Menu
Class-action suit charges Mt. Gox with fraud, seeking the return of users' bitcoins

Class-action suit charges Mt. Gox with fraud, seeking the return of users' bitcoins

The exchange committed fraud by not properly handling a hacking attack, the suit alleges

A class-action lawsuit has been filed against the Mt. Gox Bitcoin exchange and its owner Mark Karpeles, seeking damages in the hundreds of millions of dollars and the return of bitcoins to users whose accounts were frozen on the site.

The lawsuit lays out a number of claims against Mt. Gox, chief among them that the exchange did not keep users' bitcoins securely stored or adequately detect a theft of those coins. When the online exchange figured out what was going on, it clouded the truth by telling customers there was a computer glitch, the lawsuit claims.

The situation is akin to a bank being robbed and then closing up shop and simply saying "sorry," said Jay Edelson, managing partner at Edelson PC and the plaintiffs' attorney.

The lawsuit was filed Thursday in the U.S. District Court for the Northern District of Illinois by Gregory Greene, on behalf of some 600,000 other people in the U.S. who have used Mt. Gox to buy or sell bitcoins at one point or another.

A spokesman for Mt. Gox did not immediately respond to a request for comment on the lawsuit.

Mt. Gox filed for bankruptcy Friday, amid reports that it may have lost 750,000 of its customers' bitoins, basically all of them, in a hacking attack.

The bankruptcy protection Mt. Gox seeks, however, would not protect it from the charges of fraud in the lawsuit, Edelson said.

Mt. Gox stopped allowing bitcoin withdrawals earlier this month due to what it said was a computer bug afflicting its servers. But the "bug" may actually have been a several-years-long security breach causing the theft of millions of dollars worth of bitcoins, the suit said.

Mt. Gox subsequently halted withdrawals and froze users' accounts, not to fix the problem or protect users, but to plan its exit strategy, Edelson said.

The lawsuit only covers people residing in the U.S. who have used Mt. Gox. A subsequent class-action suit may be filed representing other Mt. Gox users internationally, Edelson said, like Bitcoin holders in Japan, where Mt. Gox is based.

Mt. Gox CEO Mark Karpeles did admit to some weaknesses in the exchange's system, during a Friday press conference at the Tokyo District Court. "I am deeply sorry," he told reporters in Japanese.

Mt. Gox's demise is a blow to Bitcoin, though other exchanges have grown to prominence since Mt. Gox was founded in 2009. Across those exchanges, one bitcoin was trading for roughly US$560 on Friday, according to CoinDesk, which averages Bitcoin trading prices.

Zach Miners covers social networking, search and general technology news for IDG News Service. Follow Zach on Twitter at @zachminers. Zach's e-mail address is zach_miners@idg.com


Follow Us

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags internetlegale-commerceInternet-based applications and servicesCivil lawsuitsMt. GoxBitcoin Foundation

Featured

Slideshows

The making of an MSSP: a blueprint for growth in NZ

The making of an MSSP: a blueprint for growth in NZ

Partners are actively building out security practices and services to match, yet remain challenged by a lack of guidance in the market. This exclusive Reseller News Roundtable - in association with Sophos - assessed the making of an MSSP, outlining the blueprint for growth and how partners can differentiate in New Zealand.

The making of an MSSP: a blueprint for growth in NZ
Reseller News Platinum Club celebrates leading partners in 2018

Reseller News Platinum Club celebrates leading partners in 2018

The leading players of the New Zealand channel came together to celebrate a year of achievement at the inaugural Reseller News Platinum Club lunch in Auckland. Following the Reseller News Innovation Awards, Platinum Club provides a platform to showcase the top performing partners and start-ups of the past 12 months, with more than ​​50 organisations in the spotlight.​​​

Reseller News Platinum Club celebrates leading partners in 2018
Meet the top performing HP partners in NZ

Meet the top performing HP partners in NZ

HP has honoured its leading partners in New Zealand during 2018, following 12 months of growth through the local channel. Unveiled during the fourth running of the ceremony in Auckland, the awards recognise and celebrate excellence, growth, consistency and engagement of standout Kiwi partners.

Meet the top performing HP partners in NZ
Show Comments