CoinLab suing MtGox for $75 milliion?

[tumak]

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

As an established player in the North American Bitcoin industry—registered and fully compliant with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)— CoinLab provided Mt. Gox with U.S. financial and investment partnerships necessary to drive more U.S. volume and pave the way for institutional investors and high net-worth individuals to buy and hold large amounts of the digital currency.

Oh, the hilarity:

The Agreement further provides for a transition period whereby United States and Canadian customers are transitioned from Mt. Gox to CoinLab by March 22, 2013. Mt. Gox isrequired to cooperate with CoinLab to transfer North American customers, defined as “CoinLabCustomers” in the Agreement, from Mt. Gox to CoinLab.28.

CoinLab took the step last week of registering with FinCEN to become a Money Services Business (MSB) and their entity and registration number are available here. Since they are a self-declared seller of prepaid access (MSB code 413), they now must comply with a litany of Bank Secrecy Act requirements, including Suspicious Activity Reporting.

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

It's a trap?

[jubalix]

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.

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.

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.

[Chuck Finley]

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.

[jubalix]

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.

[ArticMine]

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.

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

As an established player in the North American Bitcoin industry—registered and fully compliant with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)— CoinLab provided Mt. Gox with U.S. financial and investment partnerships necessary to drive more U.S. volume and pave the way for institutional investors and high net-worth individuals to buy and hold large amounts of the digital currency.

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.

[vampire]

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.

[tumak]

Blame Canada!

[Chuck Finley]

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

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.

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 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.

[repentance]

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.

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.

[darkmule]

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

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.

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.

[jubalix]

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

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.

sighhhh... Read

Posted by: darkmule
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.

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)

[DeathAndTaxes]

CoinLab took the step last week of registering with FinCEN to become a Money Services Business (MSB) and their entity and registration number are available here. Since they are a self-declared seller of prepaid access (MSB code 413), they now must comply with a litany of Bank Secrecy Act requirements, including Suspicious Activity Reporting.

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

It's a trap?

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.

[darkmule]

From the "Important Announcements" thread.

The complaint of May 2nd, 2013, is between Mt Gox and CoinLab Inc., and does not involve the Bitcoin Foundation.  The Foundation exists to serve the best interests of Bitcoin and not the best interests of individual board members.  If the best interests of Bitcoin are not being served or if the mission to standardize the protocol and protect and promote Bitcoin is in jeopardy, then the board is prepared to take thoughtful action to ameliorate.

Bitcoin is not only relevant within a single jurisdiction, but its reach is global. With strong and growing support from many countries around the world, the Bitcoin Foundation is acutely aware of its global mission.
https://bitcoinfoundation.org/blog/?p=180

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.

[Chuck Finley]

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.

*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.

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.

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.

[bernard75]

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

[lordgrows]

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.

*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.

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.

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.

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

[lordgrows]

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

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

[Herodes]

From the "Important Announcements" thread.

The complaint of May 2nd, 2013, is between Mt Gox and CoinLab Inc., and does not involve the Bitcoin Foundation.  The Foundation exists to serve the best interests of Bitcoin and not the best interests of individual board members.  If the best interests of Bitcoin are not being served or if the mission to standardize the protocol and protect and promote Bitcoin is in jeopardy, then the board is prepared to take thoughtful action to ameliorate.

Bitcoin is not only relevant within a single jurisdiction, but its reach is global. With strong and growing support from many countries around the world, the Bitcoin Foundation is acutely aware of its global mission.
https://bitcoinfoundation.org/blog/?p=180

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 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.

[bernard75]

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

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

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

[matt4054]

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).