Mt. Gox Victims Must Take Claims in Japanese Courts
Since its implosion back in 2014, the Mt. Gox exchange hacks continue to loom large within the cryptocurrency ecosystem. The US District Court for the Eastern District of Pennsylvania decided recently it does not have jurisdiction in a case regarding Gox victims and a bank closely associated, in effect condemning victims to redress their grievances at the scene of the crime, Tokyo, Japan.
Gox Victims Must Take Claims in Japanese Courts
Gregory Pearce, according to court documents, picked the perfectly worst time to attempt withdrawing $5,900 through Mizuho Bank Ltd of Tokyo, Japan. The bank had the sole US market for Gox withdrawals and deposits at the time. Mizuho and Gox were both under suspicion for crimes, with the bank allegedly regarded as funding organized crime in various aspects. Gox, then processing something like 70% of the world’s bitcoin, was similarly under investigation for suspected money laundering.
According to the court decision, “Mizuho facilitated international cash wire transfers from Mt. Gox users into the exchange and processed user requests to withdraw fiat currency from the exchange to their outside bank accounts,” the judge wrote. “When an user wanted to deposit money in their Mt. Gox account, Mizuho would accept the payment that had been wired through the user’s outside banks and deposit the funds into Mt. Gox’s Mizuho account. Such wire transfers not only designated Mt. Gox as the beneficiary of the wire and Mizuho as the beneficiary’s bank, but also included the Mt. Gox user’s account number to which the funds were to be directed.” He continued: Likewise, when an user wanted to withdraw fiat currency from their Mt. Gox account, Mt. Gox would provide the request to Mizuho for processing. Such requests included the user’s banking details and the amount to be transferred. Mizuho would then transfer out the requested amount to the user’s outside bank.
Right around this exact time, exchange clients began agitating about not being able to withdraw from accounts. Either unknowingly or willingly, the bank continued to take deposits and collecting requisite fees up until Gox, rather than the bank, blocked users. Mr Pearce was among them. He received notice of a “delay” for international withdrawals.
Mizuho Off the Hook in US
The rest is cryptocurrency history, and the broader community has been fighting Gox and its creditors and receivers to get at funds owed. Mr. Pearce brought a class action against Mizuho, claiming it had balked on its contract. He also brought claims of fraud and negligence against disgraced exchange CEO and president Mark Karpeles. Unfortunately he brought his suit in the wrong jurisdiction, Philadelphia. Mizuho quickly moved to have the claims dismissed on the grounds the bank is a Japanese company operating under Japanese law, and therefore a US court was clearly out of bounds. The bank doesn’t have a single employee in Philadelphia, much less a branch. Other than Mr. Pearce being a resident, the bank’s ties are exactly zero. Judge Robert F. Kelly agreed, granting the dismissal.
The court affirmed not having general jurisdiction in this matter, arguing Mr. Pearce didn’t establish “a prima facie case for specific jurisdiction over Mizuho.” Beyond even that, it wasn’t clear to Judge Kelly the bank had any idea Mr. Pearce was requesting withdrawal (the spark of the whole matter). What this might mean for US victims in the Gox case all together is unclear, going forward. At the very least, the US judicial system is of little use. It appears that for US victims they’ll have to either file in Tokyo proper or hitch their claims to a larger class action suit filed in Japan.