CoinLab suing MtGox for $75 milliion

[Maged]

It didn't work out that way, according to a lawsuit filed today by Coinlab's attorneys in Washington State. Coinlab alleges that Mt. Gox has breached a contract clause which was supposed to give Coinlab exclusive access to the North American market. "Defendants have breached the exclusivity provisions of the Agreement by directly servicing customers in the United States and Canada since the Agreement took effect," the lawsuit states.

Coinlab also says Mt. Gox hasn't allowed them to transition existing U.S. and Canadian customers from Mt. Gox to Coinlab, as agreed in the contract. "Despite repeated requests to do so, Mt. Gox has failed to deliver all passwords, Yubikeys, administrative logins and any other security information required so that CoinLab may assume operation of the Bitcoin exchange services for customers in the United States and Canada."

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

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).

[Maged]

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.

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/

[Maged]

I have more news on the Mt. Gox transition. Today, CoinLab regretfully filed a formal complaint in Federal Court against Mt. Gox.

In the last month, many of you have contacted me directly and asked for more details on our transition, and I would say (charitably) that I've been frustratingly vague -- I just haven't been able to talk about it.

I'm going to take this chance to talk about it. I'm not here to complain, our filing contains and accurate summary of events, but I want to talk about what I see as most important for Bitcoin right now.

Bitcoiners have, on average, lost more money due to technology difficulties, frozen / lost banking relationships and shady characters like pirateat40 than due to any part of Bitcoin's fundamental economics. I hate this fact, passionately. I have a vision in which high quality service and technology and ethics can be delivered to you, me, my kids, everyone who has a stake in Bitcoin.

It is my goal for CoinLab that we provide fundamental infrastructure to minimize these risks for everyone in our space, and I do mean everyone; from those on the Bitcoin Forums who dislike and distrust me personally, to the mom and pop cupcake makers in San Francisco, to my daughter who recently sold some knit products for .01BTC.

While I was willing to take a two year restriction on our venue (US and Canada only for two years was part of our contract), I have for a number of years now wanted to make sure that Bitcoin is properly situated for everyone's good.

When we spun up our initial alpha customers, they included companies that from one perspective could reasonably be deemed to be our competitors, some of the best companies in our space. We worked extremely hard to provide them great service, because I want to build our ecosystem; I want a robust economy and a broad base of service and product for everyone.

What tipped us into filing was our complete inability to get Mt. Gox to deliver on the few simple things left that were needed for customers to move over en-masse; we were often left just apologizing to our alpha customers while their own businesses suffered. I'm just not willing to put any of our customers in that position -- if we can't do a good job for you, I won't promise that we can.

What I hope is that Mt. Gox has this same interest in the good of Bitcoin, and Bitcoiners, and finds a way to work this out.

So, what's next? I hope that we'll be able to provide some good news on that front soon, from a financing and technology perspective at the very least, and ideally with news that we've settled this dispute. In the interim, my biggest hope is that Mt. Gox does an excellent job keeping Bitcoiners safe and liquid and trading on the exchange.

Peter Vessenes

http://coinlab.com/status

[Maged]

More discussion:
https://bitcointalk.org/index.php?topic=193888.0
https://bitcointalk.org/index.php?topic=193889.0
https://bitcointalk.org/index.php?topic=193926.0
https://bitcointalk.org/index.php?topic=193903.0
https://bitcointalk.org/index.php?topic=193985.0
https://bitcointalk.org/index.php?topic=193999.0
https://bitcointalk.org/index.php?topic=193944.0
http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues_mtgox/
https://news.ycombinator.com/item?id=5648282

[Maged]

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

[Maged]

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.

[Maged]

Tokyo, Japan, May 3rd, 2013 - Mt. Gox has been contacted by Coinlab (US) regarding a
formal complaint filed against us in the United States. As we have just now received the
complaint, neither Mt. Gox nor our legal team can make any official comment on the
matter at this time, but we take this very seriously and will respond appropriately and
quickly once we have had time to review it.
Mark Karpeles
CEO, Mt. Gox Co. Ltd.

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

[MemoryDealers]

For what it is worth,  this thread was the first I heard of any lawsuit.

[Maged]

CoinLab Files Breach-Of-Contract Suit Against Mt. Gox

SEATTLE (May 2, 2013) — CoinLab, the world’s first U.S. venture-backed Bitcoin company, today filed a complaint in the United States District Court for the Western District of Washington alleging breach of contract against Japan-based Mt. Gox, the world’s largest exchange for the digital currency Bitcoin.

“While it’s unfortunate that our agreement with Mt. Gox has not proceeded as planned, our hope is that we can quickly resolve the issues and clear a path to better serve our U.S. and Canadian customers,” said Peter Vessenes, CEO, CoinLab, Inc.

CoinLab and Mt. Gox entered into an agreement in November 2012 to provide Bitcoin purchase, sale and exchange services to customers in the U.S and Canada. 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.

In return, under the agreement CoinLab would handle all of Mt. Gox’s North American transactions, providing enhanced product delivery, liquidity and customer service to the North American Bitcoin market.

However, Mt. Gox did not fulfill key terms of the agreement. Mt. Gox continued to market to North American customers and failed to provide CoinLab with account reconciliation data, service access and other information essential to fulfilling the terms of agreement, eventually attempting to ban all customers who had worked with CoinLab.

“We invested multiple staff years and significant resources into making this deal a success,” Vessenes said. “While it’s disappointing to file a lawsuit, we can rest assured that we tried every other avenue to resolve the issues outside of the courtroom.”

Vessenes continued: “My continued hope is that Mt. Gox will do what’s best for U.S. and Canadian customers and settle this matter quickly, allowing our customers to transact in the U.S. with a fully licensed and registered company that meets American standards for service quality. It’s most important to me that customers are able to maintain uninterrupted flow of services, and I hope that Mt. Gox shares that goal and works to resolve this dispute.”

CoinLab is represented by Edgar Sargent, Floyd Short and Lindsey Godfrey Eccles of Susman Godfrey LLP and Roger Townsend of Breskin, Johnson, Townsend PLLC.

CoinLab, headquartered in Seattle, is the world’s first U.S. venture-backed Bitcoin company. It was funded in April 2012 by a group of progressive investors including Tim Draper, Geoff Entress, Barry Silbert, Roger Ver and Joel Yarmon.

http://coinlab.com/press

Statement Regarding CoinLab/MtGox Dispute

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