in 1kg bars. Many thanks to @Melanie for that info! But I note that this should also be reflected in the aforementioned support article.

Question 2 - small quantities and cash
In the case of bankruptcy, how is gold handled at quantities less than 1kg?
The aforementioned support article does state you would "receive your precious metals balance in physical gold or the equivalent value of your metal", but this is unclear. Would we receive a mix of physical gold and cash? For example, would you get physical gold only if you have more than 1kg, and any fraction of 1kg would be in cash? Would the cash be sent via wire transfer? Or would you receive gold coins up to a certain number of grams? I understand that "payment to you is assured by a court appointed administrator who would complete the winding-up process", but it would be helpful to know what process has been outlined for the liquidation scenario.

Question 3 - Brinks vault implications
In the case that the user is to be reimbursed with some amount of physical gold (be it 1kg bars, or coins, or GoldCubes), how will he/she receive it? Does the user become a client of Brinks at that point? Is that a "global" client, or a client of the local Brinks vault? Or do you have to go to pick up your gold? Or is it shipped to the user? This is an important point, because since Brinks needs to be paid for storage, the user will need to start to pay for this to not risk any confiscation of his/her gold. And if you need to go pick it up, it obviously becomes expensive if one's gold is halfway across the world. I'm sure most users (myself included) have no idea what it even costs to be a client of Brinks on your own. Some clarity on this issue would be extremely useful.

Question 4 - paying for insolvency
Apart from liquidation of BitGold Inc. assets to pay the necessary costs related to bankruptcy (e.g. the stuff mentioned above, like shipping gold to users, etc.), are there any other funds to deal with this?
e.g. does BitGold Inc. hold some sort of insurance that would pay out to deal with all this in the case of bankruptcy? Or are part of BitGold's fees placed into some sort of "liquidation fund" to deal with these potential costs? If BitGold is bankrupt, I assume there won't be any money left to ship gold or pay for any further Brinks vault insurance, so this would have to come from "somewhere", and the question is "from where?".

Final thoughts
While I do appreciate any answers from BitGold staff as posts here, I think that these are important issues that need to be specified either in a new, dedicated bankruptcy support article, or an extensive update to the aforementioned support article to include further details.
It goes without saying that all of us users sincerely hope that the above scenarios never take place and that BitGold simply becomes a huge success! But just as one takes out life insurance "just in case", a plan for the worst is very important.

Thanks!

Best Answer

Answers

  • 79Au19779Au197 Posts: 4,047 Gold ✭✭✭✭✭
    @Darrell @Melanie

    This question is beyond the ken of regular users, but is of some concern to all of us. Can management please comment.
  • GoldIsCurrencyGoldIsCurrency Posts: 1,784 Gold ✭✭✭✭✭
    edited January 2016
    BitGold is not going anywhere, one of the fastest growing startups ever! BitGold has been able to monetize gold like nobody else has been able to do. BitGold is here to stay. Gold is real money.


  • MelanieMelanie Posts: 1,045 Gold ✭✭✭✭✭
    edited January 2016
    A good question! The information provided in that article is as specific as we can be without knowing future information. In the event BitGold were to go bankrupt, users would be notified of the process to follow. More redemption options may be available at the time of this hypothetical event, so I wouldn't want to confirm that a currency equivalent will be sent via bank wire if we offer a myriad of redemption options and you are able to receive your balance through multiple tools. All gold that BitGold is bailee for would at that time be either physically sent to owners where applicable or the currency equivalent would be redeemed to them. Much of the process would be determined by the court administrator and again, it is hard to be very specific about how funds will be sent because different redemption options will be available in the future.

    As BitGold is publicly traded company (that has received a large amount of investment, I might add) with no ownership rights to your gold, payment of your vault balance to you is absolutely assured. More information about BitGold's regulatory compliance, insurance. and auditing can be found here!
  • KimKim Posts: 636 Bronze ✭✭✭
    @Melanie, insightful and reassuring! Thanks.
  • 79Au19779Au197 Posts: 4,047 Gold ✭✭✭✭✭
    @BigD

    Thanks for the updated chart. The last version I saw was at the six month mark. Can you post the URL for which you got that chart?
  • GoldIsCurrencyGoldIsCurrency Posts: 1,784 Gold ✭✭✭✭✭
    @79Au197 Please note it is not an updated chart. I would like to see an updated chart though. I would say the chart ends with the solid line, ignore the dash's. I have seen two versions of this 6 month chart. I couldn't find the other one that you are speaking about. I found the chart searching hashtag #bitgold on twitter under the pictures tab.
  • 79Au19779Au197 Posts: 4,047 Gold ✭✭✭✭✭
    @Melanie

    Yes I read your link yesterday or the day before and was quite reassured and VERY impressed.

    I was particularly impressed by:

    Real-Time Audit of Gold
    This allows for real-time "audits" of the gold bullion in all vaults enforcing a reconciliation of all corresponding account holders and the allocated physical gold holdings vaulted with the Vault Custodian. Aurum distributes these records in three ways:

    1. Digital and physical copies are distributed to disaster recovery backups at randomized times each day.

    2. Every 24 hours, an encrypted digital copy is sent to a third party via a secure encrypted connection.

    3. A third party auditor conducts audits at the Vault Custodian ensuring the reported gold holdings are reconciled through physical inspection.


    B)
  • solargoldsolargold Posts: 115 Copper ✭✭
    Thanks @Melanie for this info. The fact that BitGold is a publicly-traded company is a huge benefit, because of the enforced transparency. I read through all the documents actually before opening an account. I'm really impressed by the company and all the protocols that have been setup.

    So, all the while BitGold is a going concern, I'm feeling very confident and secure about the whole ecosystem.

    That said, I don't think the answer that you've provided adequately answers the concerns that I have raised in the event of a bankruptcy. Leaving it simply to just "much of the process would be determined by the court administrator" is not much of a plan. Of course this is NOT an eventuality that BitGold, nor its users, want to see take place! However, even some of the most respected companies have come under bankruptcy protection (e.g. Kodak, Pacific Gas & Electric, American Airlines, Chrysler, General Motors, etc.). The difference though between say, the bankruptcy of American Airlines, and a BitGold bankruptcy is the custodianship of potentially substantial amounts of financial assets per user. And there are real costs that would need to be incurred to deal with that event (see my question 4), and without any plan, one is left to wonder how the costs will be paid for reimbursement/return of gold assets.

    I do recognize that you've answered to the best of what BitGold has thought of (thanks for that!), but I ask that you please raise my post with your upper management. As your platform grows (not in terms of number of users, but rather gold held per user), the issue of a bankruptcy plan is not something to treat lightly -- it could happen for any number of unforeseen reasons.

    Thanks again!
  • solargoldsolargold Posts: 115 Copper ✭✭
    edited January 2016
    I want to give a big thanks to founder @Roy Sebag for such a thorough answer. I really appreciate taking the time to do so, and I'm sure other users would agree that this gives us a lot of comfort as we invest and use the platform more and more. (Also, it shows that these forums are being monitored if anyone had any doubt! :smile: )

    Thanks again to @Melanie for her answers as well, and to the whole BitGold team, keep up the good work! I look forward to the platform's further evolution.
  • GrandpaBrianGrandpaBrian Posts: 679 Silver ✭✭✭✭
    I second @solargold note of appreciation for Roy's excellent post above. The founders and backers of this enterprise deserve full marks for the thought and care they took before launching BitGold. It has been a solid foundation upon which to build an exciting global service.

    That being said, I would caution readers not to get too carried away by the graph shown above. "Signups" by themselves are no indication of financial strength. The market graveyard is full of companies who went bust because they never found a way to monetize their membership.

    I personally invested in BitGold because I could see the direct link between their customers and their service offering right from the start. The gold market right now is some $7 trillion. BitGold is clearly positioned to earn a handsome share of that market. Even better, BitGold is attracting people to the use of gold as money who never owned gold before in their lives.
  • ProspectorProspector Posts: 147 Copper ✭✭
    Awesome response by Roy.
    Bookmarked this post.
  • cyruscyrus Posts: 121 Copper ✭✭
    Well! Great answer @Roy Sebag

    Keep up the hard work!
  • 79Au19779Au197 Posts: 4,047 Gold ✭✭✭✭✭
    I thought I had commented on this earlier but apparently not.

    I too wish to thank @Roy Sebag for taking the time to respond directly to @solargold

    If you have not watched any of the interviews with Roy, I strongly recommend that you do you. In all of Roy's interaction with his interviewers he remains calm, well reasoned, and articulate. In fact, the lack of hype by Roy and @Josh Crumb is the reason I opted to join BitGold back when it first established ACH deposits in the US.
  • solargoldsolargold Posts: 115 Copper ✭✭
    @79Au197
    Happy to be contributing discussions that members find worthwhile!

    @Melanie
    I think it would be informative for members to update the support article, "Ownership, Safety, and Security of Your Gold", with some of the useful information that @Roy Sebag shared in his answer to me, since a member may not even see this post in the forum.
  • rohanibuang61rohanibuang61 Posts: 2,379 Gold ✭✭✭✭✭
    From the 1st very day I joined BitGold without knowing who my referrer is, I straight did my signup.

    I am so optimistic with BitGold and confident with the leadership of the founders.

    Name any other sites like BitGold that having a Comnunity Site and the Founder humbly come down responding to normal members like us.

    @Roy Sebag you deserve to be one of BitGold founder with your creativity, effort, time, money, skill, commitment, energetic, knowledge and you are one of the up rising world corporate leader.
  • Sanity_101Sanity_101 Posts: 7 Tin ✭
    Solargold and Roy Sebag:
    Great questions/concerns and answers! Nice to know as a "technology guy" that there is a safe way to accumulate/transact this precious metal using one of my most favorite mediums! At this point I am looking toward a long relationship with Goldmoney. I might want to add I enjoy using the Paypal product, (it has saved me from losing my funds on several occasions) Thanks for that Roy.
    Again gentlemen, thanks for the meaningful dialogue on both the "risks and rewards". I will put my money(and gold) on the reward side of Goldmoney!

  • TimKTimK Posts: 90 Bronze ✭✭✭
    This is all well and good. However I suspect that half of the article went over the head of many on here as it did mine. I have no legal backround and did not understand some of the terms or how they work. I understand some but not all.

    I've been around long enough to know that no matter what happens ( If the company should go bankrupt) the customer, depositor or whatever were called, always looses. If somehow we were able to have are gold or cash returned it would take year's and most likely a long fight.

    I thought about this the other day. If this company disappeared off the internet I have no way of proving I ever had anything. I have the statements, which I save on my own computer. It's the only way to prove I ever owned anything.

    Just my suggestions as a regular guy. Download your statements, it's your only proof. Don't use this platform as your only source. It should just be a part of your overall portfolio or whatever you want to call it. Don't put anything in your account you can't afford to loose.

    Don't get me wrong, I've liked what I've seen so far but I proceed with caution. You never know what will happen. It's very difficult in this day and age to have much trust for anything.

    Physical cash, gold that you actually have stashed in your possession is the only real way to be sure you actually own anything or would have access to if the need arises. Anything electronic can be shut down very easy eliminating are access.
  • UvasUvas Posts: 678 Silver ✭✭✭✭
    edited August 2016
    @TimK

    While this is an internet business, the gold being held is very real. And gold cannot be hacked.

    Bailment laws are strong, probably stronger than the laws that keep you fiat safe in your banks. Did you notice that governments seem to have the right to limit your access to your own bank accounts, a la Greece, in a financial crisis?

    A very fine example I can give is E-gold. I held some gold in an E-gold account, back in 2006 or thereabouts. Now E-gold was more of a crypto currency, they didn't care who you were when you opened an account. So, a lot of credit card fraud started to be laundered through the e-gold system. Steal a credit card number, open an account with any email, deposit some gold through one of their 3rd party companies. Then you could transfer the stolen money to your account. There was no oversight, no way to address this problem. So the feds stepped in and closed it down.

    So e-gold out of business and I had gold sitting there. Now as I was not involved in any criminal activity, I got my value returned to me. It took a while, as the Feds checked through each account for criminal activity. They froze everyone's account at a certain gold price and simply sold off the gold that was warehoused by egold, and the proceeds were equitably distributed to account holders.

    Now that is a really worst case scenario, and I didn't lose a dime of value. There is no way for that sort of criminal activity to happen here at Goldmoney due to the safeguards they have in place. (Know your customer, money can only come in through regulated banking entities, and so on).
  • GoldmattersGoldmatters Posts: 3,965 Admin
    @TimK @Uvas

    I understand your concern @TimK . Keep in mind that the ledger of ownership is physically printed every day and keep by third party iron mountain. So that's physical copy that has nothing to do with the Internet.

    So I guess it's theoretically possibly that the Internet gets shut down, Goldmoney dissapears, AND this completely different company colludes to prevent you from getting your gold, but I think that scenario is extremely unlikely. (What I really want to says is virtually impossible).

    All I know is that I trust Goldmoney way more than I trust a faceless bank. Everyone knows who the founders are, everyone knows exactly where there gold is. How much more do we need?

    I know it's scary to trust people, but I think Goldmoney has done EVERYTHING it can to make this the best situation we can hope for with regards to gold ownership that also has utility.
  • PapiPapi Posts: 1 Tin ✭
    Let me start by saying Apple did well under Steve Jobs the visionary, and these days they're just recycling the same old ideas. That's what happens to a company once the main man is gone. Microsoft also used to be good under Bill Gates and nowadays they're writing the worst code on the market. Those two companies were big for less than 20 years. And here with Goldmoney we're inevitably having long-term plans, some of us even for 40+ years. Of course we have concerns.

    One thing I do not like is when @Roy Sebag said that "he" won't allow the company to go bankrupt. I do not know if he'll keep his promise, but what I do understand from this is that one man has the power over this company - therefore drawing comparison to all similar ventures by visionaries. Unless they transcend to become part of a bigger system - they tend to fail at some point. The question is will Goldmoney take the proper course in the next 5-10 years or not. I've seen a lot businesses that "can't fail" fail. At one point, Yahoo thought nothing can go wrong.

    Having been involved in bankruptcies, Roy knows this better than most of us. Virtually all businesses have their start and end. And when the end comes, things get predatory.

    The reason why I'm a depositing customer is because I trust the vaults. Goldmoney is just making the transfers convenient and affordable. However, the affiliate program practices could be described as unfair or even predatory, though I don't attribute them to intent but perhaps unawareness that something shouldn't be done in a certain way. This is a poor indicator of overall business practices.

    While it is very reassuring to see the two companies are separate, I'd still like to see the actual steps I'm supposed to do in the event I want direct access to my gold in a certain vault.

    1. In case of any problems with Goldmoney (e.g. bankruptcy), would I as a customer have to wait for the process to finish or do I get direct access to my gold at any moment?
    2. Can I just walk into a vault and show them ID and some proof I own e.g. 11 grams of gold? Probably not. Should Goldmoney disappear, which documents and papers should I need to show - and to whom and in what way - in order to get hold of my possessions?

    Or is it impossible to do anything without Goldmoney being the mediator between me and the vault? If that's the case, the only surefire way to avoid trouble is to redeem physical gold.

    Could use some further clarification on all this. Thanks.
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