Dallas Courts Allow MtGox Class Action to Continue as Japanese Proceedings Carry On

In a short update today, MtGox announced on its website that following its filing of Civil Rehabilitation in Japanese courts, they are consulting with the local police department in regards to investigating the disappearance and possible theft of customer and company bitcoins.  After filing for bankruptcy in Japan, the Civil Rehabilitation was meant as a means to freeze assets as the firm is given time to inspect its asset shortfall.  Due to the asset freeze, the investigative period also shelters MtGox from possible litigation against them from debtors until the courts resolve the firm’s financial wherewithal.

When initially filing, MtGox had blamed a bug in the bitcoin protocol as they stated “there is a high probability that these bitcoins were stolen as a result of an abuse of this bug.”  Since then, the firm has stated that they had found 200,000 bitcoins that had been believed to have disappeared; thus revealing that their initial opinion of the source of losses isn’t fully the result of outside forces.

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In addition to Japan, MtGox filed for Chapter 15 bankruptcy protection in the US on March 10^th .  The filing occurred after a class action lawsuit had been issued against the exchange in Illinois courts at the end of February.  The Chapter 15 was filed in order to provide MtGox with access to US courts to assist them handling the insolvency case.  In addition, the Chapter 15 was aimed at applying the Civil Rehabilitation status in the US, as court documents from MtGox’s initial filing explained that “The enjoining of certain ongoing litigation to which MtGox and its affiliates are parties in conjunction with the protections afforded by the Japan Proceeding is essential to this effort.”

In response to the Chapter 15 filing, creditors in the US class action lawsuit against MtGox filed an order of Motion for Termination of Provisional Relief.  In a decision yesterday from Dallas Bankruptcy courts where MtGox made their Chapter 15 request, the court approved the motion, thereby granting the class action suit that was filed in Illinois to proceed, but with Dallas courts holding jurisdiction over future matters of dispute.  The decision ultimately weakens MtGox’s ability to thwart ongoing litigation against them in the US as the proceed with the bankruptcy investigation in Japan.

MtGox Motion of Termination of Provisional Relief