A class action against Mt. Gox is being organised by a London law firm that says it will go after CEO Mark Karpeles personally to recover its clientsâ lost bitcoins.
Selachii LLP says it is representing over 200 claimants from China, the US, Canada and 12 European countries, and that it will launch proceedings against Karpeles âwherever in the world he isâ.
They also are in discussions with lawyers in Japan to mount a case against Mt. Gox, which has filed for bankruptcy in Japan after admitting it had lost around 750,000 its customersâ bitcoins. One of the claimants in the lawsuit has lost over 4,000 coins, which equates to $2.3m at todayâs exchange rate.
The lawsuit may also make a claim against Tibanne, Mt. Goxâs parent company, which was founded by Mark Karpeles.
Separate legal action was also launched against Mt. Gox and Karpeles in Denver, Colorado, on Thursday by Mt. Gox customer Gregory Greene.
With Selachii taking action on multiple fronts, Mark Karpeles could find himself defending Mt. Goxâs actions on at least two continents.
Richard Howlett of Selachii says that the facts around the closure of what was once bitcoinâs largest exchange âdonât add upâ and that the court action would force Mt. Gox and Mark Karpeles to prove that the huge bitcoin hack actually occurred:
âI donât know if itâs true that they were hacked, no one knows if itâs true. but thatâs something that will come out in court. I will be surprised if itâs as simple as they were just hacked.â
Howlett also raised questions about the loss of fiat funds in addition to Mt. Goxâs bitcoin, which canât be explained by the hacking of data in the same way as a loss of bitcoin.
Mt. Goxâs public statements reassuring their customers that all was well could come back to haunt the company.
If the company and Karpeles were aware of Mt. Goxâs dire financial situation â which, considering the scale of the issue, is a plausible assumption â Howlett says they could be accused of behaving fraudulently by inducing customers to continue to invest their money in the exchange:
âThey had to be honest [with their customers]. They should have stopped everything, because it appears that they were in serious financial difficulty.â
This element of potential liability could explain why Mt. Gox deleted all of its tweets in the days leading up to its eventual demise.
Furthermore, how bitcoins were allegedly stolen from cold storage will be a key technical point, with Howlett suggesting that one explanation could be they were never in cold storage and that Mt. Gox was acting negligently.
Once a leading member of the bitcoin community, Mark Karpeles bowed deeply last week at the press conference in Japan announcing Mt. Goxâs bankruptcy filing.
The lawsuit could yet see him on his knees if his personal wealth is plundered to pay back Mt. Gox customers. Howlett says that every part of Karpelesâ wealth will be targeted:
âHis bank accounts will be scrutinised, his finances will be scrutinised, any offshore accounts, all those sorts of things â if thereâs money there, those assets could be pulled into the pot to distribute to the people in the class action.â
Hunting down a personâs assets could prove difficult, however, if they are largely held in bitcoin wallets. Proving ownership of bitcoin assets is not straightforward, even if it is possible to find them in the first place. Bitcoinâs held in cold storage could be hidden in any number of offshore locations.
It is is likely that assets owned by Karpeles, Tibanne and Mt. Gox will be frozen to prevent them being liquidated or hidden once the lawsuit is underway.
If the lawsuit succeeds, there will be a crucial legal battle about whether any payout should be in bitcoin or in fiat currency.
The value of bitcoin may have risen enough by the culmination of the case to make a fiat currency payout small compared to the total value of any remaining bitcoin in Mt. Goxâs control. Many of Selachiiâs clients in the lawsuit are not necessarily looking for their bitcoin back, just their money, says Howlett:
âMany people have got their fingers burnt. The vast number of people weâve spoken to would rather have the financial value back instead of bitcoin, theyâve been scared off now.â
If the lawsuit is settled in fiat currency and not in bitcoin, then âMt. Gox could end up winningâ, says Howlett, even if the allegations against them turn out to be true.
Old Bailey image via Shutterstock
