Bitcoin Update -Class Action Against Bankrupt Mt. Gox

02 March 2014 Internet, IT & e-Discovery Blog Blog
Authors: Peter Vogel

Mt. Gox shut down and a lawsuit was filed that alleges Mt. Gox and Mark Karpeles’ “catastrophic loss …uncovered a massive scheme to defraud millions of consumers into providing a private company with real, paper money in exchange for virtual currency.”  Computerworld reported that Mt. Gox and Mark Karpeles’ bankruptcy filing in Japan “implied that hackers stole approximately 850,000 bitcoins, worth nearly $475 million at current values.”

The class action Gregory Greene v. Mt. Gox et al was filed on February 27, 2014 in the Northern District of Illinois  and alleges that:

In early February 2014, Mt. Gox halted all withdrawals from its website due to a supposed computer bug… reports began to reveal that the so-called “computer bug” afflicting Mt.Gox’s servers may have actually been a several-year long security breach that resulted in the pilfering of millions of dollars worth of its users’ bitcoins.

Bitcoins and Mt. Gox’s role in the bitcoin market are described in the Complaint:

Unlike traditional money, bitcoins aren’t issued from a government and aren’t regulated by any central authority. Instead, bitcoins can be created by any person with specialized hardware and computer software and then sold to other consumers on the Internet via private companies, called “Bitcoin exchanges” (like Mt. Gox).

Mt. Gox has also become one of the largest “digital wallets,” meaning that users can deposit and store their bitcoins and the keys (passwords) necessary to access them on Mt. Gox’s servers.

Unregulated Internet monetary systems will surely be the focus of governments around the world, and what happens to bitcoin consumers may guide new banking regulations.

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