Bitcoin Forum

http://gawker.com/massive-bitcoin-business-partnership-devolves-into-75-487857656?rev=1367540238

This is gonna be interesting given that there are very high profile Bitcoin people on both sides of this lawsuit (Roger Ver is a CoinLab investor).

I predict a 25% loss in value by this time tomorrow evening.

Just make sure this is a true story before spreading it everywhere.

Yesterday we had false story of MtGox being raided by police. Today MtGox being sued for $75m.

It might well be true, but please someone contact CoinLab first to verify.

"Coinlab is demanding $75 million in damages, and even that, it says, "likely underestimates the actual damages.""

Lawyers normally demand far more damages than "actual damages" - is this really real?

CoinLab have already said they haven't been served yet.

CoinLab are the people serving the writ. Its MtGox that said they haven't been served yet.

Wonder what would happen if they disable those customer accounts right now...

That's what I said  ;D

Are you looking to buy cheap Bitcoins?

There's a link to the court documents in the Gawker article.

http://www.scribd.com/doc/139160091/Coinlab-v-Mt-Gox

If this is legit and Gox hasn't yet been served then it would be because Coinlab's attorneys have already filed the suit, but have yet to serve. A court house search in that jurisdiction would confirm or debunk this, but that won't be possible until tomorrow anyway.

Trouble with that document is it's hard to verify it's authenticity.

In the meantime, maybe someone's trying to pick up some cheap Bitcoins.

Could be real even if Gox hasn't received the Complaint yet.  Federal civil actions must be filed with the court before serving the defendant.  See below.

http://www.law.cornell.edu/rules/frcp/rule_3

Possible. However, in the document it says it was filed May 2 (today), so it's very reasonable that it hasn't been served yet.

If real, the complaint should be available at http://www.pacer.gov/

*edit*

I couldn't locate the case on PACER.  I'll check again tomorrow.

no court stamp on the Doc that I can see

Yet another lawsuit involving Mr. Ver.  There go some more of my tax dollars to support Bitcoin participants.  I'm not complaining per-se...but sheesh.  Can't these guys just shoot eachother or something?

Doesn't the losing party in civil court generally pay court costs?

Certainly not if they are indigent.  "Can't get blood from a turnip" so they say.

Amazing!

This news has helped stabilise the price on Mt. Gox.

And based on the terms alleged in the complaint it appears that MtGox's attorneys would be grossly negligent and extremely poor negotiators. Thus, most likely fake and simply someone trolling and Gawker going after page views. Also, no court stamp and not showing up in PACER.

And the story breaks at the last possible moment before a long weekend in Japan.

Europe's in bed too and hasn't all of US just closed (after 5PM)?

Interestingly I just tried to log in to my Mt. Gox account and nothing happens.

I don't often log in since I don't do any trading, but I've used this same machine before without problems.  I guess it's off to the 'service' board to see if others are having similar difficulties.

I'm logged in fine if that makes you feel any better.

You both in US/Canada?

UK

To be fair I logged in about 40 mins before the news broke.

There's a case number at the top and it looks like the court accepts electronic filing.

If it's a troll, it's one into which someone with legal knowledge put a lot of effort.  It refers to aspects of the agreement which were not public knowledge.


Not even "before".  Its almost 24 hours since business closed for the long weekend.  It's Friday in Japan now and it's a holiday today - as is Monday.  The 4 day holiday weekend is already underway.

It's sure as hell going to make Bitcoin Foundation board meetings uncomfortable.

I'm also from the USA and unable to log into MTGox at this moment.  Clicking on the yellowish "Login" button, after entering my username and password, does absolutely nothing.  No error message.  Nothing to even confirm or deny having received the request.  I was logged in earlier today without any problems.  Weird.  

If MTGox doesn't have enough money to pay any award, are we looking at a Cyprus-like event?  Will MTGox take what it needs from depositors? 

My guess is that MTGox is worried about a mass transfer of coins out of their deposit coffers...

It's on PACER, had to go directly to West Washington DC's site, and search 'Coinlab'. I just RECAP'd* the complaint so we can all read it (doc 1): http://ia601700.us.archive.org/8/items/gov.uscourts.wawd.192566/gov.uscourts.wawd.192566.docket.html

There's a much larger exhibits file, if anyone has a fresh PACER account and wants to RECAP it too. I don't want to go over my free PACER threshold.

The cover sheet is typically just court clerk business, uninteresting.

The Praecipe for Summons is the initial request by one side to ask the Clerk to issue a Summons to the other side in a lawsuit.

* https://www.recapthelaw.org/

Double-confirmed, so almost certainly legit, and Mark seems to be implying guilt, heh.

/sub... Its cool to wake up at 3am in the morning and discover things.

Me three (in USA). Can't login to MtGox. No error, nothing. Tried 6 different browsers, 2 different computers.

The site is working fine here and it's very responsive too.

Same here (U.S.)

Seems to line up with the lack of trading over the last 10 minutes or so. 

I'm in the US also.  Using chromium everything about the cert looks in order.

It would be interesting to know if anyone from outside the US (and our territorial possessions like Canada) is having the same issue.

Can't get in either.

Dito Can't get in either.

Do they try to prevent panic selling?

More likely there's a run of people rushing to withdraw and it's overloading their system.  Their response times are pretty shitty on weekends anyway.

Alternately, www.mtgox.com/login works (thanks, INAU!)

I've only heard people's pet theories that they do by slowing down user access during panic selling periods but I reckon it's just their kit being overloaded.

Can't sign in from the UK. Works fine on my phone using the mobile site though.

this link works fine www.mtgox.com/login

I'm still reading, but so far, it looks like the suit will likely be tossed.  The contract will likely be nullified.

Your bank, brokerage, etc, etc, can't just sell your account to someone else, and a contract to do so would not be valid.  There are complicated hoops that you have to jump through for that.

What a dumb way to prevent their users to login... Another proof of mtgox's professional coding skills.

Can't login either from Canada using Chromium and Firefox.

http://www.mtgox.com/login is working.

Was able to panic withdraw by going to the above login link. Thx.

Yes, unless all compliance issues in all countries were resolved, the contract is void. Also they can file they all want in USA, MTgox has no exposure in USA.

I can see the terrible headlines already.

Same nonsense spread by "doom and gloom" bears again, I and many others have seen gox becoming slugox when price went up countless times.

Confirmed.  The problem seems to center on the LOGIN script on the main landing page.

Is anyone from outside the USA able to login from the main landing page?  Or does the script error on the main landing page affect everyone, regardless country?

Posted in another thread about the same issue:

http://coinlab.com/status

I am sure there are hoops, but they can certainly sell your account to someone else -- and without any input or say-so from you, the customer.  This has occurred to many of us who have had the misfortune to bank at a brick-and-mortar bank -- only to see it bought up by a mega-bank.

U.S. federal district courts are where you sue international parties.

http://books.google.com/books/about/International_Litigation.html?id=cSI41AY1jM0C

Surely you see the difference.  Selling an account is one thing.  Selling a bank is a whole 'nother story.

confirmed the link www.mtgox.com/login works

Main page started to work just fine.

Not the first time the login on the front page has broke, just saying. Whenever they are under high load the ajax stuff starts to time out.

There's very little trading going on at the moment.

Lawsuits are about forcing the other party to the negotiating table.

Banks take over the customers of other banks all the time, so I wouldn't assume a priori that this is a frivolous lawsuit.  Very often the ToS of financial institutions state that they can pass your information to third parties to provide services on their behalf (remember that this is what we were told the deal was - and the complaint tends to support that) as long as the third parties adhere to the same data protection standards.  

Where there's some confusion is that MtGox originally said US customers would need to agree to new ToS with CoinLab whereas CoinLab's website said customer funds would be automatically migrated without customers doing anything - so there was no "opt-out" provision.


Without reading the original agreement - which is presumably among the exhibits - we don't know which jurisdiction governs the agreement.  It's not like it's impossible to get a court order domesticated in another country (and for tens of millions of dollars, you'd bother doing so).

I very much doubt that MtGox has anything approaching $75 million, though so the question becomes what non-cash assets the plaintiffs would be willing to accept in settlement.


So the deal allowed CoinLab to service customers outside of the US and Canada after the first two years.

No, actually -- I see little difference.  I can use my experience with Verizon as an example.  They sold a PORTION of their customers to Frontier.  

Thanks.

Interesting side effect of this little spat is that the original Mt.Gox/Coinlab License Agreement is now public knowledge:

http://ia601700.us.archive.org/8/items/gov.uscourts.wawd.192566/gov.uscourts.wawd.192566.1.1.pdf

How to make a statement and say nothing.

He should be in politics. :D

Poland cannot login from the main page either.

Well that's a bummer. I was looking forward to having a fincen-compliant exchange tied to a US bank, which should make transferring funds in/out much easier. (Or heck, open an account with the bank itself.)

Yep, sounds like Coinlab is run by a bunch of greedy litte bitches.

the point of contention:


Basically coinlab must of expected mtgox to freeze all North American accounts until they could be handed over to coinlab.
MTGox would have to be insane to do this as they would suffer a mass exodus of clients during the transition period.

Shame Mt. Gox didn't pick up on that before signing the contract.

Talking about crashing Bitcoins this will do it.

When they sue, why not sue them for bitcoins?

+ 1

http://ia801700.us.archive.org/8/items/gov.uscourts.wawd.192566/gov.uscourts.wawd.192566.1.0.pdf

Bitcoins are not legal tender in the United States (or anywhere for that matter). 

Courts award damages in legal tender.  If I wreck your priceless antique car the courts can't force me to find another one, they can't however (if they find I am liable) award you damages in the value of the car. 

Courts ONLY award damages in legal tender.  If two companies had a dispute over gold, or computer chips, or barrels of oil the damages would only be in legal tender which for these United States is the Federal Reserve note.

Did you read the agreement?  It's written in USD.

Looks like CoinLab managed to convince MtGox that the agreement should be under US jurisdiction. Impressive.

This is true for judgments at law.  Not for judgments at equity.  Courts can get very creative with their judgments if you frame your complaint that way.

Seems like Mt. Gox lawyers were asleep at the wheel.

That said, I'd bet they'd accept payment in Bitcoins if offered.

They might have a bit of trouble exchanging them if they put MtGox out of business.

Incorporated in Delaware who charges no income tax on corporations not operating within the state, suing MtGox for 75000000$, surely Coinlab has the well being of the Bitcoin community as their number one priority and money doesn't matter to them.

I understand why the first instinct is "price will crash sell now"... but if people are worried about Mt.Gox losing this lawsuit, wouldn't they buy and withdraw bitcoins instead of sending Mt.Gox more bitcoins and/or leaving their fiat potentially trapped?

That's an interesting way of looking at it.

I believe that running the bicoin exchange of the size of that of MtGox is a profitable business now and should be even more profitable in the future.

Why would MtGox sell the operations generated on North American clients so cheaply (the revshare described in point 4)? - 60% on current customers and 10% on new ones while they could very well enjoy 100% of old and new ones by running the operations by themselves?

From: http://coinlab.com/status (http://coinlab.com/status)
That sounds to me like the competitor/customer he's talking about Coinbase, the amazingly convienient way to buy bitcoins that you can never use because they're always sold out.

So much this. Buy, withdraw, and rest assured that you can sell later and not have your money frozen as part of the settlement.

I can see that Coinlab was supposed to pay to MtGox for transfer, here is a scenario:

MtGox to Coinlab: It will take 5 million dollars to develop a solution to transfer all customers safely
Coinlab: WTF
MtGox: Read the contract
Coinal: I'll sue you for 75 millions

At least the folk worried that they could never get in for less than $100 can fill their boots.

It's in PACER now.

http://ia601700.us.archive.org/8/items/gov.uscourts.wawd.192566/gov.uscourts.wawd.192566.docket.html

http://ia601700.us.archive.org/8/items/gov.uscourts.wawd.192566/gov.uscourts.wawd.192566.1.1.pdf

Just recently requirements that foreign financial service providers report the investments of US citizens to the IRS and collect tax for the IRS were implemented.  Japan is one the the nations implementing this.  Major foreign banks and trading firms have been dumping US customers for a while now.  An agreement like this one would allow MtGox to evade that requirement while still profiting from a US customer base.

Yeah, dammit.  Coinbase would be amazing, if they ever had bitcoin.  Better than an exchange, actually:  keep bitcoin at Coinbase and fiat in your bank.  As long as you have some personal liquidity it's much more secure that way.

Thought of this as well. Still unlikely though. Curious to see as what will happen.

Not to mention dropping this little bomb just before a long weekend in Japan.

Wankers... All of them.

What's the significance of the long weekend?

Banks closed in Japan till Tuesday. The BTC to fiat flow just became a one-way street. It's almost like they're trying to destroy Bitcoin, on purpose.

What is the worst case scenario for Bitcoin, Bitcoin users and MtGox clients?

When will the court proceeding realistaically take place? Will there be asset freeze? Etc?

I doubt this will ever even make it before a judge. If it does ever go to trial, it would be many months till a decision came down. But this is mainly about the optics, really.

MtGox: we determined it was a bad idea to go through with giving this shady looking individual the banking credentials and passwords of non-consenting users, especially since he got into the scamcoin business.

Me: Hey coinlab, where can I serve you notice? Me and 1000 others will get default judgements against your "company" in every state of the union, even before your lawsuit with MtGox is dismissed in summary judgement.

You would be the wrong group to have on your/anyone's badside.

Do you think it is credible to cite a $75MM loss on a $500k investment?   hmmmm.
what a joke these people are.   need some grown ups.

What do you guys make of this ?

http://coinlab.com/status

Is it professional ?


Here's an excerpt:

 ::)

I wonder what fraction of that percentage is CoinLab's?

No MtGox support staff there to approve wire transfers or large withdrawals.

Need to get rid of this calvin and hobbes type of backyard clubhouse behavior.   grow up.   deal with the real world.  this is not some video game world that you are playing in.   If coinlab is credible and wants to be seen as credible, go down to palo alto and get 20MM of funding and play like an adult.

i spot the same personal cues you are hinting at. also the pirateat40 reference is a fracking internet handle, so i got real turned off at that point in terms of quality of release. i don't really care much for coinlab as a business entity.

edit: those are all non-professional opinions :) i'm new here.

Is this not appealing to our humanity? A little bit of humility doesn't hurt, does it?

Edit: Granted, it doesn't speak of high business.

No you didn't. You said "CoinLab have already said they haven't been served yet". The people doing the suing don't get served anything.

 ::)

Gosh, if only I'd removed the evidence to the contrary!  :-\

Just proves the bitcoin "business community" is still full of school children instead of business people. Take the bitcoinATM example yesterday.

Bring on the day when real business people start exchanges up. Then bitcoins will show their reveal value. Until then, expect squabbling kids to cause major crashes and pick up some cheap bitcoins.

Some history there?

Forgive me if it's posted somewhere in this thread.  But has the complaint been posted online yet?  I'm anxious to read it.  

Just saw it.  Nevermind. 

Yep.

If you can manage to make it all the way through the first post, it's on the page that the link goes to.


Edited: For clairty

Bitcoinica lawsuit still hasn't gone to trial so no time soon.

Nobody's lawyer is going to be advising them to actually take this to trial.  There'll be lots of negotiations back and forth in an attempt to reach a settlement.

This is sure going to make the Future of Payments conference interesting...

Why would anyone trust Mt Gox in any business relationship after this?

Because they control a very large, tasty pie and greed will convince them too.

Most lawyers suggest that you only spend as much on fees as you can credible get back from the party you are suing.  No pockets = little sense in suing.   On this issue, do you really think some federal judge will consider than anyone could lose $75MM on a $500k investment?

First thing I notice:  There's a big typo in this complaint.  

I guarantee the drafting attorney meant to write in Paragraph 3: "This is an action for damages in excess of $75,000.00 excluding interest, attorneys’ fees and costs."

Instead the complaint says "$75,000,000.00".

The federal diversity statute 28 U.S.C. § 1332 requires the complaint to be in excess of $75,000.  I have never seen any federal complaint when any number other than $75,000 is written in this paragraph.

So the $75 million number that is being thrown around is quite simply wrong.  

I'll continue reading the complaint now.  That's as far as I got before I noticed that.  

Edit:  In fact, there is a liquidated damages provision in this contract.  So the MOST under any circumstances they could get would be $50 million.  I'll have to lookup WA state common law on liquidated damages though to determine how the court will analyze this provision.

I'm tempted to say, I told you so, but at least it seems that my reservations (or rather questions) towards Vess were warranted.

Here's an old thread that could be relevant:
https://bitcointalk.org/index.php?topic=148147.0;all


I don't know what Coinlab is trying to achive by suing MtGox like this. First off, if they intend to do business on the US/Canadian market, they need to have trust in their userbase. Knowing about all the scammy operations in Bitcoin-land, any new player must be super careful to build confidence in the community and with customers. You don't build confidence by suing the largest Bitcoin exchange for 75million dollars. I don't know how hard they've tried to get MtGox to cooperate, as we all know it can be slow getting MtGox do do anything, as they're swamped with requests. But I would think Coinlab has more effective channels of communication than the usual customer service channel.

Also - if Coinlab want MtGox to cooperate, then suing them won't make them much more cooperative I would think. So it seems to me that Coinlab is burning bridges and attempting a very opportunistic lawsuit. I also read in the lawsuit that Bitcoin is the most successfull kind of digital money. As Bitcoin has less market share than Paypal for instance, I don't think that's an accurate statement.

I'm looking forward to a statement from Mark Karpeles regarding all of this.

Edit: Someone else in this thread claims it must be an error in the court document, and that it's not 75 million dollars but 75 thousand dollars. That's quite a difference..

Looks as if Peter has thought better of his press release and edited out the less professional elements.

Did anyone save a copy of the original?


Ooops! Looks like I was reading the wrong page.

Business Plan

1. Receive 500k
2. Sue MtGox
3. Profit

American Dream...

Nope.  Washington State has personal jurisdiction over Mt.Gox due to the contract Mt.Gox signed with CoinLab. 

More drama in bitcoin land, it seems.  reddit is worth reading too.

http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues_mtgox/c9rfq4p

Gox update:

https://mtgox.com/pdf/20130503_coinlab_lawsuit.pdf

No mention of Pirate? No mention of the forum dwellers that dislike and distrust him?

I'm kind of coming to the same conclusion just based on the contract I'm reading.  I really want to see Gox's answer.  Won't get that for probably 30 days or so though. 

I bet this has totally fucked Mark's plans for the long weekend...

FYI: The 75 millon sum is mentioned several places in the lawsuit document, and there's also mention of a 50 mill clause in the contract agreement between Gox and Coinlab, and it's also repeated in the filing papers, so it looks like it's 75 millions and not 75K.

MtGox wasn't raking in the $$$$$$$$$$$$ when the deal was put together. Perhaps they have decided the deal isn't worth doing now i.e. got greedy and have just pulled out. Whether CoinLabs gets any money out of MtGox only millions of dollars in lawyer fees will decide.

In the meantime, all this shit will be all splashed everywhere. Expect a new 2013 bottom on bitcoin prices, this isn't going to be pretty.

One thing I must mention is that I posted a series of questions regarding the implications of the deal for Canadian MTGox customers and while I was provided with a prompt and appropiate response from MTGox, I have not to this day seen a reponse from Coinlab.  I also started a thread in speculaton back in March on this subject https://bitcointalk.org/index.php?topic=154400.0;all (https://bitcointalk.org/index.php?topic=154400.0;all).  The response from Coinlab was


I also am wating for the formal response to the legal complaint from MTGox. One thing I must say is that there is a lot more to these kind of contract disputes that first meets the eye so I would not rush to any conclusions before the court has passed judgement.

I saw that.  If that was intentional, I do not have anything nice to say about CoinLab's attorney.  You don't do that in your complaint.  The $50 million is fine.  That's the liquidated damages provision. 

Why isn't this a normal thing to do?

Edit: Fixing quote

It's tough to explain, but it's called "subject matter jurisdiction".  Federal courts are courts of limited jurisdiction.  One of the ways you can sue in federal court is if you have total diversity of parties.  Meaning all of the plaintiffs are from different states (or countries) than all of the defendants.  In addition to this, you must plead that you are asking for greater than $75,000 in actual damages, exclusive of interest and attorneys' fees.  I have NEVER seen any attorney state more than $75,000 here.  It's even possible you could piss the judge off, and he might dismiss your complaint for incorrectly citing the statute or you have overstated your claim (especially in light of the liquidated damages provision), which is a sanctionable offense in and of itself.

In the real world, although the jurisdiction is set to Washington state, there is still an international process to be followed as Gox does not have physical or legal presence in the US. To be served the court papers, it must be done through a court-to-court petition (rogatory letter, that cannot be sent by post office) the US court must request the Japanese court with jurisdiction over Gox to serve them the papers officially. Not only the japanese court can refuse ou delay it as much as possible (I've seen such cases take from 6 months to years just on this int'l paperwork come-and-go, it is usually a very very slow proccess even when the Hague Convention is applicable.

http://en.wikipedia.org/wiki/Letter_rogatory

Nothing is going to happen in the weekend. Or for a good number of weekends to come.

From reddit:

http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues_mtgox/


It was also downvoted on reddit, so it wasn't immediately visible. This is petty. If they do something and then can't take the heat, then they should get off the internet, you can't supress free speech online.

Edit: I think the correct statement is that Y-Comb funded Coinbase, not CoinLab, but to my understanding, Coinbase was one of the major customers of CoinLab ?

The Hague Convention.  Damn that was fun in my Conflict of Laws class.   ;D

I've had about enough of this Vess tea-bagger. This lawsuit reeks of frivolity and is well-timed to dump BTC valuation over the weekend.
How hard would it be for anyone with inside knowledge of the lawsuit to pre-sell, then get ready to buy after the panic (Guess what,
there are no "insider trading" laws regarding bitcoin)? There are any number of ways to profit from this lawsuit, and I don't regard
any of them as ethical. Worse still, the lawsuit is HORRIBLE for the bitcoin community and the currency's public image.  Mt Gox needs
competition, but this is precisely the wrong way to create it.

Maybe the thread titled "Should Peter Vessenes resign as CEO of the Bitcoin Foundation?" was NOT premature.
https://bitcointalk.org/index.php?topic=177679.0 (https://bitcointalk.org/index.php?topic=177679.0)

There are talks about some selling not long ago that was done prior to this announcement. I won't mention any names though. But clearly there were a number of persons knowing about the lawsuit before it went public.

The funny thing about this is, that were talking about bitcoins. I can see it now.

MtGox is ordered to pay 75 mill (which wont happen)

MtGox replies "we have no money to pay"

Really they have 1 million BTC but nobody can find it or prove it.

Gotta love BTC

Roger Ver is saying that he knew nothing about the lawsuit until news of it was posted on these forums.

A 75 million dollar lawsuit is a pretty huge thing to keep your investors in the dark about.

https://bitcointalk.org/index.php?topic=193922.msg2013531#msg2013531

Well, I'm seeing Roger as a standup dude, but when there's talk about a lot of money, it's not that easy to know anymore.

Lawsuits tend to bring out the dirt.  If people have been lying, it's going to come out when the parties start flinging shit at each other and I'm damned sure there'll be a ton of people on here reading every single document filed with the court. 

Maybe he's one of those "have money, will send to strangers" type folks?  He seems a veritable gold-mine for a certain class of participants in the ecosystem.

There was an obvious huge sell-side imbalance in BTC market the past few days. But nobody knew...
What goes around comes around. The only ways to counteract this strategy are to: 1) hold your coins,
or 2) wait until the next bull run, and drop your own logic bomb on these twats.

http://news.cnet.com/8301-1023_3-57582688-93/bitcoin-exchange-partnership-dissolves-with-lawsuit/

It's making the rounds.

Why the fuck can @magicaltux get to work immediately on this when he owes us bitcoinica creditors tons of coins first?  Can't gawker or some other website pick up that mt gox has probably been financing their operations with our money this whole time? 

Let's see how inaccurate it is by the time Verge and Wired pick it up.

No such thing as bad publicity? :-\

http://www.theverge.com/2013/5/2/4295638/top-bitcoin-exchange-75-million-lawsuit-international-partnership

The article seemed fine (in terms of info) and what do you have against the Verge?

DISCLAIMER: I'ma Verge fanboy and have been following them since their days of Engadget and ThisIsMyNext.

You can't realistically expect companies not to exercise their legal options because doing so might reflect badly on Bitcoin.

Plenty of people would sue Trendon Shavers if they though they could win in court, and his scam makes BTC look far more shady than any dispute between MtGox and CoinLab.


Mostly that they often pick up stories first published elsewhere and do no fact checking before republishing them.

Relevant: https://news.ycombinator.com/item?id=5648282

If exchanges were decentralized, they would be very difficult to sue.

This is a contractual dispute between business partners.  No amount of decentralisation is going to stop people forming business partnerships or suing one another when deals go sour.

A decentralized exchange would have no need of business partners. In fact, they could even be loosely distributed with a network of brokers. Only brokers would have contractual obligations with their clients. The exchanges would only require licensing.

Mt Gox has bitten off more than it can chew or they would not have reached out to Coinlab in the first place.

Or, alternately, you won't stop people from "executing a planned frivolous lawsuit strategy aimed at destabilizing the top-grossing bitcoin entity, whilst profiting from panic-selling."

Yep, this is why you need lawyers to examine contracts and NEVER sign on (or bet) on something that you do not understand and or that does not cover every detail explicitly.

^ this, Im certain Coinlab is an elaborate money grab scam.

I don't disagree with you about MtGox being out of its depth.  FACTA is a huge game changer for any financial services provider in nations which are implementing it and foreign banks and trading houses started dumping US customers long ago to avoid its requirements.  At least on the surface, MtGox had to scramble to find a way of dealing with it.

That said, I doubt that over the longer term exchanges like MtGox will remain relevant.  Different types of financial service providers will emerge and plenty of them will involve partnerships of some kind.  Start-ups plus partnerships in new industries pretty much guarantees that there'll be plenty of contractual disputes and subsequent lawsuits.  Take it as an indication that Bitcoin business is now regarded as worth suing over.

Stop thinking that Bitcoin is "different".  It's going to see the same kind of business tactics as the conventional business world, regardless of how much Bitcoin enterprises might drape themselves in ideology. 

This is just a demonstration of a simple fact.  You can fuck around with Bitcoiners and all they will do is cry about it like pussies.

Make a contract with venture capitalists and fuck them and they will sue you.  

I don't know who is right yet, but it's pretty obvious MtGox signed a contract and is not following through.  They may have an escape hatch because it's entirely possible Coinlab itself didn't come through, i.e. a "material breach," and therefore, Gox isn't obligated to do it.  But litigation was a predictable result of breaching the contract themselves.  And material breach is an affirmative defense.

Whether or not it's true, assuming they ever actually serve this suit on Gox (they have 120 days after filing), we'll likely be seeing a motion to dismiss of some kind soon.  If that doesn't work, we'll likely see an answer citing material breach or some other legitimate reason for pulling out of the agreement, discovery, dueling motions for summary judgment, and if it doesn't end there, a trial where Gox would have to prove out their defenses, which are mainly affirmative defenses, i.e., the defendant has to prove they apply by a preponderance of the evidence.

It could be Coinlab never even actually serves this or it settles well before trial.  The latter is the most likely alternative.  Neither side has much to gain by protracted, expensive litigation on this issue.  Contract litigation is rarely profitable and the remedy is generally to put the plaintiff in the same financial position he'd have been in had the contract been carried out.  In this case, that's highly speculative and would take a lot of time-consuming expert testimony to establish.

So my guess is we'll see some preliminary sabre-rattling and motion practice, then it'll settle for some sum we'll never know because of a non-disclosure agreement.

So they happened to be psychic and knew that Gox would sign a contract and then immediately just breach it?  They must be pretty smart.  Maybe they deserve that money.

Which is why it's always so amusing to see people chasing VC.  They might be "angel" investors when things go well and everyone gets rich but they're fucking pirahnas when it doesn't and they'll take control of everything you've worked for in a heartbeat given the legal opportunity to do so.

Interesting that the contract between gox and coinlab only had two signatures. The witness was Mark. Could that make the contract void ?

OK, the last part of this bit of the press release is interesting.


http://coinlab.com/press

That is interesting! Did I say interesting? I mean depressing. So angry about this. We had this incredible shot in the sun and it's all been screwed by GOX.

Its ok, taking out the cluster $%^K that is Gox, will open the market to better competitors

No it hasn't.  It's just another bump in the road.  There are really only two possibilities here.

A)  Gox was completely fucked in breaching this contract and will be sued out of existence.  If they did that, they're incompetent and we need a temporary vacuum that can be filled by a competent entity.

B)  Gox was correct to breach the contract, and Coinlab was actually the party that fucked up.  In that case, the ill-begotten scheme to move over U.S. Gox users to Coinlab won't happen (I never thought this was a good idea) and Gox will go on.

In either case, we're fine long-term.  Glad I cashed in at $135, even though as usual I missed the "top."

There's a lot more potential here for disruptive revelations. I'll randomly enumerate a few possibilities.

It could be the case that Mt Gox is unable to deliver the funds they promised to transfer because they don't have them. They could have been operating on a undisclosed fractional reserve of BTC, or of USD, or both due to malice, incompetence, undisclosed hacks, or all of the above. If any of those were true things would get even more exciting than usual.

The more boring explanation is that they just didn't have enough manpower to complete all the steps in time because they were scrambling to keep the exchange operating under the rapidly-increasing load we saw earlier in the year and it took the filing of a lawsuit to get their attention and move this deal to the top of their priority list.

Indeed, Mtgox made a horrible deal with coinlab according to that document.

So coinlab gets all US clients of mtgox and in return coinlab gives 'relationships', 'knowledge', yeah right.

Sign me up Mtgox! I'll get a european license and you give me your european clients and are forbidden to take on any european clients in the future. We will split the profits! :D

Another line:

Coinlab realized (after the FINCEN guidance came out which, iirc, came the announcement but not by much) that it was going to be costly and risky since it was clearly just some opening volleys in the abuse yet to come.  Mark and Peter still needed to give their investors/friends something and what these people want are BTC (being late to the party and finding themselves sucking hind tit to a bunch of geeks and garden variety criminals.)  So they engineer a bubble collapse calculated to shake out the highest number of BTC.  The rather questionable figure of $75M seems a bit pulled from the air which lends some strength to the admittedly far-fetched hypothesis.

dunno how gox fucked this up, or why they would want to handle fiat/money. just run the exchange and get paid in bitcoins from trading fees, let some other fool run the bank funds and take all the heat.

lol so much for the bitcoin foundation

At least as likely as any other explanation I've seen.

No no thats no how it works.  A smart contract is written who's execution is evaluated by all bitcoin miners, and an arbitrator adjudicates and signs the coin multisig releasing assets to the wronged party.  Smart-contracts all the way :)

Adam

This might not be a huge concern for mtgox.

First: it's a big lawsuit so it's guaranteed to take years (not including appeals which wouldn't surprise me).

Second: isn't mtgox owned by a Japanese company now? Where are their servers? Even if coinlab could get some quick injunction to stop mtgox from operating in North America while the suit continues they'd have to actually be able to enforce it. Good luck doing that quickly / at all depending on where mtgox has/moves its servers.

Third: even if coinlab is successful at getting a monetary judgment from mtgox that is where their quest begins - THEN they have to actually go about trying to collect the money from mtgox. Due to the global/international nature of the internet (and the ease at which bitcoins can be "lost") that could also take a significant amount of time.

Unless they can get an emergency injunction enforced quickly, it is likely business will continue as usual at mtgox for quite some time.

I am not sure, but if you look at the complaint on one of the websites, it says that the contract itself included a $50M penalty clause for breach that MtGox had there lawyers review and elected to sign.  If they willfully breached the contract in those circumstances the damage seems more than a bit self-inflicted no?  (I see someone posted a link to the now public contract so presumably that $50M and the terms around it can be verified.)

And its not like MtGox have seemingly demonstrated a lot of competence in the internet facing aspects that we can see (various HTTP response codes indicating overloaded systems from web server, massive lag in processing AML, bewildering array of odd-ball indirect payment methods).

When they finally processed my AML after serveral weeks, they declared it to be "temporarily rejected" claiming it was scanned below 300dpi.  Not sure about that - it looked ok to me in the previewer, and was the default scanner setting, but worse now I have to rescan (paying careful attention to dpi advanced options!) and send it back, and that'll probably take another few weeks.

Oh yeah and my fiat might just be jammed up now.  Maybe that fact is propping up the price even as someone else commented  - people taking out via BTC as better than having fiat jammed in mtgox for who knows how long.  Or people potentially trading jammed fiat for potentially less tradeable BTC (in both directions).  Thats not exactly a great market environment.

I wonder actually if the fiat deposits (and even bitcoins) are firewalled from mtgox liability if they dont settle or lose, in terms of like banking separation of client money.  What I put in there to buy my first BTC* is not going to bankrupt me but its still a nuisance.  (*  Except for $6 a redditor tipped me a few days back)

Adam

I think MtGox agreed to US jurisdiction, thus it may allow a very quick injunction to freeze all Gox assets that a Japanese court would probably just assent to due to the agreement of jurisdiction. I would keep all funds out of Gox until you can see this taking years or not.

You mean like how they also agreed to hand over their NA customers to coinlab? lol.

Doesn't really matter what they agreed to - at the end of the day a court order is only as good as it is enforceable. You can't just take a court order from any random jurisdiction, show up in another jurisdiction waving it around and expect it will be enforced like a court order from that jurisdiction.

Even if a Japanese court was to uphold a US order (no guarantee that they would regardless of what is written in the contract) that process takes even more time and again they could only touch whatever was in Japan. If the servers are in another country (or the Japanese company is just a shell with nothing the court can touch) there might not be a lot that can be done there.

Coinlab could have a world-wide adventure following these guys around the globe with their lawsuit :P

The contract is governed by laws of Canada, USA and Japan, if any of the these countries' law or regulation weren't complied with - the contract is void (it is actually is in the contract).

Data privacy laws, were they followed in all three countries?
Financial regulations of selling private accounts?

Other theory:

http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Under some interpretation, Coinlab would have to pay $15M to get the govt license. They don't have that kind of capital, at least officially.

The deal was made just before fincen "guidance".

Premise: Uncle sam forcing MtGox/Coinlab to comply with financial regulations (simplistically said, pay up huge sum to be a bank, otherwise you'll end up like e-gold). This lawsuit is the the consequence (passing the sucker bag).

Source:
http://p.gw.gd/view/e4f5a9dd
http://bitcoin.stackexchange.com/questions/3757/what-is-the-story-behind-mtgox-and-their-french-bank/3856#3856 (same story, but europe)

Well, according to CoinLab http://coinlab.com/press

Ok there is the classic battle of the forms as to which jurisdiction apply

but in the case where both parties agree to a jurisdiction, then the matter is 99% of the time heard there, and most other countries court will accept this in a civil case.

You don't have to sell anything or reveal any private data. You just in-junct Mt. Gox from removing funds---however usual precedent is an injunction will not sound against normal trade, as if the suit fails, it will have done un reparable damage, and normal trade is just that, not money hiding/siphon off. Further Mt Gox could argue that its is in CL interests to do normal trade as this give more possible money to pay out.

If they get an order against mtgox that's just the beginning. Even if a court is quick to grant relief against mtgox that does not mean enforcing that order will be anywhere close to easy. They could get an order today saying mtgox owes them $75,000,000 - that doesn't mean they'll ever see a dime of the money.

Oh, the hilarity:



http://www.forbes.com/sites/jonmatonis/2013/03/02/bitcoin-exchange-deal-repatriates-assets-to-u-s/

It's a trap?

You have obviously never won nor served an ex-parte injunction on a CEO before or their banks/IT suppliers....can do it in about 2 HRS Max.

I doubt this will be the case here.

Again, serving a piece of paper on someone is next-to-useless if it's not enforceable in that jurisdiction. Even if it is, that piece of paper itself can't actually force them to do anything and if you go kicking down their door and ripping out servers to "enforce" the order yourself, you're not going to be doing yourself any favours.

Oh and why exactly would this be ex-parte? That's not a simple threshold to meet and since they now can't argue that informing mtgox about the application could cause serious harm (since they've apparently already been served with it) or that there is an urgency issue (since they apparently have had time to issue and serve the application and they apparently didn't bring a successful motion at the time) so I'm curious as to whether you had a reason for saying ex-parte or you just threw it in there because you thought it sounded legalish.

You have never had your bank account frozen/garnished have you....that "piece of paper" can do both very quickly

ex-parte is a general term for seeking something (eg relief) when the other party is not present, you will note I said relief would be unlikely to be granted in this case, so thank you for agreeing with me. I for one however would not be leaving funds on Gox for a few days/week at least.

Being compliant in the United States alone is not enough they also have to be compliant in Canada.  As far as I can see Coinlab has made no representations that they are compliant in Canada.

Exactly. So the agreement is void. But it will take time to resolve it, like years.

Blame Canada! (http://www.youtube.com/watch?v=bOR38552MJA)

If you showed up at my bank with a court order from Japan they aren't going to touch my account. The second they improperly touch funds in my account they open themselves up to a lawsuit (and I'm sure their insurance company wouldn't like that). The only way they are going to freeze or garnish my account is if they are legally obligated to and court orders from other jurisdictions are not generally legally binding.



I don't think ex-parte relief at this point would be likely for reasons I said above. That doesn't mean they can't get any relief - if they're asking a court to make a decision affecting a person AND to not allow that person to be there they'd better have a pretty compelling reason as to why that person can't defend themselves. I'm not sure where you got ex-parte from originally though as I never said that was the relief being sought.

Yeah and no.  You're talking about VCs playing hardball here.  We have no reason to believe that MtGox has $50,000,000 in liquid assets so they're going to be willing to settle for something else.  Like IP rights to the trading platform and the Bitcoin trademark.  The plaintiffs could make "a piece of MtGox" the thing they aim for in settlement negotiations (it wouldn't be the first time VCs have basically taken over a company this way).

The question is how long MtGox can go without blinking and whether they'll cave in the face of a long, expensive out legal battle.

They wouldn't show up with a court order from Japan.  They'd show up in court here with the foreign judgment, and depending on the jurisdiction, have the foreign judgment domesticated and enforced, obtaining an enforcement order from the local court.  Then they would serve the bank with an order from the local court incorporating the judgment of the foreign court.

Japan is, of course, party to the treaties which allow this, and United States law has, itself, recognized the judgments of foreign courts both in common law and under statutory law passed pursuant to the mostly Twentieth Century treaties.

sighhhh... Read



also you wouldn't even know they were at you bank, until you tried to use your funds,  and they would be frozen. At that point how are you going to even fund a law suit or do anything...

the bank manger does not give a %^#% about you and will always obey a court order vs protect your account (kinda one of the stong points of BTC/CC ...when you think about it and Mt.Gox could have a lot stashed in BTC, though how they convert it when they are taken out is interesting)

What is strange is that is not the correct MSB classification (at least not since FinCEN "clarification" in March).  FinCEN has deemed that exchangers of virtual currency are money transmitters*, also an MSB but code 409.

http://www.fincen.gov/financial_institutions/msb/definitions/msbKey.html

Maybe Forbes just got it wrong.


* For the record I think this is trying to put a square peg into a round hole and FinCEN should have done it properly by going to Congress getting Congressional approval for creating a new class of MSB related to virtual currency exchange with regs that actually deal with virtual currencies instead of trying to use an existing unrelated classification (with a host of regs which are either nonsensical or pointless when applied to virtual currencies) but that is water under the bridge at this point.

From the "Important Announcements" thread.


Now if that isn't just seven shades of happy horseshit.

Being involved in this lawsuit and being on the so-called "Bitcoin Foundation" board is as clear a conflict of interest as you find.

*I* understand how these things work.

I was replying to an assertion that it's easy to sue a company in a foreign jurisdiction with servers/financial assets in further foreign jurisdictions and how you could quickly and easily start an action against them, get an order, and get that order enforced in a "couple of hours".

Anyways as a party to the action now I think it's highly unlikely they'd get an order in the american court without mtgox knowing about it and then getting that order to japan/wherever, filing to enforce it and showing up at the bank/ISP/etc. and having the assets seized/frozen/etc all without mtgox seeing this coming. So mtgox would still have much more notice than "sorry your accounts have been frozen".  (If they wanted they could play cat-and-mouse and move the assets once the order has been issued but before it has been enforced - the judge would be really pissed but in that case they're obviously thumbing their nose at the jurisdiction anyways.


Well first, depending on the government, being a party to the treaty can be meaningless. I can't speak for Japan but in some countries the government can do what it wants internationally but those treaties will not become actual domestic law until they are properly ratified in the country.

That aside, even if Japan has agreed in certain areas to have the same law as the USA that definitely does not mean an order from an American court will be enforced in Japan. Even if the Japanese court is satisfied that the American court made the correct decision in law it still might decide that America was not the correct forum or that according to their laws the proper jurisdiction was Japan. In that case you'd have wasted tens of thousands and months/years of your time to get a court order that is worthless.

I have never said that it is impossible - only that big lawsuits like this move at a glacial pace when they are dealing with domestic parties and assets - the fact that the company that is being sued here and its assets are in many foreign jurisdictions will only slow this process down further.

So like I originally said, this might not be a huge pressing concern for mtgox as it isn't likely something drastic would happen overnight.

What are the chances of the money and bitcoins being frozen until this is settled?
   

Ditto. That was what I thought before but preferred to e xpress in more simple ways.

Zero unless Coinlabs sue them in Japan. But then only Fiat assets frozen.

I agree, I don't know why people in the 'Foundation' don't just have the balls to tell it as it is. Disappointing statement from Matonis here.

In the recent BTC24 case fiat accounts were frozen in Germany instantlly and in Poland a day later, when the request from Germany arrived.

Your comparison would be insightful IF the BTC24 case was representative of the "average" case. But really (there are other threads for the details), Bitcoin24 was definitely a case of its own. One of my associates still has thousands for euros stuck on the German frozen account, and I told him not to expect them back before months...

Now several members including myself strongly voiced their opinion about the case on the Foundation forum, and I expect a more explicit statement from the Board soon (I appreciate that at least Jon made one).

That's because it was requested by the German state prosecutor.

True, and it was a criminal case, not a civil lawsuit.

Money: the farther removed from the jurisdiction the lawsuit was commenced in, the less likely that is to happen. In this case it's a toss up - although if you're going to ask a court to freeze the accounts you'd better have a good reason why (ie: the person is about to clear the accounts out and run or they have a history of moving the money around to evade courts/collections, etc). In this case mtgox would need the money liquid so they can carry on day-to-day business. It's probably not likely that the company will just pack up and disappear overnight (although that wouldn't be unprecedented) and forcing mtgox to collapse isn't going to help coinlab collect money from them if they are awarded any at trial. So in this case probably not super likely but definitely a possibility.

BTC/LTC/etc.: Not a chance. As long as a crypto-currency has no regulating body that can control it, who exactly would "freeze" the coins? This is one of the things that appeals to people are BTC/LTC. For example, the government can't come in and say "yeah we're broke so anyone with money in a bank account.. well 30% of that is now ours" (I think the situation in Europe was, at least partially, responsible for the rapid rise of the BTC recently... people want to put their money where only they have access to it).

Well, two questions:
1) If someone from the court said to Gox, "You can't allow any BTC withdrawals until the case is settled," would they comply?
2) Is there anyone who can, or would, say that to them?

Then we're agreed on that part.  Also, the number of lawyers with experience in enforcing judgments internationally is limited.  They don't come cheap and if you have to fly them to where you are, they're flying first class.

I also don't believe they're going to get anything like assets frozen before getting a judgment, unless they do something dumb like try to hide them and get caught.  No court in its right mind would basically destroy a business based on a breach of contract case the other side might not even win.  For one thing, seizing Gox assets would basically instantly destroy the value of the company and render it unable to pay any judgment.


But not this part.  Generally, as a matter of international comity, and pursuant to treaties to which both Japan and the United States are party, courts from one country do not act as appeals courts for those of another.  So long as the proper procedure is followed, the United States and Japan will enforce a breach of contract judgment from a court in the other country.

Japan, just as the United States, enforces choice of law and choice of forum provisions, and this contract has an unambiguous agreement to jurisdiction and which law applies.  Neither a Japanese nor an American court are going to tell the court of another country that they got their own law wrong.  I'm not going to say something like this would never happen or that courts never play favorites with a local company, but it's very unlikely in this case.

You might see something like this where one party gets a default judgment against the other, with the other having basically contended there was no jurisdiction the whole time and then collaterally attacking it only when the other side tries to domesticate the default judgment.  But you're really not going to see a Japanese court say a U.S. court doesn't understand its own law.

The U.S. and Japan have deep and lasting business relations, and you don't want to sour that by making contracts between companies unenforceable, because people will stop doing business. 

That's up to gox. If they're serious about the court action it would behoove them not to piss off the judge. That wouldn't really be "freezing" as much as "complying with a court order" though. Freezing accounts basically means preventing people from being able to take their money and run. If gox was going to do that then they surely wouldn't obey the court order.

If they didn't comply with the order coinlab would go back to court to ask for contempt or another remedy but if they are ignoring the first court order odds are they aren't going to follow any further ones (this is where the "freezing" would come into play, but like I said it would be pretty hard to freeze crypto coins).


A judge/court in a jurisdiction that has the teeth to back up their order. I don't know anything about Japanese law but since gox is owned by a Japanese company I would imagine a Japanese court could take action against them. Even if they bank accounts are in another country a Japanese court could at least mess with what is in Japan (for example, cancelling their business licence or revoking their charter.. or perhaps piercing the corporate veil and allowing coinlab to take action against the personal assets of the owners of the company.




Exactly - coinlab would have to make a pretty convincing case for something like the management at gox were preparing the move the assets out of the jurisdiction to frustrate judgment for the court to do something like that.


I saw this in my googling, anyone following this particular discussion might find it interesting (I can't comment on the factual correctness of the document but at first blush it doesn't strike me as suspicious) 

http://www.tomeika.jur.kyushu-u.ac.jp/procedure/Overview02_judgments.html

Here's a snip:



We have already discussed (i) being jurisdiction. I agree that they will be concerned about proper procedure and failure to follow that could easily result in judgment not being enforced (such as if the defendant was not properly served and didn't have a fair chance to defend themselves that wold probably qualify as in (ii) above).

However I think there are other considerations as well (which I might have mentioned earlier) which are touched on in (iii) - if the Japanese court thinks the decision is improper they are under no obligation to enforce it.


Those jurisdictional choices are like waivers that try to exempt someone from gross negligence - far from bulletproof. The parties could agree that the moon was the proper jurisdiction but that doesn't mean you'd be unsuccessful bringing an application before a Japanese court. Regardless of what the parties agree vis-a-vis jurisdiction I would imagine most courts on the planet would want to satisfy themselves that they are the proper jurisdiction for any application brought before them. Sure one party could argue "hey we agreed on the USA!" but the moving party could easily say "yeah well Japan is forum convienens for this because the paties are here and so is all of the best evidence" and if the Judge accepted that argument the case is very likely going to go ahead there regardless of what it says in the contract. It could very well be that there is a law in Japan that says regardless of contract all cases involving a Japanese company must be sued in a Japanese court. I doubt that law exists but just as an example that would override that contract.

A judge isn't bound by what is written in a contract, only by power given to them by the law. They don't have a problem striking any or all of a contract if they believe it is in the interest of justice / complying with their law.


Sorry that's not what I was trying to say. It's not a Japanese court saying to an American court "you got American law wrong". It would be a Japanese court saying "it doesn't matter what you said in the USA, you want to enforce an order against a person/property that is located in and falls under the laws of Japan and we get to decide whether or not that order gets enforced". As I said above even if everything else the American court did was correct, the Japanese court could find fault with only one thing (like perhaps in the USA it isn't required to serve the defendant - I know it's not but for argument's sake... and Japan could say "hey in Japan we have a requirement that a defendant have a fair chance to make a case in their own defence before an order is made - since that didn't happen in this case we aren't enforcing".

Anyone got any updates ? It's a shame this is hidden in 'service discussion'. It should've been in the main forum, as it's a rather important issue. Anyone been in touch with any of the parties and learned more about the case?

There's nothing more to learn in any such case until the court date. Nobody comments on pending suits.

I don't know. If Mt. Gox's lawyers are anything to go by so far, they're probably writing a press release that will jeopardise their trail as we speak.

The nested quotes in this are a bit confusing.  I didn't write the directly quoted text.

However, I'm not sure such an order would be enforceable through the method used for domesticating a final judgment.  I'm pretty sure it wouldn't be.  I'm not sure if there would be some alternative.  My guess would be yes, but I'm not going to go much further than that, because I don't think a court in either the U.S. or Japan would grant such an order in the first place.

So far as I can tell, Gox is still operating and solvent and freezing its assets would just bankrupt it (making it unlikely any judgment could be paid).

Allow me to retract my ill thought-out, rash earlier statement. Obviously you are correct.

In my defense, I was a victim of their own success.

Yes a freezing order can be made enforceable as in the criteria in the link I posted above or the similar link in your post.

When they say "final" they mean that it is a final order on that specific issue, not of the entire matter.

I can appreciate that this is confusing but what would happen is that a motion would be brought in the course of the lawsuit to have some accounts frozen for a duration and reason (ie: freeze 75,000,000 in this account in case we win our claim for 75,000,000 so there will be funds available to pay it - while I think it is unlikely that they'd get such an order let's assume that they do for purposes of this discussion). There will be some sort of order on that motion either allowing the freezing or dismissing the motion. So while the actual lawsuit itself is still making its way through the court, there could be a final order made on the issue of freezing accounts until the main trial is resolved.

However if there is an interim order on the motion (perhaps the judge orders a temporary freezing of funds for a week while he makes his decision on whether or not to freeze the funds for the duration of the lawsuit) that would not be enforceable in Japan since it is not a final order on the motion.

Does that make sense?

Makes perfect sense.
Unfortunately i this hypothetical scenario Gox would get their share out and the 75kk would be the customers cash.

Just tried to withdraw money from MtGox to my Dwolla account, here's what I got as a response from Dwolla:

Dwolla Support
MAY 14, 2013  |  01:44PM CDT
<name removed>,

Due to recent court orders by the Department of Homeland Security and U.S. District Court for the District of Maryland seizing the account of Mutum Sigillum LLC (“Mt. Gox”), Dwolla is immediately no longer legally able to service Mutum Sigillum LLC’s account.

As a result if you have not seen funds arrive in your Dwolla account from this merchant then this will not be occurring with Dwolla. You will want to contact Mutum Sigillum LLC (https://mtgox.com/contact-us) to inquire on how to go about withdrawing these funds.

Sincerely,
Dwolla Support
www.dwolla.com
www.trydwolla.com (Send someone free money on us to get them started)

 :o

Is this because of this lawsuit though?

I thought Homeland securities mandate was to make and enforce regulations for "Public Health Security" and "Bio terrorism-Preparedness" and "Response to terrorism" in general.

Do they really have nothing better to do?

Apparently not. Coinlab claims they have all necessary licenses and connections ready, so why don't they just start accepting their own US customers ? I would think any decent exchange would quickly catch up business. And if it was easier to get money in and out of the Coinlab exchange, I would think a lot of people from the US would move to this exchange. No matter the pending court case, people's memory is short anyway.

If they have a trading engine and account system and interface with the Sillicon Valley Bank ready, why don't they just start to accept customers, instead of wasting time on a lawsuit, that probably will never go anywhere. Actually it would be quite interesting if MtGox declared bankruptcy, and all customers got their fiat and btc back, and Mark retired on the money he'd made. Then Coinlab would be looking into a void.

Other exchanges would rise to take MtGox's place.

Well there you go just in-junct (freeze) their local accounts, that was easy! and done without Mt. Gox even knowing!!!!
Ex-parte

as I specifically said
"You just in-junct Mt. Gox from removing funds"



Apparently not Chuck apparently not.

How wrong could you be. I think you need some real theoretical training and real world legal experience in getting injunctions, freezing bank accounts and international law and how to pursue matters. Something Drastic has happened overnight without even the Knowledge of Mt. Gox ie. ex-parte (it remais to be seen if  Coin labs was involved, but you can do this)

Next up will be the freezing of gox funds in Japan, by the treaty and or agreed US jurisdiction.

*ahem* ;)

Because they're subject to the same gigantic $50 million liquidated damages clause that they're using to sue Gox. 

While I've written a more detailed article with legal reasoning (https://bitcointalk.org/index.php?topic=194377.msg2023010#msg2023010) on that issue as to why I think that contractual term is a literal paper tiger, considering that CoinLab is depending on that clause in their own arguments, it would be foolish to go violate it themselves.

They also don't have the Gox technology, such as it is, to deploy anything.  While I don't see that preventing them from working on implementing after the litigation is resolved, they probably can't just go ahead and do it, at least not without risking losing their $50 million lottery ticket against Gox.

Thanks - I will read your post. But also, if they have the technology ready, they could just start a second company and start operating an exchange. Nothing stops them from that.

The contract between MtGox and Coinlab only had signatures from 2 people, and Mark even signed as a witness. I don't know, but should not a witness usually be a person not being part of the contract ? Could it be grounds for making the contract void ? What if the contract was made under some kind of pressure, could not also that make it void ?

I'd be fine with Coinlab taking over. It sounds like they were suppose to anyways. MtGox has not been doing the best job AT ALL.

But do you feel a slightly bumbling incumbent is better than a ruthless and financially motivated newcomer or the other way around?

Valid Point.

I think that we need
1) More entries into the marketplace (more exchanges).
2) More competition.
3) I don't know that its preferable for US customers should be dealing with a japanese based exchange, the japanese laws are not setup to protect american consumers, businesses, investors, etc. We need exchanges at home (note that I've lived in japan for around 6 months in the past).

Obviously the solution is difficult, but I do believe in capitalism, so let profit motivate, hopefully more than just coinlab's to get into the US market now that the bumbling giant is been hit with a stone.

I'm not sure why it took you two separate messages to reply to the same message... :lol:

Although you've already embarrassed yourself enough let me clear things up for you: this would appear to have NOTHING to do with the coinlab lawsuit:

1) The Department of Homeland Security does *NOT* go around enforcing private civil lawsuits.

2) Coinlab filed their lawsuit in Washington State. The Dwolla court order came from Maryland which is on the exact opposite side of the country.

3) There is nothing saying Mt Gox didn't know about this as you claim. Just because it happened doesn't mean they didn't have lawyers in a courtroom in Maryland arguing against it.

4)  Mt. Gox's business has not been stopped. All that has happened is a completely separate company was given a court order telling them that they were not allowed to continue to process business for Mt Gox.

You need to stop watching so much "Law and Order"  ;D

Coinlab looks all-around dodgy to me. First they change their business model 3 times, then they sneak their way into the Bitcoin Foundation. Next they try to sneakily acquire all of Gox's USA customers (since the have zero credibility in the crypto community), and finally they file a frivolous lawsuit that appears to have the weight of DHS/Feds behind it?  4 strikes and you're out...

On the other hand, I definitely wouldn't place too much faith and/or capital into Gox right now...

Your a riot, the two quotes were merely to condense what you said,

My point was that it is easy to freeze funds, and you thought not!

Also there were no lawyers for Gox in any Court Room because Gox made the public announcement it was not even aware that it had happened until after it had happened!!!!

The embarrassment good sir is all yours.

nor did I link the action to coins labs.

I also never said business would stop, if some funds are frozen. However, accounts are stopped. It is not a large step to see how this could happen to Gox in JP, In fact I am sure coin labs lawyers are watching with interest.

Note that it wasn't MtGox's accounts which were frozen.  The accounts belong to Mutum Sigillum LLC, their payment provider.  There has been no word from them about their involvement.  Probably got a national security letter with a gag order.  This is "Land of the Free" after all, not Soviet Russia.

It is unlikely that MtGox had much money there.  From IRC a while ago:

And yet you're still wrong! :lol:

You are clearly confusing a private lawsuit with the government here. Coinlab has not had the funds frozen. The US Government stepped in and for whatever reason took action against Dwolla re: gox. Obviously the government will have a much easier time doing things like this than a private citizen - duh!


I'm sure coinlab's lawyers don't need to "watch with interest" to see how to conduct a lawsuit. "Oh they got an order against a company mtgox works with to stop doing business with them? Damn, we should try something like that!" :lol:

If anything every minute that goes by makes you look more foolish since apparently it is "so easy" to freeze funds and now that coinlab's lawyers are apparently "watching with interest" to see how "it is not a large step to see how this could happen to gox". If it's so quick and easy, why hasn't coinlab tried to freeze gox's funding yet? Surely putting their nuts in a vice could help force them to the bargaining table....

:lol:

While I'm not going to endorse Coinlab, the lawsuit does not appear to be frivolous.  Gox contracted to do something and they didn't do it.  In fact, they're actively obstructing carrying it out.  While I don't know why they chose to renege on the contract, and they may have had good reason, that's what a breach of contract suit is for.  The $50 million liquidated damages clause is somewhat dodgy, but the suit itself (if the facts are actually as claimed) is legitimate.

Also, the Dwolla thing appears to be the DHS' doing, not Coinlab's.  They just don't have the clout to engineer something like that.

I've seen this claim made elsewhere but didn't think to ask for information at the time.

What information is available for them actively obstructing the contract?

The point was it is relatively easy to freeze some ones account, you thought not, it has happened, you do not deny but acknowledge that point. You do appear to minimize the fact of what has happened. A few quotes ago, you were full of sound and furry should any one touch your account at the bank, and how it would never happen if you were not there. QED on that.

Nether do you now deny your second error (quite large) that you though some how GOX's lawyers were in a court fighting this, yet GOX themselves knew nothing about it and they publicly said so. That's just basic research of the facts and understanding of what happened.

Further you don't appear to understand the separation of powers doctrine. The Govt is as private person or commercial entity in-front of the court when it comes to seizure of funds, freezing accounts. Sure they have a few more statues here and their but they still have to go before a court like anyone else. Here is a good example of separation of powers

"The poorest man may in his cottage bid defiance to all the forces of the Crown. It may be frail—its roof may shake—the wind may blow through it—the storm may enter—the rain may enter—but the King of England cannot enter—all his force dares not cross the threshold of the ruined tenement." So be it—unless he has justification by law.

    Southam v Smout [1964] 1 QB 308 at 320



As I explained before Coin labs may face a hard time, due to normal trade considerations made before injuncnting them, and it could be sort of shooting themselves in the foot, but this may give another limb to go after funds, though they will have to consider that such an attack may lead to gov confiscation. CoinLabs also have to conisder would you rather let them trade so they have money to pay. However countering that is the question of who will get priority to any funds so should they leap in. This was not my point here, but you seem to be averting to it, as cover for your capitulation and error.

Please do continue you are most fine sport.

In dictatorships, like the Democratic Republic of the USA, the government can seize any bank account any time.  They have secret laws, and special government departments  can issue secret gag orders which are called "National Security Letter" in the "Land of the free".  Japan is a democracy.  Not as easy for foreign governments to seize money there.

No account belonging to MtGox has been seized or frozen.  The accounts in question belong to Mutum Sigillum LLC, an US payment provider which MtGox uses.  We do not know why Mutum Sigillum LLC were targeted.  MtGox is affected, but I doubt they would ever get invited to court to defend another company.

In Europe, which prides itself for its liberty and democracy, accounts are closed across borders as simple as pushing a button.
Lets not kid ourselves, once a certain "threat level" is reached or big brother asks for a favor, every country throws their principles overboard.

I am also having a very hard time believing in the cluelessness of MtGox, they are somehow always involved, but are the last to learn about it.

They could intervene if they're affected in some way, such as having a claim to some or all of the money in the account.  I have no idea what Mutum Sigilum LLC is other than a Delaware corporation that has been associated with Gox and apparently processes payments for it.

from the source I read they all went along the Mutum Sigillum’s Dwolla account (a.k.a. Mt. Gox) line

http://arstechnica.com/tech-policy/2013/05/feds-seize-money-from-top-bitcoin-exchange-mt-gox/ (http://arstechnica.com/tech-policy/2013/05/feds-seize-money-from-top-bitcoin-exchange-mt-gox/)


"The Department of Homeland Security and US District Court for the District of Maryland issued a ‘Seizure Warrant’ for the funds associated with Mutum Sigillum’s Dwolla account (a.k.a. Mt. Gox)," a Dwolla spokesperson told NYO's BetaBeat. "Dwolla has ceased all account activities... for Mutum Sigillum while Dwolla’s holding partner transferred Mutum Sigillum’s balance, per the warrant."

This is just plain wrong. Besides, Europe is 30+ countries, each of them are have their own bylaws and jurisdictions.

If by any chance you were referring to the BTC24 fiasco, it wasn't the push of a button but a federal prosecutor asking for international cooperation on a criminal matter. Go there, read the statements, see for yourself, and learn.

OTOH, yes I agress that even in Europe, this shit could happen. It's just, as a rule of thumb, that it is less easy, IMHO, to cover everything up under the seal of secrecy, invoking higher national interests, terrorists, and that kind of BS.

I wasnt referring to that case specifically, but since you mention it:
They closed the account in Germany for suspicion of fraud instantly. Poland followed suit without inspection as soon as the request from Germany arrived too.
Now if accounts can be closed that easily in separate countries, with their own bylaws and jurisdictions, for suspected fraud, imagine what the freakin DHS can do on whatever charges they dream up.

Edit: Im having difficulties understanding your edit, are you saying its not so hard afterall?

From what I've read other places, Mark Karpeles was the one making the bank account dealing with Dwolla, so MtGox seems to be very much directly involved.

Mtgox is definitely directly involved, haven't you guys read the court order?

http://cdn.arstechnica.net/wp-content/uploads/2013/05/Mt-Gox-Dwolla-Warrant-5-14-13.pdf

That is very interesting read, thanks for the link.

So basically, the Dwolla account was seized because of a violation of 18 USC § 1960 (http://www.law.cornell.edu/uscode/text/18/1960). Another very interesting quote :


My personal analysis is that the United States government (DHS in that case) is now considering Bitcoin as a currency, and is not buying the attempted separation of roles between "MtGox" (as a Japanese corporation) and "Mutum Sigillum LLC" that seems to exist only as a kind of money pipe between MtGox (Japan) and Dwolla. In short: they have frozen the account in an attempt to enforce more regulation and force MtGox to operate within the US under FinCEN regulation.

It's not THAT bad. It's is just very political, and very unfortunate that MtGox US customers that had pending/ongoing Dwolla transfers are suffering from it. It should be settled between Gox and the US gov't, eventually.

When you said freezing accounts across borders was just a matter of pushing a button in Europe, I thought that implied that any arbitrary power could do it whenever it suits their needs. And I argue that it is not the case. Whether in the US or in Europe (any "serious" democracy), prosecutors will need to provide a lawful rationale before they can freeze any account. And joesmoe2012's link shows that it was the case here.

So basically I meant that it was not worse or better between Europe or the US, pretty much the same process.

Yes it has been frozen and even more seized

http://cdn.arstechnica.net/wp-content/uploads/2013/05/Mt-Gox-Dwolla-Warrant-5-14-13.pdf (http://cdn.arstechnica.net/wp-content/uploads/2013/05/Mt-Gox-Dwolla-Warrant-5-14-13.pdf)

What a terrible 28th birthday present coming on June 1: http://web.archive.org/web/20090323014632/http://bbs.solirc.com/index.php?showuser=1

found via http://web.archive.org/web/*/http://mutumsigillum.com

Agree - although I imagine they'll begrudgingly settle for Mutum Sigillum to pay the $50k fee to become a registered MSB... They usually win the old extortion game. Of course Gox will have to pay a fine/late fee as well...

So, who is this confidential informant from Maryland?  Way to go, douchebag!

Everything that transacts in US$ can be defined as "money pipe".

The rules of the game are very simple. It doesn't matter in which country is your business incorporated. If your business is dealing in US$ you have to pay a special tax to the US Government. This tax depends on what other favors you'll do for them.

It isn't "relatively easy" for a number of reasons as I stated. Again, this is the US Government here NOT a private individual so it really has no bearing on what we were actually talking about - lawsuits like coinlab's.


Huh? When word about the DHS thing first came out there wasn't much information. It wasn't clear whether this "court order" was obtained ex-parte or not. That's all I was saying. I never argued that gox did have lawyers in court before the order was made and if I had to guess I'd say they weren't.


Uhh, no they aren't. You actually link to the court order in a later post yet you obviously haven't even read it. If you had, you'd see the law under which the court order was made. 18 U.S.C. section 981 gives the government - yes the government only, not private citizens - the power to seize property that is involved in a transaction violating 18 U.S.C. sections 1956, 1957 or 1960. This was the case here and so the order was made. Coinlab can not do this in their lawsuit.    



As I said above, coinlab could not do this in their lawsuit. Nor is there any question of "priority". If you read the law cited in the decision you will learn that those funds in question become property of the United States which is why the government can seize them. They do not become "recovered funds" that all creditors are allowed some share of. Even if coinlab won a lawsuit today they have no claim to any money in the dwolla accounts as they already belong to the US Government.

You really don't understand separation of powers,





you said


It was crystal clear that Gox had no idea what was going on at the time you made this statement, Its called basic research, I did it, you just went oh GOX had lawyers there.




Thats got nothing to do with separation of powers. Ok at this point, you probally need to get a formal legal education, or refresher if you have had one. Separation of powers has nothing to do with the executive having more ways to bring an action vs a private person. It is to do with the judicial arm being separate to the the executive and parliament.





The govt has to stand in line for property like anyone else or compensate: check your Constitution

for example

the 5th

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.[1]


see those last words without just compensation.[1]

My money held that is owed to anyone else eg your money held in say GOX's account and that bank and that account is seized by gov, for your part you are entitled to just compensation from the GOV for them taking your property.

I'm confused - are you trying to be an obvious troll now? If you're going to make up something I didn't say don't claim it is in the part you just quoted when it clearly does not say "mtgox had lawyers in court" anywhere in the quote.




Alright my confusion is clearing up - so you ARE just being a troll, right? I *really* hope you aren't a lawyer. Separation of powers doesn't have any bearing here.





:lol: :lol: - well I guess the DHS will be pissed when gox's lawyers show up in court and say "hey guys this law is unconstitutional kthxbai".

See the part where it says "nor shall any person ... be deprived of ... life, liberty, or property, without due process of law"? Do you know what that means? I guess the government can't throw people in jail either, right? Wrong. That's exactly what the "due process of law" part means. This order follows the due process of law - legislative branch made the law, executive sent out the DHS agents to ensure compliance and now the judicial branch is hearing it. There's your "separation of powers" lol. In any event the US can certainly make a law that says that if you break a law the property used in that lawbreaking is forfeit to the US Government and that's what happened here.

The part about "just compensation" is a restriction on the government's power to exercise eminent domain which is a direct "taking" and different from the case at hand.

Anyways if you seriously think the US government has NO power to seize funds (and can only "buy" them for fair market price) you'll be in for a rude awakening if it ever happens to you.

your confused yes, you wrote
"There is nothing saying Mt Gox didn't know about this as you claim. Just because it happened doesn't mean they didn't have lawyers in a courtroom in Maryland arguing against it."




your argument devolves into ad hominem, re -read what you though separation of powers was as against what it is.





[/quote]
due process is an additional and separate requirement imposed by 5, the in read AND  nor shall private property be taken for public use, without just compensation, is another separate condition.

Do you see the ";" followed by nor

sure the govt can take private property, but not without just compensation.

anyhow in addition to taking some formal legal education, I recommend basic reading/comprehension, and attetnion to detial.

also the executive Gov does not throw anyone in "jail" they have no authority to. At most they can hold a person on remand, but must take that person before a judge / magistrate or judicial officer within a very short time frame, and then the Judge decides on bail/jail/imprisonment to trial. Again you appear to have no grasp of how the judicial, executive and legislative arms or government work, or a person rights in respect of them.

You probably don't even know what the term executive Govt means.


as I said before, please continue your have leveled up (down) to shooting fish in a barrel stage.

ffs, could you guys please get back ot?

both guys are members of Bitcoin Foundation, both guys wanted to cooperate. But my opinion is Coinlab's Mr. V is a Bastard. He chose war instead of peace.

OTOH American laws are not set up to destroy Japanese exchanges.

If someone signs a contract to do something and then doesn't, you don't just suck their dick.  You sue their ass.  Unless you are a total sucker who likes being made a fool.

Would it not be possible to sit down for an hour or two at the (then) upcoming bitcoin conference and talk about the situation instead of suing right off the bat ? I know if someone sued me, I would stall and evade as much as possible just to make life hell for them, especially so if they did it with evil intentions. And how can they possibly work together after this ? Essentially it's burning a bridge.

You have three cases on your table - one's with a subcontractor, one's with the guys that sued your ass, and one's for the IRS, which case will come at the bottom of the que ?

As best I can tell, the details of the contract are not public.  So, unless you claim to be privy to information that others are not, it's kind of hard to take your argument very seriously.

Seems to me that things started to go sideways when customers realized that their accounts (information and possibly funds) were being sold off without their authorization and pitched a bitch about it.

I've lost trivial amounts of funds in two instances when 'investors' bought accounts.  One was Bitcoinica, and the other was Instawallet (though I do not know if Instawallet was sold or gifted.)  In fact, it seems that CoinLabs has involvement with some of the same parties that purchased Bitcoinica and seemingly nose-dived it into the ground (where 2 or 3 BTC which used to belong to me got lost...and I suspect 'found' as well.)

To my knowledge the only time the equation has gone the other way was when that Polish exchange 'lost' their funds in a (purported) EC2 accident.  When Krapeles bought it the customers got their coins restored as I recall.

  Edit:  I pro-actively correct my statement about the details of the contract.  The details of the supposed failure in compliance remain murky I would say.

The contract is public. It's part of the filed complaint.