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MtGox gets its sorry assets frozen amid US class-action lawsuit

Plaintiffs announce restraining order in Bitcoin 'fraud' lawsuit

Internet Security Threat Report 2014

Embattled Bitcoin exchange MtGox has experienced a setback in its efforts to gain bankruptcy protections in the US, their opponents' legal team tells us, as the company has been hit with a temporary restraining order freezing its assets.

The order, attorney Christopher Dore of Edelson PC tells The Reg, was obtained by plaintiffs in a Chicago class-action lawsuit alleging fraud and negligence, and temporarily freezes the assets of MtGox, Mark Karpeles, and parent company Tibanne KK, and will allow the plaintiffs to proceed with efforts to seek out where the company is keeping its assets.

The decision, according to Dore, was a victory for client Gregory Greene, the main plaintiff in the suit. In winning the temporary restraining order, he says, the plaintiffs will now be able to move forward with discovery proceedings.

"We view this as a big victory, this is often something that would take months to do," Dore told us.

"We are going to be able to unpack and examine what Karpeles and his entities have been doing and understand what the assets are," he said.

The reported decision works around a Monday ruling handed down to MtGox granting the company bankruptcy protections under Chapter 15 of US Bankruptcy law. The Chapter 15 provision allows foreign firms to file for protection against creditors.

MtGox continues to face litigation from irate customers wondering what the company has done with the hundreds of millions of dollars in Bitcoin it is still said to hold. MtGox and Karpeles have sought out bankruptcy protections while the company seeks to re-emerge.

Based in Japan, the company is filing for bankruptcy in order to shield MtGox and Karpeles from suits such as the one filed by Greene in the US. A similar class-action case is said to be pending in the UK with hundreds of potential plaintiffs.

Dore said that when MtGox filed for protections, the company threw opponents for a loop by seeking shielding not only for MtGox, but also for Karpeles and other entities named in the Chicago suit. MtGox is also facing a separate legal complain filed by a Seattle company.

A restraining order and a temporary freeze on assets would allow the plaintiffs to work around the bankruptcy plea and continue to press forward with the the case. Soon, Dore tells us, he and his team hope to issue a deposition to Karpeles himself and launch an investigation to seek out and catalog all of the company's assets. ®

Internet Security Threat Report 2014

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