Original URL: http://www.theregister.co.uk/2014/03/01/mtgox_sued/
Chicago man lobs class-action sueball at MtGox
Bitcoin exchange accused of 'intentional and systematic' misappropriation of funds
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. ®