Mt. Gox’s Chapter 15 Bankruptcy Won’t Stop US Class Action, Lawyer Says

Pete Rizzo
Mar 11, 2014 at 15:50 UTC
Updated Jun 20, 2014 at 15:46 UTC

A US bankruptcy judge in Dallas, Texas, granted Mt. Gox’s request for Chapter 15 bankruptcy protection on 10th March, a move that will partly shield the troubled Japan-based bitcoin exchange’s assets from creditors and block at least two lawsuits against the business.

While this may seem like a setback for those hoping to recoup lost funds from the exchange, Edelson law firm partner Chris Dore has suggested that the ruling only protects Mt. Gox KK, its Japan-based entity, from further action, not all of its associated legal entities.

Dore, whose firm is representing the US class action case against Mt. Gox, told CoinDesk the move does not cover other Mt. Gox entities such as Tibanne, its parent company; MtGox, Inc., its US entity; and CEO Mark Karpeles.

Dore said he will seek to move litigation forward against these defendants on behalf of his clients.

Mt. Gox filed for bankruptcy in Japan on 28th February, citing outstanding debt of ¥6.5bn ($63.6m). The most recent US filing listed $37.7m in assets and $63.9m in liabilities.

Baker & McKenzie, the law firm representing Mt. Gox in the US, did not offer comment on the developments.

Mt. Gox mounts a defense

In sworn statements at the courthouse on Monday, Karpeles maintained that issues with the Bitcoin protocol contributed to the demise of his company. The comment is similar to past claims made by the CEO, ones which were roundly denounced by notable members of the bitcoin community.

Said Karpeles:

“The facts known to date indicate that it was caused or related to a flaw in the software algorithm that underlies Bitcoin, and ‘hacking’ attacks of one or more persons.”

The statement suggests that bitcoin’s transaction malleability could be a continued line of defense for Mt. Gox as it looks to ward off criminal accusations.

Federal probe

Bloomberg reports that Manhattan US Attorney Preet Bharara and the Federal Bureau of Investigation are allegedly currently investigating whether Mt. Gox and its associated legal entities may have committed any wrongdoing during the shutdown of the company.

The media outlet indicated that a representative for Bharara would not comment on the investigation.

A temporary restraining order hearing against Tibanne, Mt. Gox Inc. and Karpeles will be held today, according to Dore.

The next hearing in the developing case is set to take place on 1st April, when Mt. Gox will seek to extend its protection until its bankruptcy in Japan is resolved.

Image credit: Gavel via Shutterstock