Former MtGox clients object to Mark Karpeles’ arguments in US case

Maria Nikolova

The plaintiffs in a case against the ex-CEO of the ill-fated Bitcoin exchange say he is not protected from prosecution under the fiduciary shield doctrine.

The arguments of Mark Karpeles, former head of notorious Bitcoin exchange MtGox, have resulted in a stark response from former clients of the Exchange.

On Tuesday, October 16th, Gregory Greene and Anthony Motto, former customers of MtGox, filed their response to Karpeles’ motion to dismiss with the Illinois Northern District Court.

One of the central points of argument is the so-called fiduciary shield doctrine. This doctrine prevents courts from asserting jurisdiction over a person on the basis of acts taken by that person not on his own behalf, but on behalf of his employer.

Karpeles contends that the fiduciary shield doctrine prohibits the exercise of jurisdiction over him related to actions taken as MtGox’s CEO. He claims that a corporation must be his alter ego so that he may lose the protections of the fiduciary shield.

But the plaintiffs say it is not so. While a finding that a defendant is the alter ego of a subject entity would of course negate any protections afforded by the fiduciary shield doctrine, the doctrine itself is far narrower.

“The fiduciary shield doctrine does not protect a defendant who has decision-making authority and a financial stake in the company that directed him or her to a jurisdiction,” the plaintiffs argue.

According to them, Karpeles controlled all aspects of MtGox’s business. Karpeles acknowledges that he was the sole shareholder of the entity that held 88% of MtGox’s equity. Thus, the fiduciary shield doctrine does not preclude jurisdiction over Karpeles, the plaintiffs say.

Let’s recall that Mark Karpeles is being sued in Illinois by US clients of MtGox who accuse him of:

  • intentionally, with gross recklessness, or negligently stealing plaintiffs’ bitcoins and fiat currency;
  • negligence, alleging that Karpeles owed the plaintiffs a duty of reasonable care to prevent improper access and misuse of the plaintiffs’ bitcoins and fiat currency and to allow authorized users complete access to the same and breached those duties;
  • consumer fraud – Karpeles represented that he would protect MtGox clients’ bitcoins and fiat currency and allow them to buy, sell, trade, and withdraw those funds, while siphoning, or allowing others to siphon, funds from Mt. Gox customers’ accounts.

The plaintiffs also allege that Karpeles concealed that Mizuho Bank was no longer providing international withdrawal services, that thousands of bitcoins had been lost or stolen, and that he was shutting down the exchange and filing for bankruptcy.

The case, captioned Greene v. MtGox Inc. et al (1:14-cv-01437), continues at the Illinois Northern District Court.

Read this next

Digital Assets

Jacobi Asset Management seeks FCA’s greenlight for Bitcoin-pegged ETF

Crypto asset manager Jacobi Asset Management has received a regulatory go-ahead for an exchange-traded fund that seeks to track the price of Bitcoin (BTC) while satisfying the laws in the UK.

Digital Assets

Tether, Bitfinex to pay $41 million fine to end CFTC probe into USDT reserves

The US Commodity Futures Trading Commission (CFTC) settled Friday a nearly two-year investigation into the finances and corporate practices of Tether and Bitfinex.

Retail FX

Cypriot license of Dualix & AGM Markets parent wholly suspended

After several months of pause, the Cypriot authorities is once again flexing their muscles and actively finding compliance irregularities.

Retail FX

CySEC Suspends ‘in whole’ CIF License of Maxiflex Ltd (EuropeFX)

The Cyprus Securities and Exchange Commission (CySEC) today said it has wholly suspended the Cyprus Investment Firm (CIF) License of FX retail brokerage firm Maxiflex Ltd (trading as EuropeFX).

Retail FX

Freetrade celebrates 1 million UK users as trading platform plans to roll out in Europe

Freetrade will soon be launching in Sweden as the trading platform begins to roll out across Europe in 2022.

Industry News

Neteller launches fiat-to-crypto withdrawals 8 months after Skrill

Its sister digital wallet, Skrill, has launched its fiat-to-crypto withdrawal service in February of this year.

Institutional FX

Mexico gets US fractional shares trading via GBM – Drivewealth partnership

Drivewealth is a pioneer in fractional investing and has much to do with the momentum for real-time fractional trading within the industry.

Industry News

Jarden Securities gets slap on wrist from NZ’s FMA for violations prior merger

The regulation allows derivatives issuers to deposit money into the trust account to safeguard against the risk of a shortfall, but the FMA found the OMF did it for business-related payments to third party providers.

Industry News

Plum gets $14 million in funding as it enters race for super app

Plum, a money management app launched in 2017, has announced that it has raised $14 million in its Series A funding round from a host of investors that include Ventura Capital, dmg ventures, Global brain, and others.

<