A years-old $75 million lawsuit against Mt Gox by U.S. company CoinLab is delaying payouts to creditors, the Japanese bankruptcy trustee revealed today.
Back to Tokyo Bankruptcy Court
In the latest creditors’ meeting at Tokyo District Court, bankruptcy trustee Nobuaki Kobayashi confirmed the suit remains active. U.S. company CoinLab filed the suit in 2013, roughly eight months before Gox ceased operating and filed for bankruptcy.
The trustee announced in May that all ordinary creditor claims were finalized. Subsequently, the court published a list that included the full name of all claimants and size of each claim. To date, however, no creditor has received a payout.
The trustee must calculate all outstanding assets and liabilities before payouts can proceed, Kobayashi said.
As well as individual investors, there are also outstanding legal issues with companies including Tokyu Construction Co. Ltd. over the unfinished Bitcoin Cafe, Gox CEO Mark Karpeles’ company Tibanne Co. Ltd., and Karpeles himself.
Frustration at Payout Delays and Bitcoin Investigation
It is now two years and seven months since Mt Gox declared bankruptcy.
Bitcoin exchange Kraken is overseeing the claims process. Kraken CEO Jesse Powell and Japan director Ayako Miyaguchi also attended today’s meeting.
Powell told Bitcoin.com he is frustrated at the delays, saying much of the blame for the lawsuit’s circumstances possibly lies with CoinLab itself.
“I’m disappointed to hear that this lawsuit is responsible for holding up payouts, and that any judgement for CoinLab would be treated on par with the depositor victims. I think people are having a hard time getting their heads around the $75m+ claim given that common perception is that CoinLab never performed and owes $5m+ back to MtGox. If the deal had been carried out, it might be CoinLab on the hook for the shortfall of client deposits.”
Computer security expert Kim Nilsson and his company WizSec have also investigated Gox’s bitcoin theft, using publicly-available information. He said the CoinLab suit delay is “obviously not in creditors’ best interests”.
The Japanese police, in cooperation with auditing firm Deloitte Touche Tohmatsu, continue to investigate the missing bitcoins. There is no update on their progress.
What’s Left (and Not Left) at Mt Gox
Today’s proceedings and official documentation did not mention the CoinLab lawsuit, which Kobayashi acknowledged only after a creditor’s question.
Documents revealed there is now ¥1,054,483,013 JPY ($10.48 million USD) and 202,185 BTC in Gox’s bankruptcy estate. While the bitcoin amount remains constant, the fiat currency reserves diminish as time drags on, via administration charges.
Mt Gox CEO Mark Karpeles, was also present today, looking svelte and barely-recognizable after a one-year stay in Japanese prison. He still faces further investigation and possible sanction.
Why the CoinLab Case Mattered
CoinLab first filed suit against Mt Gox in June 2013. The dispute stems from CoinLab’s 2012 contract giving it official Gox partner status in the U.S. and Canada. CoinLab claims Gox breached this contract by not revealing adequate data on existing clients.
Both sides were reportedly dissatisfied with the agreements from early on. CoinLab reportedly needed to fulfil U.S. licensing and regulatory requirements before it could act as Gox’s U.S. agent. Mt Gox claimed this never happened.
Things became especially heated in early 2013 when Bitcoin experienced a huge rise in value and media attention.
Mt Gox still desperately needed access to the vital North American market. The Department of Homeland Security made things more difficult in May 2013 when it intervened to stop payment processor Dwolla sending money to Gox.
The DHS then froze Mt Gox’s U.S. bank accounts and seized a total $5 million, preventing it from transferring money. From that time on, Gox experienced lengthy delays sending money to its U.S. customers. Though the exchange suffered systematic problems and possibly had few bitcoins even then, the DHS account seizures didn’t help.
CoinLab’s Troubled Existence
Both companies and their founders (Mark Karpeles and Peter Vessenes) were Bitcoin Foundation founding members, causing disharmony in that organization.
Vessenes founded CoinLab as a Bitcoin startup incubator and infrastructure builder, but the company barely got off the ground. Its only portfolio company, mining firm Alydian, filed for bankruptcy shortly after it launched in November 2013.
CoinLab also had to pay $2.4 million in bitcoin to settle a breach-of-contract suit by Bitvestment Partners LLC the same month.
“Who’s to say what might have been?” Powell concluded. “Today, both entities are bankrupt. I’m concerned that those burned by CoinLab/Alydian will complicate the issue further once there’s a hint of any payment going to CoinLab. Personally, I think that business claims should be considered only after depositors have been made whole.”
Are you a Mt Gox creditor? Would you prefer to see this saga settled once and for all? Let us know.
Images: Jon Southurst, Twitter
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