Not particularly. A deposit is a liability of the corporation; the cash on deposit is an asset. Where do people imagine these things typically exist? In the absence of legal requirements to the contrary, money is money -- it doesn't typically carry along requirements to physically segregate it by owner, intended purpose, etc.
My company owes money to vendors, customers, and contractors, too, in the ordinary course of business. At any given time we have probably a few dozen creditors. How many deposit accounts do you think we have?
I don't think the comparison with an ordinary company is useful. They weren't mingling money paid to the company with money owed (which is normal), they were mingling client money, which they have no good reason to touch except under explicit instruction from the client, and their own funds used for operating expenses.
Companies which explicitly hold other people's money are usually held to higher standards in holding it (Solicitors, Banks, Estate Agents, etc). For example deposits are usually held in a client account, separate from other corporate funds, and not usable except for the intended purpose. The reasons for this are obvious, as it makes fraud far harder to perpetrate, and Mt.Gox not doing so is a red flag given the business they were in. Even worse than this, this wasn't a corporate account, it was Mark's personal account!
Even worse than this, this wasn't a corporate account, it was Mark's personal account!
I understand how you could read that from the employee's statement, but this allegation is contrary to fact. Gox did most of its business through a series of business accounts at Mizuho, one per currency. A list was provided by the bankruptcy trustee to creditors multiple times -- c.f. here: http://www.mtgox.com/img/pdf/20141126_document.pdf
Separating client and corporate funds, if done properly, will also protect the money from company debts. E.g. If the company becomes bankrupt, the client funds cannot be used to pay creditors.
> Companies which explicitly hold other people's money are usually held to higher standards in holding it (Solicitors, Banks, Estate Agents, etc). For example deposits are usually held in a client account, separate from other corporate funds, and not usable except for the intended purpose.
Banks use client deposits to fund their lending, though.
I don't see any fundamental problem with mixing client and corporate funds, provided there is good accounting, solid auditing and sufficient oversight in place to ensure client funds don't go missing. Obviously none of those existed in Mt. Gox.
Banks are pretty much the only institution that's allowed to commingle client funds with their own funds, and they're subject to a whole bunch of extra regulations and scrutiny as a result. Indeed, I've seen people argue that being able to do this is basically what defines a bank.
I get what you are saying but when you deal with managing other people's money I think it's a different story. It's a safeguard to prevent you from dipping into funds that are spoken for. Now you an still dip in (and may need to) but by having the accounts separate it's a conscious decision to dip in instead of a just a CC swipe away...
In the absence of legal requirements
to the contrary, money is money --
it doesn't typically carry along
requirements to physically segregate
it by owner
Right - for companies that aren't routinely transferring client money. Here in the UK, the way Mt Gox was run would be extremely irregular - clients' money would usually be stored in a client money account.
To use an analogy, consider if I courier you a parcel. When I hand it over to the couriers they have custody of it - but they don't own it. If the courier company goes bankrupt while my parcel is in transit, they don't get to open all the parcels and auction them off.
Likewise, companies like conveyancers and insurance intermediaries act as 'money couriers' - and they're expected to keep the money in separate accounts so, if the company goes bust, it's clear who is the owner of the money and who just has custody of it.
Obviously, not every financial service is a 'money courier' - but generally getting licenses that let you lose client money is more work than getting the licenses where you can't lose client money.
Of course, I'm not an expert on Japanese financial law, so it's possible financial conduct standards in Japan are different.
Well yes, there are legal requirements when money is handled.
BitCoin operates in a fuzzy realm, for sure, but it is still poor practice to not follow banking safety practices.
Any business that handles customer money (for example, a lawyer that holds client funds in escrow to pay for services later) is required to maintain separate accounts.
The only exception would be if the customer is lending money to the business (as when you invest in a bank account), not having the business to hold the customer's money.
Any business that handles customer money (for example, a lawyer that holds client funds in escrow to pay for services later) is required to maintain separate accounts.
Respectfully: this is not accurate generally or in Japan. Lawyers are special-cased in the laws of several US states for this purpose.
Software consultants in Japan, to use one example I am intimately familiar with, are not. If you take a deposit of $50k from a client which isn't your money yet, you book an asset (the money, typically deposited in your bank account, where there is no duty for segregation) and a corresponding 前受金 ("advance payment received") liability. As soon as you provide the service which you've received the money for, you're obligated to decrement that liability and increment sales. (This is important for tax purposes if the two events happen in different calendar or fiscal years, one reason why I have to keep books and report to the friendly local tax office once a year how much of OPM I'm presently holding.)
n.b. My understanding of GAAP here would be that Gox would probably hold the money on the books as a deposit (預かり金) rather than an advance payment (前受金) but I'm not positive about that -- my business never had to worry about it.
I think, in the case of a bank or banking-like-entity, it's really easy to argue that commingling deposits with corporate funds makes it much more likely for things like.. what happened at mt gox to happen.
If you violate professional standards while providing your services, even in the absence of requirements to the contrary, you're putting your clients at risk, probably to an unethical degree depending on what assurances you gave them.
Ok, that makes sense. I think I misread your original comment as referring to commingling personal funds with the corporate funds - which on rereading your OP is not what you said at all.
My company owes money to vendors, customers, and contractors, too, in the ordinary course of business. At any given time we have probably a few dozen creditors. How many deposit accounts do you think we have?