Beginning Next Week: InsideCounsel will become part of Corporate Counsel. Bringing these two industry-leading websites together will now give you comprehensive coverage of the full spectrum of issues affecting today's General Counsel at companies of all sizes. You will continue to receive expert analysis on key issues including corporate litigation, labor developments, tech initiatives and intellectual property, as well as Women, Influence & Power in Law (WIPL) professional development content. Plus we'll be serving all ALM legal publications from one interconnected platform, powered by Law.com, giving you easy access to additional relevant content from other InsideCounsel sister publications.

To prevent a disruption in service, you will be automatically redirected to the new site next week. Thank you for being a valued InsideCounsel reader!

X

Federal judge freezes Mt. Gox CEO’s assets

Will hold funds for two weeks to allow for investigation into potential fraud

Mt. Gox, a prominent crypto-currency exchange that declared bankruptcy late last month has taken its share of lumps following a security event that claimed up to 7 percent of the global bitcoin supply from its secure servers. And the hits keep on rolling.

On March 12, shortly after the company filed for bankruptcy protection in the United States and Japan, a Federal Judge based in Chicago froze the U.S. assets of Mt. Gox CEO Mark Karpeles in reaction to multiple customer lawsuits brought against the exchange. The freeze will allow time for investigations associated with those suits.

While neither Karpeles nor a lawyer representing him attended the hearing, the plaintiffs asserted that Karpeles had been siphoning money from the exchange for personal use. Presiding Judge Feinerman put a hold on the assets for two weeks, but Wall Street Journal reports that he added a caveat that, "It may turn out there are no such assets."

The lawsuit comes following stronger allegations of fraud from user of the exchange. Earlier this week hackers accessed Karpele’s reddit account and personal blog, releasing what they say is evidence of embezzlement and fraud.

At the same time, Mt. Gox has sought bankruptcy protection and help meeting its fiduciary obligations. In the federal court filing, Mt. Gox CEO Mark Karpeles claimed that the company held approximately $63.9 million in liabilities and approximately $37.7 million in assets following the breach. As a result, Mt. Gox can file for bankruptcy protection under Chapter 15 of the bankruptcy code, which provides help to parties with interests “involving more than one country.”

The Maelstrom of trouble has raise concerns on the safety of digital currencies like bitcoin though Mt. Gox was only an intermediary for the exchange. WSJ reports that in the wake of the mess New York state and other jurisdictions are considering a more formal applications process for exchanges like Mt. Gox.

 

For more on digital currencies check out these stories:

Digital currency exchange Mt. Gox files for U.S. bankruptcy protection

Debate about bitcoin regulation goes global

‘Coinye’ virtual currency shuts down over trademark infringement suit

Executive Editor

author image

Chris DiMarco

Chris DiMarco, Executive Editor of InsideCounsel magazine, has a background in multimedia production with previous involvement in projects in which he developed and created content...

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.