Mizuho, one of Japan’s three largest banks and the banking partner of now-bankrupt bitcoin exchange Mt. Gox, has been named as a defendant in two class action lawsuits stemming from the exchange’s insolvency.
Reuters reported that the megabank was named as a defendant in the existing US lawsuit in which Mt. Gox is accused of defrauding customers, and a Canadian class action lawsuit blaming Gox for a security breach that allowed hackers to steal an alarming 800,000+ bitcoins.
It is still not known for sure what happened to Mt. Gox’s bitcoins, whether they have been lost, stolen or remain “temporarily unavailable“.
Speculation continued over the weekend as observers noted the exchange’s API was still being used to move bitcoins around, sometimes in very similar amounts.
The amended US suit also added Mark Karpeles’ second-in-command Gonzague Gay-Bouchery and Mt. Gox’s original founder and shareholder Jed McCaleb as defendants.
In both legal cases, it was Mizuho’s position as Mt. Gox’s banker that prompted the actions. The bank held large amounts of fiat currency for the exchange and its customers, and the US complaint made by Illinois resident Gregory Greene said “Mizuho profited from the fraud” by doing so.
The suit says Mizuho should have segregated Mt. Gox’s funds from those of the exchange’s customers, and that by continuing to provide banking services it actually inflated consumer losses.
A leaked recording, released to the Internet, reportedly shows a Mizuho manager asking Karpeles to close Gox’s account with the bank due to compliance and other concerns. Despite the manager warning the bank would close the account forcibly if necessary, Karpeles did not cooperate.
Problems for other bitcoin businesses
Holding banks so liable could cause companies in other countries to become even more reluctant to become involved with bitcoin businesses, something that’s presented a problem for startups over the past year or so.
Despite CEO Karpeles’ Japanese language press conference, public apology and the company’s Japanese legal statements posted since to its website, 99% of Mt. Gox’s customers are not Japanese and those involved in lawsuits overseas could see Mizuho as a potentially lucrative avenue for reimbursement.
Bankruptcy proceedings in the US are preventing further action against Mt. Gox in Japan, but do not protect Japanese parent company Tibanne, its CEO Karpeles or its Gox’s US-based subsidiary Mt. Gox, Inc.