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Judge Orders Mark Karpeles to Submit to Questioning in US

(@southtopia) | Published on April 2, 2014 at 03:19 BST

Mark Karpeles, the CEO of troubled Japan-based bitcoin exchange Mt. Gox, must travel to Dallas, Texas, this month to take part in his formal deposition, a form of sworn testimony that will lay the groundwork for his future defense.

Karpeles had previously suggested that the deposition take place in Taipei, Taiwan, though this motion was strongly opposed by lawyers representing US-based former exchange users.

Further, Karpeles will have compelling reason to make the trip, as the judge suggested that the journey will be necessary if he wants an extension of the company's bankruptcy protection in the US.

A Reuters report today quoted US Bankruptcy Judge Stacey Jernigan as saying:

"If he avails himself of this court, my God, he is going to get himself over here.”

More details

Under Chapter 15 of US bankruptcy law, protection from creditors is not granted or extended automatically. However, Mt. Gox KK, the company's Japanese entity was granted an initial stay by the courts earlier this March. The stay has thus far prevented lawsuits from threatening this part of the company's assets and shielded it from fact-finding.

That stay was not granted to Mt. Gox Inc., its US entity, Tibanne KK or Mark Karpeles personally.

A hearing is scheduled for 20th May to decide whether Mt. Gox deserves to continue with such protection, and courts are likely to view the matter less favorably if they don’t have Mt. Gox management’s full cooperation.

Karpeles will have to appear at the offices of Baker & McKenzie, the firm representing Mt. Gox both in the US and Japan, in Dallas on 17th April, according to Jernigan’s order.

Mt. Gox's Chapter 15 bankruptcy was filed in Dallas, though depositions are informal and generally take place outside of a court.

A reluctant witness

To date, Karpeles has shown a strong reluctance to appear personally in the US since his once-dominant bitcoin exchange imploded in February, though he did allegedly meet with lawyers in the US around the time of Mt. Gox's initial bankruptcy filing.

Karpeles had offered to hold the deposition in Taiwan instead, suggesting US representatives unable to question him there could use a video link instead.

The bankruptcy hearings are separate to Mt. Gox's other legal problems in the US, such as Illinois resident Gregory Greene's class action suit. Mt. Gox also wants to delay any US action until after its bankruptcy proceedings in Japan are completed.

Further, these cases are joined by its as-yet-unresolved dispute with former partner Coinlab, which dates back to early last year.

Losing patience

There was a hint of frustration in Jernigan's words, particularly when Baker & McKenzie attorney John Mitchell said Mt. Gox may replace Karpeles as its 'foreign representative' in US bankruptcy court. "He filed the case," she replied.

Mt. Gox has been fulfilling its local legal obligations and doing most of its communicating in Japanese first recently, but its largest customer base by far was the US.

Karpeles, who was born in France and lives in Japan, speaks English as a second language and may be unsettled at the prospect of facing questioning from a US court, or even angry US customers in person. He is, however, probably also the only person with any idea of what truly happened to Mt. Gox's finances.

According to previous reports from company employees, who were all on short-term contracts, no-one outside management had any access to the Gox's records and attempts to ask Karpeles to prove the company's reserves were rebuffed.

Mark Karpeles

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