Mt. Gox Settlement Decision Delayed As Trustee Seeks US Bankruptcy Approval
Published on May 1, 2014 at 22:50 GMT
The latest hearing in the ongoing legal case surrounding Mt. Gox today did not result in the approval of a proposed plan to revive the troubled Japan-based exchange, as presiding Judge Gary Feinerman decided to delay further deliberation of the matter until 13th May.
The delay was requested by the defence, which argued that the settlement would stay the litigation against Mt. Gox CEO Mark Karpeles and the exchange's parent company Tibanne KK, thereby preventing these parties from fighting their case in court for an undefined period of time.
The news comes amid growing uncertainty regarding how the case will evolve in the coming months and whether a proposed effort by major bitcoin investors to revive the troubled exchange will be approved by the necessary legal authorities.
For example, on 30th April, Mt. Gox's Japan-based bankruptcy trustee told The Wall Street Journal he is looking to secure approval for the company's Chapter 15 bankruptcy in the US, as the request has not yet been formally approved.
In other news, former exchange owner Jed McCaleb, a Mt. Gox equity stakeholder who will be removed as a defendant in the class action should the proposal be approved, moved to disassociate himself from the exchange, telling ArsTechnica he was not involved in operations following the sale.
Today's hearing took place in a federal court in Chicago, Illinois.
Defence argues for extension
The hearing began with lawyer Eric Macy, the representation of Mt. Gox KK and Mark Karpeles, taking aim at the proposal, alleging that it would keep the entities involved in the lawsuits for an unspecified amount of time, thus delaying the ability for these entities to clear their names, an audio recording suggests.
Mt. Gox's legal defence further took aim at the fact that Sunlot Holdings – the firm involved in the plan to revive Mt. Gox – has not yet purchased the exchange, arguing that this "has not happened yet", and by extension may not become reality. Further, he alleged that it was also not clear that continued action would be sought against these parties, or as to which entities would pursue claims.
However, US class action lawyer Jay Edelson told CoinDesk he believes the claims amount to a "crazy argument", and that both the new Mt. Gox and the former exchange users will be able to pursue claims against Karpeles and Tibanne KK.
Edelson explained a new Mt. Gox would likely seek to sue Karpeles for employment violations, such as breach of fiduciary duties among other related concerns, while former exchange users would pursue personal claims.
However, Mt. Gox's legal defence was able to lobby for any formal decision making to be extended due to its concerns.
Chapter 15 approval
It still remains unclear what the next steps might be in the approval of the revival proposal.
The lawyer for Japanese bankruptcy trustee Nobuaki Kobayashi told the Journal that clarity as to the status of Mt. Gox's Chapter 15 filing would give him “more authority” over developments in the US, including the proposed Sunlot deal.
The Financial Times has indicated that Kobayashi will at least need to give additional credibility to the deal.
Mt. Gox KK, the exchange's Japanese entity, has been awarded a preliminary relief order in the US that has thus far granted it protection from certain fact-finding.
The decision regarding whether this relief would be permanently extended was originally set for 17th June, but has been the subject of debate. A US judge had previously threatened to remove this protection should Karpeles fail to travel to the US to be formally questioned in the case.
Judge with gavel via Shutterstock
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