Mt. Gox Founder Faces Lawsuit for Misrepresentation of Exchange

Wednesday, 26/06/2019 | 12:03 GMT by Arnab Shome
  • The CEO of the exchange was already found guilty for data manipulation.
Mt. Gox Founder Faces Lawsuit for Misrepresentation of Exchange
By MtGox (MtGox.com) [Public domain], via Wikimedia Commons

The woes for the doomed crypto exchange Mt. Gox are far from over, as its founder Jed McCaleb has recently been slapped with a lawsuit for mishandling the exchange.

According to a Coindesk report, the legal suit was filled on May 19 by two former Mt. Gox traders, who accused McCaleb of misrepresenting the exchange’s financials after its hack.

“Defendants become aware of serious security risks on Mt. Gox that allowed hackers to gain access to the exchange,” the court filing stated. “Rather than secure the exchange, McCaleb sold a large portion of his interest in the then sole proprietorship and provided avenues to the purchasers to cover-up the security concerns at the time without ever informing or disclosing these issues to the public.”

The hack that brought down the mammoth

In late 2011, Mt. Gox, then the largest Bitcoin exchange in terms of trading volume, was hacked, resulting in the theft of 850,000 Bitcoins, then worth around $400 million. This created a dent on the books and business of the exchange which forced it to shut its trading operations in 2014.

“Rather than inform the public that these users were not refunded, nor stay to repair the security issues, McCaleb sold a majority of his interest in Mt. Gox to Mark Karpeles,” the complaint added.

Karpeles took charge of the exchange in 2011 and was also the majority shareholder of the exchange with 88 percent of the stakes while McCaleb only held 12 percent. He was also prosecuted in a Japanese court and found guilty under the charges of data manipulation in the exchange.

Meanwhile, creditors of the exchange are continuously fighting to regain their deposits from the trustee of the exchange, who was accused of following many improper steps for liquidation of digital assets. In April, the trustee extended the deadline for the submission of rehabilitation claims.

“In deciding to use Mt. Gox as offered by Defendants, Plaintiff accepted as true the totality of representations and omissions made by representatives from Defendants that Defendants were uniquely qualified to properly provide the services needed to operate a successful and secure exchange per the needs of Plaintiffs and that Mt. Gox was properly funded,” the plaintiffs added.

The woes for the doomed crypto exchange Mt. Gox are far from over, as its founder Jed McCaleb has recently been slapped with a lawsuit for mishandling the exchange.

According to a Coindesk report, the legal suit was filled on May 19 by two former Mt. Gox traders, who accused McCaleb of misrepresenting the exchange’s financials after its hack.

“Defendants become aware of serious security risks on Mt. Gox that allowed hackers to gain access to the exchange,” the court filing stated. “Rather than secure the exchange, McCaleb sold a large portion of his interest in the then sole proprietorship and provided avenues to the purchasers to cover-up the security concerns at the time without ever informing or disclosing these issues to the public.”

The hack that brought down the mammoth

In late 2011, Mt. Gox, then the largest Bitcoin exchange in terms of trading volume, was hacked, resulting in the theft of 850,000 Bitcoins, then worth around $400 million. This created a dent on the books and business of the exchange which forced it to shut its trading operations in 2014.

“Rather than inform the public that these users were not refunded, nor stay to repair the security issues, McCaleb sold a majority of his interest in Mt. Gox to Mark Karpeles,” the complaint added.

Karpeles took charge of the exchange in 2011 and was also the majority shareholder of the exchange with 88 percent of the stakes while McCaleb only held 12 percent. He was also prosecuted in a Japanese court and found guilty under the charges of data manipulation in the exchange.

Meanwhile, creditors of the exchange are continuously fighting to regain their deposits from the trustee of the exchange, who was accused of following many improper steps for liquidation of digital assets. In April, the trustee extended the deadline for the submission of rehabilitation claims.

“In deciding to use Mt. Gox as offered by Defendants, Plaintiff accepted as true the totality of representations and omissions made by representatives from Defendants that Defendants were uniquely qualified to properly provide the services needed to operate a successful and secure exchange per the needs of Plaintiffs and that Mt. Gox was properly funded,” the plaintiffs added.

About the Author: Arnab Shome
Arnab Shome
  • 6365 Articles
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About the Author: Arnab Shome
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
  • 6365 Articles
  • 80 Followers

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