Mt. Gox hit with class action lawsuit over $400 million Bitcoin loss

mt gox hit class action lawsuit mark karpeles
Mark Karpeles, CEO of Mt. Gox

It was only a matter of time.

An Illinois man has filed a class action lawsuit against Mt. Gox, once the world’s largest Bitcoin exchange, for its loss of approximately 750,000 Bitcoins – about 6 percent of all Biticoins currently in circulation. The lost Bitcoins, which the company claims were stolen, hold a current value of more than $400 million.

The 32-page legal complaint, filed Thursday by Gregory Greene in the U.S. District Court in Chicago, accuses Mt. Gox and its CEO Mark Karpeles of consumer fraud and negligence for failing to provide the necessary security to prevent theft of Mt. Gox’s Bitcoin reserves. The suit also claims Mt. Gox and Karpeles are guilty of breach of fiduciary duty, breach of contract, and unjust enrichment.

Karpeles did not respond to our request for comment.

While Greene is the only named plaintiff in the suit against Mt. Gox, the complaint lists “all persons in the United States who had Bitcoins or Fiat Currency stored with Mt. Gox on February 7, 2014,” the day Mt. Gox halted all customer withdrawals. At the time, Mt. Gox claimed it was trying to resolve a technical issue related to the Bitcoin algorithm.

Problems escalated on Monday, when Mt. Gox went entirely offline. A document leaked soon after the exchange shut down revealed that Mt. Gox lost more than 744,000 Bitcoins “due to malleability-related theft which went unnoticed for several years.” While the veracity of the document was initially in question, it appears to be legitimate.

Greene, who says he began using Mt. Gox in 2011, claims the exchange “intentionally and knowingly failed to provide its users with the level of security protection for which they paid.” He also claims the shutdown of Mt. Gox caused the market price of Bitcoin overall to drop, thus reducing the value of Greene’s lost Bitcoins to around $25,000.

“Because Mt. Gox did not sufficiently protect its service, including Greene’s Bitcoins, Greene did not receive the entirety of the services he paid for, and as a result, he paid more than he otherwise would have for such services,” the complaint reads. “Worse yet, at the time Mt. Gox shut down, Greene had used Mt. Gox’s services to store and protect bitcoins with a present value of approximately $25,000 dollars.”

The lawsuit also alleges that Karpeles “personally profited by shutting down Mt. Gox and obtaining users’ Fiat Currency and Bitcoins worth millions of dollars.

“This is either a case of gross incompetence, a real breach of fiduciary care, or an outright fraud,” said attorney Jay Edelson of the Denver-based Edelson law firm, which filed the suit. “People put their trust in Mt. Gox to take reasonable measures to prevent this type of theft. Now individual consumers are out tens if not hundreds of thousands of dollars, if not more.”

Hours after the lawsuit was filed, Mt. Gox, which is based in Tokyo, filed for bankruptcy protection in a Japanese court. During the hearing, Karpeles revealed that, in addition to the 750,000 Bitcoins belonging to customers, Mt. Gox also lost 100,000 of its own Bitcoins.


Apple is still selling iPhones in China despite being ordered not to

Apple is following the FTC's lead and has sued Qualcomm for a massive $1 billion in the U.S., $145 million in China, and also in the U.K., claiming the company charged onerous royalties for its patented tech.
Home Theater

These awesome A/V receivers will swarm you with surround sound at any budget

There is no one-size-fits-all approach to shopping for a receiver, so we assembled our favorites for 2018, at multiple price points and all loaded with features, from Dolby Atmos to 4K HDR, and much more.
Emerging Tech

Thrill-seekers will be able to pilot themselves in a giant drone as soon as 2019

Want to hitch a ride on a giant drone? The startup Lift Aircraft is gearing up to let paying customers fly its 18-rotor giant drones over assorted scenic landscapes across the U.S.
Emerging Tech

CRISPR gene therapy regulates hunger, staves off severe obesity in mice

Researchers from UC San Francisco have demonstrated how CRISPR gene editing can be used to prevent severe obesity in mice, without making a single edit to the mouse's genome. Here's how.
Emerging Tech

Capture app saves money by 3D scanning objects using iPhone’s TrueDepth camera

Capture is a new iPhone app created by the Y Combinator-backed startup Standard Cyborg. It allows anyone to perform 3D scans of objects and share them with buddies. Here's how it works.
Emerging Tech

Sick of walking everywhere? Here are the best electric skateboards you can buy

Thanks for Kickstarter and Indiegogo, electric skateboards are carving a bigger niche than you might think. Whether you're into speed, mileage, or something a bit more stylish, here are the best electric skateboards on the market.
Emerging Tech

Rise of the Machines: Here’s how much robots and A.I. progressed in 2018

2018 has generated no shortage of news, and the worlds of A.I. and robotics are no exception. Here are our picks for the most exciting, game changing examples of both we saw this year.
Emerging Tech

Parker Solar Probe captures first image from within the atmosphere of the sun

NASA has shared the first image from inside the atmosphere of the sun taken by the Parker Solar Probe. The probe made the closest ever approach to a star, gathering data which scientists have been interpreting and released this week.
Emerging Tech

Say cheese: InSight lander posts a selfie from the surface of Mars

NASA's InSight mission to Mars has commemorated its arrival by posting a selfie. The selfie is a composite of 11 different images which were taken by one of its instruments, the Instrument Deployment Camera.
Emerging Tech

Researchers create a flying wireless platform using bumblebees

Researchers at the University of Washington have come up with a novel way to create a wireless platform: using bumblebees. As mechanical drones' batteries run out too fast, the team made use of a biology-based solution using living insects.
Emerging Tech

Awesome Tech You Can’t Buy Yet: Booze-filled ski poles and crypto piggy banks

Check out our roundup of the best new crowdfunding projects and product announcements that hit the web this week. You may not be able to buy this stuff yet, but it sure is fun to gawk!
Emerging Tech

Bright ‘hyperactive’ comet should be visible in the sky this weekend

An unusual green comet, 46P/Wirtanen, will be visible in the night sky this month as it makes its closest approach to Earth in 20 years. It may even be possible to see the comet without a telescope.
Emerging Tech

Gorgeous images show storms and cloud formations in the atmosphere of Jupiter

NASA's Juno mission arrived at Jupiter in 2016 and has been collecting data since then. NASA has shared an update on the progress of the mission as it reaches its halfway point, releasing stunning images of the planet as seen from orbit.
Emerging Tech

Beautiful image of young planets sheds new light on planet formation

Researchers examining protoplanetary disks -- the belts of dust that eventually form planets -- have shared fascinating images of the planets from their survey, showing the various stages of planet formation.