MtGox civil rehabilitation proceedings may halt US lawsuit against Mizuho

Maria Nikolova

MtGox’s US customers would like to see whether they will receive full or partial compensation in Japan before proceeding with their action against the bank.

The latest updates from Nobuaki Kobayashi, the civil rehabilitation and bankruptcy trustee of ill-fated Bitcoin exchange MtGox, appear to have had an effect on a US lawsuit brought by former customers of the Exchange. Let’s recall that in September this year, the Trustee said he had managed to generate a significant sum via the sale of Bitcoins. A special trust was also established.

This piece of news, as well as the recent developments around the filing of civil rehabilitation claims, have impacted the lawsuit brought by Joseph Lack, an ex-customer of MtGox in California. The action targets Mark Karpeles and Mizuho. The bank is accused of creating transaction difficulties for the clients of the exchange around the time of its collapse.

On Monday, October 1, 2018, Joseph Lack and Mizuho filed a Joint Report with the California Central District Court, asking for a stay. In the document, seen by FinanceFeeds, the parties explain that the effect of the civil rehabilitation proceeding in Japan is potentially significant to claims asserted in the US case, particularly because the appointed rehabilitation trustee announced that the Mt. Gox estate may have sufficient assets (following the sale of a sum of bitcoins held by the estate, which has left the estate with cash assets greater than $617M in USD, along with over 143,000 in bitcoin) to pay in full the claims of Mt. Gox users who lost money or bitcoin when Mt. Gox collapsed, including Lack and potential members of the putative class alleged here.

The rehabilitation claims period closes on October 22, 2018. According to documents published by the rehabilitation trustee, those claims will be approved (or not) by January 24, 2019, followed by the submission of a proposed rehabilitation plan (providing for any modifications to rights of civil rehabilitation creditors and a payment plan) on February 14, 2019.

The parties recommend that the case against Mizuho is stayed until February 28, 2019. At that time, the parties expect to have an indication of whether Lack and other members of the putative class are likely to receive full or partial recoveries through the Japanese civil rehabilitation proceeding (an outcome that may affect the scope of the class that the plaintiff will seek to certify in this case) and, thus, will be better positioned to make an informed recommendation to the Court about appropriate next steps in the case.

Joseph Lack, who brought this action, is a resident of California. He joined Mt. Gox in January 2014. Upon joining, he 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 unresponsive. Lack waited in vain for his deposit to appear in his Mt Gox account and he did not succeed in getting his money back.

Accordingly, Lack brought an action against Karpeles and Mizuho. Lack alleges that Mizuho had a duty to disclose material information to him and the other depositors. Also, the plaintiff accuses Mizuho of intentionally defrauding him by concealing that the bank was no longer accepting withdrawal requests. Furthermore, the plaintiff alleges that Mizuho caused him damage.

In late August, Judge R. Gary Klausner nixed an attempt by the bank to appeal an earlier Court ruling. Mizuho had tried to prove that by passively accepting wires from Californian residents it did not technically commit anything, especially, anything targeted at the Californian plaintiffs in this case. The Judge did not find such argumentation convincing and sided with the plaintiffs.

The case is captioned Joseph Lack v. Mizuho Bank, Ltd., et al (2:18-cv-00617).

Read this next

Executive Moves

Christine Kiener joins Saxo Markets UK as Head of Institutional Sales

“I have been very impressed by the strong track record, clear strategic pathway and ambition of the Saxo business. I am excited to start working with the team to further grow the institutional footprint which has been established in the UK.”

Industry News

CFTC charges Rathnakishore Giri with $12m Bitcoin ponzi scheme

“Identifying and policing fraud in these emerging markets may be difficult or delayed in light of the agency’s limited visibility in these markets”, said CFTC Commissioner Kristin Johnson.

Institutional FX

AbbeyCross raises $2.47m to develop FX market infrastructure for EM currencies

Many EM currencies are currently traded without full-price discovery, creating an unlimited compliance and regulatory risk.

Digital Assets

YouHodler enhances Multi HODL: faster rates and execution, lower fees

“We know some traders mentioned freezing issues when opening or closing a Multi HODL deal. Now, those problems are completely gone”.

Industry News

ASIC bans Funds United Pty director for six years

The six-year ban will prevent Ms. Hutchinson from controlling an entity that carries on a financial services business, and performing any function within the industry.

Inside View

Brave new world: Recruitment of fintech talent in the new UK immigration environment

In this article, solicitor Denise Osterwald outlines what UK businesses should do to attract top talent from abroad.

Digital Assets, Interviews

FX goes Crypto: Exclusive interview with BVNK’s Jonathan Cumberlidge

BVNK is the new name in the City of London. Co-founded by ex-TradFi Chris Harmse, Balfour Group founder Jesse Hamson-Struthers, and ex-TrueLayer George Davis, the firm provides a single platform to bridge fiat and crypto together. 

Digital Assets

AAX ranked world’s second largest spot exchange, only behind Binance

Crypto trading volumes experienced their first surge in activity since March as the majority of digital assets began their recovery from the recent grim price action, according to a new report by Cryptocompare.

Digital Assets

Bitpay teams up with Cardlytics to provide 15% cashback rewards

Crypto payment service provider Bitpay announced a partnership with Cardlytics Inc (NASDAQ:CDLX), which it says will offer more rewards for BitPay cardholders on its platform.