Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Temporary Mt. Gox bankruptcy filing accepted
Author: Joel R. Glucksman
Date: March 18, 2014
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After scandal, uncertainty and accusations of massive fraud, Mt. Gox has been afforded some good news. According to PYMNTS.com, the embattled Tokyo exchange was granted protection in the U.S. under Chapter 15 of the bankruptcy law on March 10. This determination will allow the crypto-currency exchange to continue to operate internationally while negotiating the resolution of lawsuits in the U.S.
A Chicago judge was due to hear an investor’s request on March 11 to freeze the company’s assets in a class action lawsuit filed against Mt. Gox last month, according to the news source. The company claims that millions of dollars in assets were stolen as a result of “transaction malleability,” a weakness in the protocol underlying Bitcoin, though not all of the company’s investors believe this story, and all of the other major Bitcoin exchanges remain open.
“This case involves a massive fraud,” Steven Woodrow, an attorney leading the class action, told Judge Harlin Hale, who presided over the bankruptcy filing, according to Reuters. “They claim incredibly that they will preserve assets and protect assets by entrusting the servers and other property to Mr. Karpeles. Respectfully, your honor, that is the definition of the fox guarding the henhouse.”
An attorney for Coinlab Inc, which sued the exchange last year for a breach of contract, said that her client was concerned by possibly fraudulent activity as well.
“We don’t have proof yet but we do have concerns about the movement of hundreds of millions of dollars in Bitcoins over the weekend, moved by Mr. Karpeles,” said Jane Pearson, an attorney with Foster Pepper, according to the news source.
Mt. Gox’s attorney denied the allegations of fraud, saying that Mt. Gox and its former CEO were complying with Japanese bankruptcy proceedings by protecting the company’s U.S. assets.
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