Mark Karpeles refuses to produce documents related to MtGox operations

Maria Nikolova

Karpeles insists he is unable to produce documents sought by plaintiffs in US lawsuit for fear of criminal liability in Japan.

Several lawsuits targeting ill-fated Bitcoin exchange MtGox and its head Mark Karpeles continue in the United States, with one of these cases being brought by ex-customer Gregory Greene. The latest dispute in this case focuses on documents production.

The plaintiff – Gregory Greene, propounded interrogatories and document requests on Karpeles on February 11, 2019. The plaintiff seeks information all of which falls under the following categories:

  • Documents sufficient to identify witnesses relating to Karpeles’s operation of the Mt. Gox exchange;
  • Documents relating to Class members’ interactions with the exchange, along with their bitcoin and fiat currency holdings;
  • Documents relating to Karpeles’s ability to access and/or control Mt. Gox’s systems or user accounts, including his use of “bots” on the exchange; and
  • Documents relating to unauthorized exchange activity, whether resulting from “bugs” or “hacks”.

Each of these topics bears on the manner in which Karpeles, as the acting MtGox CEO from 2011 until 2014, operated the exchange and interacted with actual and potential customers of the Exchange.

On October 8, 2019, Mark Karpeles filed his reply to the information request with the Illinois Northern District Court. The document, seen by FinanceFeeds, stipulates that Karpeles is unable to produce documents for fear of criminal liability in Japan.

Karpeles explains that, in early 2014, the trustee for Mt. Gox’s Japanese bankruptcy told him and all other Mt. Gox employees to confirm that he had sent the trustee all relevant data, to provide the trustee with any remaining documents, and to erase any remaining data. Karpeles says he complied with those instructions.

As of today, Karpeles explains, the Mt. Gox exchange database is in the possession of the Mt. Gox trustee and Japanese law enforcement, e-mails related to Mt. Gox are also in the possession of the Mt. Gox trustee and Japanese law enforcement, and e-mails related to Tibanne KK are in the possession of the Tibanne KK trustee and Japanese law enforcement. At the time of Mr. Karpeles arrest on August 1, 2015, he did not have any documents or materials related to Mt. Gox or Tibanne KK in his possession.

Karpeles says that Japanese prosecutors provided him with certain of those documents and materials in order to put on his defense in his criminal trial. Any documents or materials related to Mt. Gox that are currently in Mr. Karpeles’ possession were provided to him by the Japanese authorities in that context.

According to Karpeles, Greene’s Motion to Compel should be denied because Karpeles cannot produce the requested documents and communications without subjecting himself to criminal liability under Japanese law.

Let’s recall that Gregory Greene seeks to hold Karpeles accountable for conduct that led to the loss of more than $400 million from U.S. users of the Mt. Gox bitcoin exchange on theories of negligence, conversion, and fraud. The plaintiff alleges that, as the CEO of Mt. Gox, Karpeles controlled all aspects of the exchange: he was responsible for the code underlying the exchange, knew of bugs and other security issues affecting the exchange, and controlled what information was disclosed to Mt. Gox’s customers.

Greene seeks to hold Karpeles accountable on theories of negligence (by failing to protect class members’ holdings using reasonable security measures), fraud (by misrepresenting or concealing the health or stability of the Mt. Gox exchange for the purpose of inducing class members to invest or keep investments on the exchange), and conversion (by abusing his access to Mt. Gox’s systems or enabling third parties to infiltrate such systems and move bitcoin off the exchange without authorization).

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