'Emergency Hearing' Could Lead to New Discoveries in Mt. Gox Case

An emergency court hearing set for tomorrow could enable the prosecuting attorneys to obtain new fact-finding abilities.

AccessTimeIconApr 15, 2014 at 6:50 p.m. UTC
Updated Sep 14, 2021 at 2:07 p.m. UTC

Mark Karpeles, CEO of bankrupt Japan-based bitcoin exchange Mt. Gox, has filed an emergency motion stating that he needs more time before choosing whether to appear for formal questioning in the US.

The development finds Karpeles attempting to push back this decision until 5th May so that his legal team can "get up to speed" on a recent subpoena issued by the US Treasury department.

While a seemingly small filing, the Mt. Gox case could change dramatically depending on whether Karpeles agrees to be deposed in the US. That's because US Bankruptcy Judge Stacey Jernigan ordered Karpeles to submit to questioning on 2nd April, and threatened to remove key bankruptcy protections granted to Mt. Gox KK, the company's Japanese entity, should he not do so.

According to Steve Woodrow, a partner at Edelson law firm, the agency overseeing the US class action against Mt. Gox his team would be able to step up its fact-finding efforts, if that protection was eliminated.

Said Woodrow:

"In the event that the stay will be lifted, we will proceed to the Northern District of Illinois and we'll ask that the expedited discovery and asset freeze that has been implemented for non-debtors be extended to Mt. Gox KK as well."

Whether this comes to pass may be determined tomorrow, following what Woodrow called "an emergency hearing" related to Karpeles' recent filing to be held at 14:30 GMT in Dallas, Texas.

Increased discovery efforts

As of now, Woodrow indicates that his legal team has only been able to conduct research related to Mt. Gox Inc., the company's US entity, Tibanne KK and Mark Karpeles personally, which has somewhat limited their ability to build a case against the insolvent exchange.

Should restrictions be lifted, this could open up efforts to learn more about Mt. Gox's discovery of an old-format bitcoin wallet on 21st March containing 200,000 BTC, for example, among other things.

At the time, Woodrow's partner Chris Dore suggested that the finding was one that was not only "highly suspect", but that "made it harder" for information to be obtained about the funds.

Possible action in US

In the filing, Karpeles insinuated that he may not be able to make the trip due to obligations stemming from a subpoena issued by the US Treasury Department. This message, sent on 11th April, allegedly did not specify the topics of discussion.

On popular theory about the nature of the subpoena is that US authorities intend to charge Karpeles with criminal wrongdoing and to take him into custody at this time, providing Karpeles with a powerful incentive not visit the US.

However, Woodrow indicated that is unlikely that Judge Jernigan would allow the protection to continue should Karpeles not appear for deposition before the court.

When asked about this possibility, Woodrow remarked:

"We certainly hope not, that's having your cake and eating it, too. [...] If he violates the order, my hope is that they would withdraw any sort of provisional relief."

He added: "But we'll see what happens tomorrow."

Image credit: Attorney reading via Shutterstock


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