Mt. Gox and its founder are being attacked by the law and the lawless alike

March 12, 2014
March 12, 2014

Mark Karpeles, the chief executive of defunct bitcoin exchange Mt. Gox is being pursued online by an angry mob of not exactly law-abiding bitcoin users, who have hacked his personal blog and Reddit account, and posted his home address and other confidential data in a spreadsheet peppered with bitcoin-stealing viruses.

Offline, he faces what may be an even scarier threat: the robust machinery of the US class action lawsuit. A US investor Gregory Greene has filed a class action complaint that his lawyers believe could eventually include thousands of plaintiffs who lost bitcoins held by Mt. Gox. The suit prompted a judge to freeze assets related to Karpeles and Mt. Gox in the US on March 11.

The two-pronged offensive against Mt. Gox serves to illustrate bitcoin’s between-two-worlds status. While some bitcoin investors and regulators are pushing for more oversight, including legal consequences for Mt. Gox, much of bitcoin’s anonymous fan base advocate taking matters into their own hands to find their lost currency and humiliate Karpeles.

While hacking an online account belonging to, say, a bank CEO whose institution lost investors money would probably incur some sort of legal retribution, neither US nor Japanese law enforcement are stepping up to protect Karpeles.

The class action suit, meanwhile, not only accuses Karpeles of negligently losing his customers’ money, but stealing it outright: “Mr. Karpeles was personally and intimately involved in the fraudulent conduct, theft, and breaches of fiduciary duties described in this Complaint,” the suit alleges. It goes on to claim:

As a result of Mt. Gox “going dark” and shutting down its entire operation, users’ Fiat Currency and bitcoins previously stored by Mt. Gox are now unavailable to them, and by all accounts, have been converted and captured by Mt. Gox for its own purposes. On information and belief, Mr. Karpeles, as the sole shareholder of Mt. Gox, personally profited by shutting down Mt. Gox and obtaining users’ Fiat Currency and bitcoins worth millions of dollars.

Mt. Gox, which shut down last month after a what the company said was a long-running hacking attack, has lost 750,000 of its customers’ bitcoins, and 100,000 of its own. The company has some $38 million in assets and $64 million in liabilities, according to a Texas court filing seeking bankruptcy protection.

On March 11, a judge in Illinois froze all of the US assets related to Mt. Gox Inc., the company’s Delaware subsidiary, its Japanese parent company, and to Karpeles for two weeks, ahead of the class action. “This whole event, and the eventual resolution of our case, will hopefully push the Bitcoin industry to increase security and bring a more unified system across exchanges,” Christoper Dore, a lawyer representing the class action plaintiff, told Quartz.

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