Mizuho says not liable for “passive receipt” of MtGox’s deposits

Maria Nikolova

Mizuho insists there was no affirmative action on its part when it accepted the deposits from MtGox’s customers.

The disagreement between former customers of ill-fated Bitcoin exchange MtGox and Japanese bank Mizuho is worsening, as the bank continues to insist that it is not responsible for any damage suffered by the clients of the exchange who put money into MtGox’s account with the bank but could not then withdraw what they deposited.

The bank’s silence argument persists – at least this is indicated by the latest documents it filed with the California Central District Court earlier this week.

Let’s briefly recall that the case against the bank, captioned Joseph Lack v. Mizuho Bank, Ltd., et al (2:18-cv-00617), accuses Mizuho of intentionally defrauding MtGox’s clients by concealing that the bank was no longer accepting withdrawal requests.

According to the complaint, when MtGox’s head Mark Karpeles refused to close Mt. Gox’s account at Mizuho, the bank implemented policies it kept secret from the public that were seeking to frustrate Mizuho’s relationship with Mt. Gox. Thus, Mizuho limited and ultimately stopped processing international wire withdrawals from Mt.Gox’s Mizuho account. Mizuho, however, continued to accept international cash deposits into the Mt. Gox account.

In January 2014, plaintiff Joseph Lack, a resident of California, joined Mt. Gox. Upon joining, Lack wired $40,000 to Mt.Gox’s Mizuho account. Mizuho accepted the transfer and collected the transaction fee. On February 24, 2014, the website of the exchange went dark. Lack waited in vain for his deposit to appear in his Mt Gox account. He did not succeed in getting his money back.

Now, Mizuho insists that it is not responsible for any damage caused to Lack and other depositors as it did not commit an act. The bank says it was a simply a passive recipient of wired money.

Mizuho also argues that the action brought by Lack puts defendants like Mizuho – including but not limited to foreign banks accepting wire transfers – in a position where they are subject to jurisdiction in every U.S. state based on a policy that they applied to all their worldwide customers equally and did not “expressly aim” at any state in particular.

According to the bank, it risks being subject to personal jurisdiction in courts all over the world based on its silence and passive receipt of information from individuals who interact with a company’s website, wire money, or engage in other forms of e-commerce. Mizuho argues that such an outcome would be contrary to the Supreme Court’s jurisprudence because it would subject the defendant to personal jurisdiction in various forums in the absence of any intentional affirmative act by the defendant in or expressly aimed at the forum state.

Putting it briefly, Mizuho argues that it did not commit any action by receiving money and that the bank’s passiveness did not target anybody, including Lack.

According to Mizuho, its passive receipt of a deposit by wire transfer sent by Lack in California to Mt. Gox’s bank account at Mizuho is similar to the passive, open-to-all-comers activity. By holding that Mizuho’s passive, indirect contact with Lack is enough to subject Mizuho to personal jurisdiction in California simply because Lack initiated his wire transfer there, Mizuho could be haled into court in every state in which a Mt. Gox customer initiated a wire transfer (and, if foreign courts were to adopt the same principle, in any non-U.S. jurisdiction where a customer initiated a wire transfer), even though Mizuho did not take any affirmative act manifesting its intent to target those states.

Mizuho requests that the Court certify the Order for interlocutory appeal to the United States Court of Appeals for the Ninth Circuit.

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