Mt. Gox bitcoin exchange founder asks court to dismiss fraud lawsuit

By Jeff Benson

One chapter of the long-running Mt. Gox saga may soon be coming to a close—if the exchange's former CEO gets his way in court. 

In a motion filed on January 7 in Chicago federal court, Mark Karpeles asked the court to rule in his favor without sending a class action lawsuit brought by Gregory Greene, a Mt. Gox customer and Illinois resident, to trial. The initial lawsuit against him was filed in February 2014, the same month Mt. Gox—then the world's largest bitcoin exchange—abruptly halted trading and sought bankruptcy protection in the wake of an apparent theft of 850,000 bitcoin from the exchange's hot wallet.

As the lawsuit has meandered through court for the past six years, Greene has amended his complaint four times, most recently in March 2017. What remain are three counts: conversion, negligence, and consumer fraud.

The first count argues that Karpeles illegally assumed control of Greene's—and others'—bitcoins. The memorandum in support of Karpeles' summary judgment motion says there's no evidence of that because "Mr. Karpeles did not assume control, dominion, or ownership over any bitcoin or fiat currency from Mt. Gox."

The second count argues that Karpeles was negligent in safeguarding users' bitcoin from misuse. Karpeles' motion makes two assertions—that Greene has supplied no evidence that Karpeles acted negligently, and that, even if he did, Illinois law doesn't cover the claim Greene is making.

The final count argues that Karpeles acted deceptively by misrepresenting the services Mt. Gox provides and claiming that bitcoin would be safe and available for trading. Karpeles' motion again refutes this, saying Greene's "allegations are untrue and unfounded." It makes a meal of pointing out that in discovery Greene didn't remember what the company's terms of use actually said, nor could he point to specific marketing or website materials that were deceptive.

Karpeles has been fighting fires on multiple fronts since the fall of Mt. Gox. He's been able to put out some of them. A Tokyo court acquitted him of embezzlement in March. It gave him only a suspended sentence for falsifying data, which he's appealing despite the lack of mandatory prison time.

Since the summary judgement motion asks for all the remaining charges to be disposed, Greene's lawyers will likely be filing an opposition to the motion. Seeing as how the case has been going on longer than Mt. Gox was an exchange, maybe it's too early to project victory for Karpeles.

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