Illinois Court nixes attempt by MtGox CEO Mark Karpeles to dismiss action against him

Maria Nikolova

The Illinois Northern District Court has denied a motion to dismiss by Karpeles in a case brought by ex-customers of MtGox.

In line with earlier reports, the Illinois Northern District Court has denied a motion to dismiss brought by Mark Karpeles in a case related to the collapse of Bitcoin exchange MtGox. The relevant Memorandum Opinion & Order was issued on March 12, 2019.

The plaintiffs in the case – Gregory Greene and Anthony Motto, seek on behalf of a putative class to hold Mark Karpeles, Mt. Gox’s principal liable for financial losses allegedly arising from the exchange’s collapse. The plaintiffs are bringing state law claims that sound in conversion/trespass to chattels, negligence, and consumer fraud. Their complaint alleges that Karpeles intentionally misrepresented the security and stability of the Mt. Gox exchange and that his negligent or intentional failures in designing and operating the exchange allowed the loss of the plaintiffs’ assets. On behalf of a putative class, the plaintiffs seek actual, statutory, and punitive damages, along with prejudgment interest and attorney fees.

Karpeles has moved to dismiss the case for lack of personal jurisdiction.

In denying Karpeles’ motion to dismiss, Judge Gary Feinerman noted that Greene and Motto’s contacts with the exchange were not random, isolated, or fortuitous, but rather the product of Mt. Gox’s virtual presence in Illinois, as some 7,056, or about 1.5%, of the addresses associated with Mt. Gox accounts came from Illinois.

The Court has found that, even if the Illinois market was “simply one among many”, a place of no particular interest to him, Karpeles purposefully availed himself of that market by operating an exchange that generated thousands of Illinois accounts and by purporting to safeguard the assets of Greene, Motto, and the other Illinois users.

Although Karpeles did not himself make the alleged misrepresentations to Greene and Motto, it is enough that he allegedly directed his agents to do so given that the agents had notice that the communications concerned Mt. Gox’s business with individuals in Illinois. Similarly, that Karpeles did not expect Mt. Gox to have thousands of Illinois accounts and did not care to ascertain the origin of each deposit or communication does not deprive the contacts with Greene and Motto in Illinois of their jurisdictional significance.

In sum, because he purposefully availed himself of the Illinois market through his deliberate and continuous exploitation of that market, which in turn gave rise to Mt. Gox’s business with and communications to Greene and Motto in Illinois, Karpeles has a constitutionally sufficient connection with Illinois to justify the exercise of specific jurisdiction.

The case continues at the Illinois Northern District Court.

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