MtGox civil rehabilitation proceedings may halt US lawsuit against Mizuho
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).
