Illinois Court hints at nixing Mark Karpeles’ claims in lawsuit brought by former MtGox clients

Maria Nikolova

The parties in the case are directed to proceed on the assumption that Karpeles’s motion to dismiss will be denied.

The Illinois Northern District Court has indicated that it will nix the defense claims made by Mark Karpeles in a case brought by former MtGox clients.

In a brief notice filed on Friday, January 11, 2019, the parties in the case are directed to “proceed on the assumption that Defendant Karpeles’s motion to dismiss will be denied”.

In his motion to dismiss, Karpeles insisted that, under binding Seventh Circuit law and the evidence submitted to the Court, the Illinois Northern District Court lacks personal jurisdiction over him, and the case against him must be dismissed.

According to the defense counsel, the plaintiffs (that is, several former US clients of MtGox) never mention, and therefore abandon, the claim that “Karpeles conducted business throughout this District, the State of Illinois, and the United States.” The alleged wrongful conduct took place in Japan, not in Illinois, the defense notes.

Karpeles is said to have not “purposefully directed his activities at the forum state or purposefully availed himself of the privilege of conducting business in that state”.

Next, the defense proceeds to explain the difference in what Mizuho Bank knew about MtGox’s customers who wired money to the bank and what Karpeles knew. What Mizuho Bank knew and what Karpeles knew about these plaintiffs is very different and compels a different result in this case for Karpeles, his counsel says. Mizuho Bank had knowledge of the plaintiffs’ location. Furthermore, there is no reason to believe that Mt. Gox or Karpeles were given any information on where wire transfers to Mizuho Bank originated.

Procedural difficulties are also mentioned, as the Japanese Government has forbidden Karpeles to leave Japan. Additionally, discovery would be extremely difficult, even impossible.

Finally, the defense counsel addresses the so-called “fiduciary shield” doctrine issues. MtGox was not the alter ego of Karpeles, the defense says. The fiduciary shield doctrine applies here and is yet another basis that precludes the exercise of personal jurisdiction over Karpeles in Illinois, the defense states.

Let’s recall that the fiduciary shield 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.

“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 had argued.

Mark Karpeles, however, insists that this doctrine protects him. He requests the Court to dismiss the allegations against him.

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 is captioned Greene v. MtGox Inc. et al (1:14-cv-01437).

Read this next

Fintech, Uncategorized

BitMEX integrates HALO from Solidus Labs for cross-market surveillance

““The recent approval of the Spot Bitcoin ETF has piqued the market’s interest. As a result of price volatility, the trading volumes for crypto derivatives have gone up substantially. HALO, with its advanced technology and crypto-native detection architecture, will enable BitMEX to smoothly and safely scale trade surveillance across its increased trading volumes and provide the necessary safeguards for new product launches.”

Industry News

Horizon Software rebrands to Horizon Trading Solutions

“Horizon Trading Solutions has seen accelerated global growth over the past year to meet the rising demand for our trading solutions and built-for-purpose technology offering. The choice to rebrand represents a key part of this development, while maintaining our heritage and history in the industry.”

Market News

USDJPY has surged to levels last witnessed in 2022. Should we consider opening a short position?

The recent resurgence of the US dollar has propelled USD/JPY to new heights, touching levels not seen since 2022. This surge comes against the backdrop of stable short-term yields and ongoing economic data that fails to signal a significant slowdown, prompting questions about the extent of current monetary easing measures.

Digital Assets

DED Trends on Twitter After Memecoin Snapshot Announcement

Polkadot-backed community coin #DED, made it to the trending charts on X, demonstrating community’s engagement and interest behind the memecoin. 

Digital Assets

BlockDAG Presale Nears $10 Million Amid Toncoin’s Momentum, Green Bitcoin’s Presale, and the Rise of Other Top Cryptos

This article will examine three top trending topics: Toncoin’s potential, Green Bitcoin’s innovative presale, and BlockDAG’s sustainable mining approach. These cryptocurrencies take centre stage for their uniqueness and innovation.

Digital Assets

Coinbase scores minor victory vs SEC, but lawsuit to proceed

A federal judge in Manhattan, U.S. District Judge Katherine Polk Failla, ruled on Wednesday that the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Coinbase can largely proceed.

Web3

COTI Teams Up with Civic for Enhanced Digital Identity Control

СOTI and Civic are teaming up to enhance digital identity security in Web3, aiming to provide users with more control over their digital selves through innovative technology.

Digital Assets

BlockDAG Takes on Chainlink (LINK) Crypto, and RON With DeFi Card and 5000x Profit Potential

Explore BlockDAG’s innovative DeFi card, which transforms cryptocurrency into spendable cash, alongside Chainlink (LINK) crypto and Ronin’s advancements.

Digital Assets

Court finally decides on Sam Bankman-Fried sentence, experts predict 20 years

Sam Bankman-Fried, the former CEO of the now-defunct cryptocurrency exchange FTX, is set to face sentencing on Thursday in a pivotal moment that could see the entrepreneur beginning a lengthy period in federal prison.

<