Former MtGox customers seek to consolidate actions against Mizuho Bank

Maria Nikolova

In all cases, the plaintiffs seek redress for losses caused by Mark Karpeles’s failure reasonably to safeguard the Mt. Gox Exchange and Mizuho Bank’s decision not to process any outbound wire transfers from the Exchange’s bank account.

The legal action brought by former clients of now-defunct Bitcoin exchange MtGox against Mizuho Bank continues to develop at the Illinois Northern District Court. The plaintiffs are now seeking to consolidate several actions against the bank, more precisely:

  • Greene v. Mizuho Bank Ltd., et al., No. l:14-cv-01437 (N.D. Ill.);
  • Lack v. Mizuho Bank Ltd., et al., No. 2:18-cv-00617 (W.D. Cal.);
  • Pearce v. Mizuho Bank, Ltd. et al., No. 2:18-cv-00306 (E.D. Pa.).

According to a filing with the Illinois Northern District Court, seen by FinanceFeeds, the above-mentioned actions share almost everything in common: the proposed classes overlap, the claims are essentially identical, the factual issues that must be resolved are common across the actions, and the necessary evidentiary record is identical for each class. Plaintiffs move to consolidate these actions before Judge Feinerman of the Illinois Northern District Court.

Consolidation is set to minimize duplicative discovery, eliminate the possibility for conflicting rulings, especially on key evidentiary issues, and generally conserve judicial resources.

The claims at issue in these actions arise out of the collapse of the Mt. Gox bitcoin exchange. Three days after the exchange “went dark” in February 2013, Gregory Greene, a Chicago citizen, sued the corporate entities that owned the exchange – Mt. Gox K.K. and Tibanne K.K., as well as a number of corporate officers, including Mark Karpeles, Gonzague Gay-Bouchery, and Jed McCaleb. Soon after that the complaint was amended to add Joseph Lack, a California citizen, as a plaintiff, and Mizuho Bank Ltd., which had served as Mt. Gox’s principal banking partner, as a defendant.

Greene and Lack, on behalf of a class of all Mt. Gox customers in the United States, brought claims against the Mt. Gox defendants, over fraud, conversion, and negligence. These entities and individuals, plaintiffs alleged, had withheld vital information about security flaws, leading to the loss of bitcoin and fiat currency held in accounts on the exchange.

Against Mizuho, Greene and Lack brought claims for tortious interference with contract and breach of contract. Mizuho was the only financial institution servicing Mt. Gox’s American users but, according to the plaintiffs, had made the unilateral decision to cease processing international wire withdrawal requests. Thousands of such requests, submitted by American customers of Mt. Gox, had gone unfulfilled due to Mizuho’s policies, interfering with the contractual relationship between plaintiffs and Mt. Gox. And Mizuho had concealed its actions, thereby withholding information plainly material to the decision to purchase bitcoin on Mt. Gox.

Mt. Gox K.K. and Tibanne K.K. petitioned for bankruptcy in Japan, and quickly sought domestic recognition of those proceedings. Bankruptcy courts in New York and Dallas granted those requests in 2014. These decisions forced Greene and Lack to dismiss those defendants to avoid the effect of the bankruptcy stay. McCaleb and Gay-Bouchery settled on an individual basis and were dismissed from the case as defendants. Mark Karpeles announced his intention to contest personal jurisdiction and whether he had been properly served, but then ceased participating in the litigation.

Given these developments, a second amended complaint was filed in April 2015, which refocused the litigation on Mark Karpeles and Mizuho Bank as the sole defendants. Plaintiff Anthony Motto joined the lawsuit with the filing of Plaintiffs’ Third Amended Complaint.

Mizuho then moved to dismiss for failure to state a claim and under the doctrine of forum non conveniens. The motion was granted with respect to Greene’s claim against the bank, but denied with respect to Lack’s and Motto’s claims against the bank for fraud and intentional interference with contract. The complaint was amended a final time to add Gregory Pearce, a Pennsylvania resident, who had unsuccessfully sought to withdraw fiat currencies from his account at Mt. Gox. As against Mizuho, Pearce alleged only a claim for tortious interference with contract.

The allegations in the Lack and Pearce actions are said to be virtually identical to the allegations in the Greene action. In all cases, the plaintiffs seek redress for losses caused by

  • Mark Karpeles’s failure reasonably to safeguard the Mt. Gox Exchange;

  • Mark Karpeles’s decision to conceal the security problems associated with the Exchange;

  • Mizuho Bank’s decision not to process any outbound wire transfers from the Exchange’s bank account at Mizuho and Mizuho’s decision to conceal these practices.

The plaintiffs note that several other individuals have also come forward wishing to file their own actions. Counsel anticipates that several more complaints, alleging materially identical injuries premised on identical facts, will be filed shortly and flagged here as potential tag-along actions.

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