Mtgox, or Magic the Gathering: Online Exchange — formerly the world’s largest and oldest Bitcoin exchange — has been denied bankruptcy protection by a Tokyo court, and will now apply for liquidation said its court appointed administrator Wednesday.

Mtgox had been trying for civil rehabilitation — a structured means of paying off creditors while keeping the business alive. The rejection dashes any hope of a resurrection. It’s going to be interesting to see the Bitcoin price when the court dumps all of their remaining bitcoins on the market as part of the liquidation.

Mtgox’s troubles started when the firm claimed a quirk of Bitcoin, known as transaction malleability, had caused their incompetent exchange software to lose around 850,000 coins. They later dug around their couch cushions and just happened to find 200,000 coins sitting on a USB stick, then worth $115 million, now $102 million. However, researchers did an analysis of the Bitcoin public ledger and claim that only a few hundred coins were ever lost that way, implying Gox is lying about the volume stolen.

On top of this bad news, Mtgox’s lawyers are saying that Karaples is not going to travel to the US to appear at a hearing. US regulatory body FinCEN had sent him a summons to appear in DC on April 18th to explain himself. Gox’s lawyers said that Karaples isn’t ready and that he’s scared of being arrested. Considering the sad history of Bitcoin exchanges being scams, that’s no surprise. But we all know how judges are very forgiving of potential criminals ignoring summons and I’m sure this will in no way impact Mtgox’s US assets’ Chapter 15 bankruptcy hearings.

(Image: LaTurbo Avedon’s shrine to Mt.Gox via Webspace.Gallery)