Mt. Gox files for U.S. bankruptcy to halt class action

Some of Bitcoin enthusiast Mike Caldwell's coins are pictured at his office in this file photo. Credit: Reuters
Some of Bitcoin enthusiast Mike Caldwell’s coins are pictured at his office in this file photo. Credit: Reuters

Mt. Gox, once the world’s largest bitcoin exchange, filed for U.S. bankruptcy protection in Dallas late Sunday, a move that will temporarily halt U.S. legal action against the Japanese company.

Mt. Gox, which filed for bankruptcy protection in Japan in February, said without U.S. protection it would spend substantial funds defending itself against a U.S. lawsuit seeking class action status that was filed in federal court in Chicago.

A hearing in Dallas was scheduled for 1:30 p.m. local time on Monday to consider Mt. Gox’s request to stay pending lawsuits against the company.

The plaintiff leading the Chicago lawsuit was scheduled on Tuesday to ask a federal judge to freeze Mt. Gox’s U.S.-based servers and other computer equipment and to set up a trust over Mt. Gox’s assets.

Mt. Gox’s Japan filing last month came after it said it may have lost 750,000 of its customers’ bitcoins as part of an attack by hackers.

Mt. Gox said in papers filed with the Dallas court that the hacking attack was the subject of an intense investigation that indicated so far the bitcoins were lost as a result of a flaw in the software algorithm that underlies bitcoin, the digital currency.

The Chapter 15 filing allows Mt. Gox to ask the U.S. Bankruptcy Court to recognize its foreign bankruptcy and to assist in the Japanese proceedings by protecting its U.S.-based assets. U.S. creditors can contest Mt. Gox’s request for Chapter 15 protection.

Mt. Gox is defending itself against at least two U.S. lawsuits.

In late February, Gregory Greene, an Illinois resident, sued the company in Chicago on behalf of all U.S. residents who paid a trading fee to Mt. Gox and those who had bitcoins or other currency with the exchange when it halted bitcoin withdrawals on February 7.

Greene is seeking to recoup millions of dollars lost when the mtgox.com website went down, preventing traders from selling as bitcoin prices plummeted last month.

Steven Woodrow, an attorney for Greene, did not immediately respond to a request for comment.

Mt. Gox is also defending a lawsuit in federal court in Washington state filed by CoinLab Inc for breach of contract. CoinLab is seeking damages of $75 million from Mt. Gox. Mark Karpeles, Mt. Gox’s chief executive officer, was scheduled to be deposed in that case later this month, according to court documents.

Mt. Gox is represented by David Parham of Baker & McKenzie.

The case is Mt. Gox Co Ltd, U.S. Bankruptcy Court, Northern District of Texas, No. 14-31229.

 



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