Feeds

Chicago man lobs class-action sueball at MtGox

Bitcoin exchange accused of 'intentional and systematic' misappropriation of funds

The essential guide to IT transformation

Friday's bankruptcy filing wasn't the only time the name "MtGox" was heard in a courtroom this week. Predictably, the cash-strapped Bitcoin exchange is now the subject of a class-action lawsuit in the US alleging negligence and fraud on the part of MtGox CEO Mark Karpeles and his staff.

"Mt. Gox intentionally and knowingly failed to provide its users with the level of security protection for which they paid," claimed plaintiff Gregory Greene in his class-action court paperwork.

MtGox, once the largest Bitcoin exchange, filed for bankruptcy in a Tokyo court on Friday after admitting it had lost about $480m worth of the digital currency, an amount that represents nearly seven per cent of the total outstanding Bitcoin worldwide.

The company blamed the blunder on a technical glitch that had gone unfixed for several years, giving scammers ample time to make off with funds from its servers.

Most of that money belonged to MtGox customers, although the company said it had also lost about 100,000 Bitcoin of its own.

"There was some weakness in the system, and the Bitcoins have disappeared," Karpeles said in a press conference on Friday. "I apologize for causing trouble."

That apology wasn't enough to appease Greene, however, who has filed a lawsuit against MtGox in the Northern District of Illinois accusing it of "intentional and systematic misuse and misappropriation of its users' property."

"Plaintiff Greene is just one consumer who had Bitcoins and keys stored with Mt.Gox who has lost money as a result of Mt. Gox's conduct," the suit alleges. "Accordingly, Greene brings suit on behalf of himself and all others similarly situated, to seek both monetary and equitable relief for Mt. Gox's deceptive and unlawful conduct."

The suit seeks a court order requiring MtGox to "make full restitution of all funds wrongfully obtained," plus pay punitive damages and Greene's legal fees.

If successful, the suit would have the court place MtGox's funds in what's known as a "constructive trust" – a legal construct wherein MtGox would be compelled to use its holdings for one purpose and one purpose only, namely to return them to their rightful owners.

Greene's own stake in Bitcoin at MtGox is estimated at around $25,000.

Even if the court rules in Greene's favor, however, he might have a hard time recovering his funds. If the Japanese court looks favorably on MtGox's bankruptcy petition, the company will receive protections similar to those granted by the US's Chapter 11, in that it will be shielded from litigation while it restructures its business. ®

5 things you didn’t know about cloud backup

More from The Register

next story
True fact: 1 in 4 Brits are now TERRORISTS
YouGov poll reveals terrible truth about the enemy within
Hello, police, El Reg here. Are we a bunch of terrorists now?
Do Brits risk arrest for watching beheading video nasty? We asked the fuzz
Snowden on NSA's MonsterMind TERROR: It may trigger cyberwar
Plus: Syria's internet going down? That was a US cock-up
UK government accused of hiding TRUTH about Universal Credit fiasco
'Reset rating keeps secrets on one-dole-to-rule-them-all plan', say MPs
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
e-Borders fiasco: Brits stung for £224m after US IT giant sues UK govt
Defeat to Raytheon branded 'catastrophic result'
NBN Co claims 96 mbps download speeds for FTTN trial
Umina trial also delivers 30 mbps uploads, but exact rig used not revealed
Don't even THINK about copyright violation, says Indian state
Pre-emptive arrest for pirates in Karnataka
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
7 Elements of Radically Simple OS Migration
Avoid the typical headaches of OS migration during your next project by learning about 7 elements of radically simple OS migration.
BYOD's dark side: Data protection
An endpoint data protection solution that adds value to the user and the organization so it can protect itself from data loss as well as leverage corporate data.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?