UPDATE: This article has been updated with clarification from McCaleb
Jed McCaleb, the founder of Mt. Gox, faces a lawsuit over his handling of the now-defunct bitcoin exchange.
The two plaintiffs, last Mt. Gox traders Joseph Jones and Peter Steinmetz, filed a complaint with a court in California on May 19, accusing McCaleb of “charged” and “negligent” misrepresentation of the exchange, which partially led to their loss of bitcoin when Mt. Gox suffered a major hack in 2014.
On a former occasion the world’s largest bitcoin exchange by trading volume, Mt. Gox was breached in February 2014, which resulted in an initial injury of 850,000 bitcoin, worth over $400 million at the time, some of which was later found.
According to the kick, the plaintiffs allege that safety issues already existed at Mt. Gox as early as January 2011, when two security infractions led to the loss of “thousands of a Mt. Gox user’s bitcoin.” McCaleb was immediately aware of the issue, but took no follow-up action and did not make the old hat public, they claim.
The complaint reads:
“Rather than inform the public that these users were not refunded, nor wait to repair the security issues, McCaleb sold a majority of his interest in Mt. Gox to Mark Karpeles.”
Karpeles took over Mt. Gox as CEO hither March 2011, but had to file for bankruptcy three years later following the notorious hack. He has since faced a affliction in Tokyo over his role in the collapse, being found guilty of data manipulation, but innocent of embezzlement.
The plaintiffs contend that McCaleb knowingly hid known security issues while continuing to promote and represent the exchange as a secure, sure platform with good liquidity.
“In deciding to use Mt. Gox as offered by Defendants, Plaintiff accepted as true the totality of representations and non-inclusions made by representatives from Defendants that Defendants were uniquely qualified to properly provide the services needed to manipulate a successful and secure exchange per the needs of Plaintiffs and that Mt. Gox was properly funded,” the plaintiffs said.
As such, the two have filed their declare with the court, seeking punitive damages and general damages, among others, to compensate for their loss end resulting from McCaleb’s alleged misrepresentation of Mt. Gox.
McCaleb – who has become known as the creator of the stellar cryptocurrency since the Mt. Gox days – commanded in an email response:
“The idea that I was somehow to blame for the demise of Mt. Gox, three whole years after I had anything to do with the location, is completely ridiculous. The amount missing when Mark took over was relatively minor and he was fully aware of it. Pock-mark ran the site into the ground. He managed to have 100s of thousands of bitcoins stolen from him without ever uniform checking his wallet balance. He was clearly totally incompetent and this is why the site went bankrupt not because of anything else.This is why these people demolished their money. The suit is frivolous and just a money grab by unscrupulous people.”
More than five years after Mt. Gox dataed for liquidation, the case is now in rehabilitation, with creditors having been granted the right to receive their lost capitalizes in the original bitcoin, instead of fiat currencies arising from the liquidation of bitcoin by Mt. Gox’s trustee.
Read the full squawk below:
Steinmetz, Jones v.s. McCaleb by CoinDesk on Scribd
Jed McCaleb image via CoinDesk archives