New Federal Class Action Filed Against Mt. Gox Founder and Partner Bank (Mizuho)

A California citizen and former customer of the Bitcoin exchange, Mt. Gox, filed a federal class action on Wednesday in relation to the approximate $400 million in customer currency that was lost by Mt. Gox.  Named defendants include Mark Karpeles, who is the former CEO of Mt. Gox KK, and sole owner of its parent company, Tibanne KK.  Also named as a defendant is Muzuho Bank.

By way of background, Mt. Gox was founded in 2009 and touted itself as a secure location to store and exchange Bitcoin.  In order to fund their accounts customers were permitted to wire money to Mizuho Bank, which operated as the banking partner of Mt. Gox.  After charging a transaction fee, Mizuho would then transfer funds to Mt. Gox, where an account would be funded in the name of the customer.  Customers could buy and sell Bitcoin and use Mt. Gox’s online wallet to store their cryptocurrency.  On February 24, 2014, the Mt. Gox website abruptly went offline.  The company claimed that it had been a victim of a malicious attack and theft, and that roughly $400m of customer funds had disappeared. 

The suit alleges that Karpeles controlled all aspects of Mt. Gox’s business, and that he knew as early as 2011 the security bugs existed and could be exploited.  The allegations against Mizuho are nuanced, but basically suggest that the bank knew of risks and regulatory scrutiny relating to Karpeles and Mt. Gox, but hid these concerns from customers in order to continue generating fees.  The suit indicates that Karpeles was arrested in Tokyo in September of 2015, charged with fraud and embezzlement, and that those charges remain pending.

The class action suit, Joseph Lack, v. Mizuho Bank, Ltd., 2:18-cv-00617-RGK-GJS, was filed in the U.S. District Court for the Central District of California.  It includes counts involving negligence, fraud and unjust enrichment.  Lack is represented by Rafey S. Balabanian and J. Aaron Lawson of Edelson PC in San Franciso.

The Smith Law Firm, LLC, is not representing any party in this case.  If you have any questions relating to your rights involving a class action or other matter, please don’t hesitate to call us at (314) 725-4400 or send us a message.