Mizuho not off the hook in the US over MtGox class action suit as judge rules against bank

Two years after the high profile collapse of Japanese Bitcoin exchange Mt.Gox, the class action lawsuit against compatriot banking giant Mizuho which was brought about by former customers of Mt.Gox is still in full swing, yesterday taking a further turn insofar as US District Judge Gary Feinerman having been highly critical of actions taken by […]

Mizuho not off the hook

Two years after the high profile collapse of Japanese Bitcoin exchange Mt.Gox, the class action lawsuit against compatriot banking giant Mizuho which was brought about by former customers of Mt.Gox is still in full swing, yesterday taking a further turn insofar as US District Judge Gary Feinerman having been highly critical of actions taken by the bank.

Judge Feinerman’s understanding is that Mizuho profited from its commercial relationship with Mt.Gox even during the period in which it took action to limit customer withdrawals as a result of concerns about the bank’s liability for deficiencies in Mt.Gox’s business model.

This particular class action suit is actually two years old today, the bank having been added as a defendent in the class action litigation in March 2014, with customers of MtGox alleging that Mizuho aided a fraud by providing banking services to Mt.Gox.

Mizuho held non-bitcoin currency on behalf of Tokyo-based Mt. Gox and its customers, according to the amended complaint by Gregory Greene, an Illinois resident who has said he lost $25,000 when Mt. Gox shut down in February 2014.

The amended U.S. class action complaint was filed in Chicago federal court in March 2014, accusing Mizuho of knowing of Mt.Gox’s fraud, of not segregating funds that belong to MtGox from those of its customers and of continuing to provide banking services that inflated losses for bitcoin customers.

In this latest ruling, Judge Feinerman wrote that “Mizuho knew that if Mt.Gox’s members learned of its prohibition on withdrawals of fiat currency from Mt Gox’s Mizuho account, members would stop making deposits and Mizuho would stop collecting the associated fees.”

Judge Feinerman also alleged that Mizuho engaged in a silencing agreement with Mt.Gox, in order to prevent Mt.Gox from explaining to its customers that Mizuho’s policy was the reason for withdrawal delays and that the bank was looking to terminate its commercial alliance with Mt.Gox.

Additionally, the lawsuit also states that customers who complained about withdrawal delays from the exchange were told by Mt.Gox that they were due to ‘technical problems.’ Notably, the lawsuit alleged that Mizuho knew that these statements were false but did nothing as, the lawsuit stated, it “stood silent while allowing the public to continue being duped.”

The case which was filed in March 2014 as Gregory Greene v Mt.Gox Inc et al, U.S. District Court, Northern District of Illinois, No. 14-01437, is now the subject of a potential relocation.

Judge Feinerman denied Mizuho’s request, however he did state that a new plaintiff would need to be added to the case, otherwise the case will need to be moved to the Central District of California.

“Plaintiffs have not established that Mizuho Bank had sufficient suit-related contacts with Illinois to meet the standard articulated in Walden v Fiore, or that their claims arose out of Mizuho Bank’s contracts with Illinois,” stated Judge Feinerman in his court records.

As a result, Feinerman stated that the case should be moved to California, as plaintiff Joseph Lack transferred funds from his local bank to Mizuho.

“Mizuho knowingly accepted a deposit from a bank it knew to be in California and from somebody it knew to be a California resident, knowing that it would not allow that money to be withdrawn, despite having concealed the no-withdrawal policy for the purpose of enticing such deposits,” he wrote.

Photograph: Downtown Chicago, Illinois

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