World's First Bitcoin Lawsuit - Cartmell v. Bitcoinica

[btcx]

https://docs.google.com/open?id=0B_ECG6JRZs-7dTZ5QS0xcUkxQjQ

Filed August 6th in the Superior Court of California, County of San Francisco: http://webaccess.sftc.org/Scripts/Magic94/mgrqispi94.dll?APPNAME=IJS&PRGNAME=ROA22&ARGUMENTS=-ACGC12522983

CONTRACT/WARRANTY, COMPLAINT FILED BY PLAINTIFF CARTMELL, BRIAN MCCALEB, JED POWELL, JESSE VER, ROGER AS TO DEFENDANT BITCOINICA LP, ALSO KNOWN AS BITCOINICA BITCOINICA CONSULTANCY LTD INTERSANGO LTD. NORMAN, DONALD STRATEMAN, PATRICK TAAKI, AMIR DOES 1 THRU 100, INCL. SUMMONS ISSUED, JUDICIAL COUNCIL CIVIL CASE COVER SHEET FILED CASE MANAGEMENT CONFERENCE SCHEDULED FOR JAN-09-2013 PROOF OF SERVICE DUE ON OCT-05-2012 CASE MANAGEMENT STATEMENT DUE ON DEC-26-2012


Other discussions:  http://www.reddit.com/r/Bitcoin/comments/xv9rb/worlds_first_bitcoin_lawsuit_cartmell_v_bitcoinica/

EDIT:
It should be known that the four plaintiffs had previously attempted to expedite the claims process and proposed a settlement agreement with Bitcoinica that would have granted a limited period of time to complete the claims, a much larger margin for error, and immunity: https://docs.google.com/open?id=0B_ECG6JRZs-7SXFtdG1QXy1uSnM

Discussions began at the end of June, and while Tihan and Zhou were very cooperative and seemed to genuinely want what was in the best interest of the Bitcoinica users, Donald, Patrick and Amir were not taking the situation seriously.  Soon, those three stopped responding to communications altogether and on July 9th, 2012, we presented them with the settlement offer.  Tihan and Zhou (unfortunately, powerless) were again keen to take the offer, however, Donald Patrick and Amir declined.

Whether it's relevant or not, I don't know:
July 7th - Amir released the Bitcoinica source code
July 11th - Amir announces Mt.Gox account theft.

[Vladimir]

Based on cursory reading, they are going after Bitcoinica, Intersango, an Intersango trio personally.  Alleging consipracy, breach of contract, negligence and conversion. It does appear that the lawsuit has merit. I would guess defendants will not be able to defend it effectively. Expect some company liquidations and personal BKs to be result of this legal action. Whether all money will be recovered by claimants is not that clear yet.

[Matthew N. Wright]

Wasn't Tradehill sueing Dwolla a while back?

[Maged]

Wasn't Tradehill sueing Dwolla a while back?

Yeah, but that didn't directly involve bitcoins, like this one does.

[repentance]

I assume this is the Brian Cartmell who owns Bitcoin Ltd, ZiptBit Ltd and BitPal Ltd.

http://www.cartmell.co.nz/

It was inevitable that someone would go after Intersango as there is no reason to believe that Bitcoinica Consultancy Ltd has any assets.  As Wendon is a shareholder in Intersango (from the Company House documents which were linked the other day, Amir appears to be Intersango's only director) and is also likely to file an action against the Consultancy and the Consultancy directors as individuals, this could get interesting.  I notice that while Intersango is named as a defendant, Bitcoin Consultancy is not.

[wheeler]

I'm sure appropriate lawyers have already answered this, but would the Californian courts hold any jurisdiction over a UK incorporated company (and/or directors) and the NZ main entity?  What action could this court realistically impose on the company?

[btcx]

I'm sure appropriate lawyers have already answered this, but would the Californian courts hold any jurisdiction over a UK incorporated company (and/or directors) and the NZ main entity?  What action could this court realistically impose on the company?

Sure, you can be sued wherever you have contacts.  In this case, Bitcoinica has both customers and employees in San Francisco.

[repentance]

I'm sure appropriate lawyers have already answered this, but would the Californian courts hold any jurisdiction over a UK incorporated company (and/or directors) and the NZ main entity?  What action could this court realistically impose on the company?

Assuming the defendants get legal representation, lack of jurisdiction will be one of the first arguments made by the defendants.  Bitcoinica LP will likely have been liquidated by early 2013.  This is about setting the stage to go after individuals and their assets.  Also, obtaining a judgement and enforcing a judgement are two very different things, especially if enforcement requires an order to be domesticated by a foreign court (hell, it can even be problematic getting judgements made in one US state enforced in another).

[Yuhfhrh]

This is good.

[adamstgBit]

This is good.

what will be even better is seeing how the courts handle this

will their be a live feed of the trial?

this is epic  

this really sucks for BITCOINICA they buy the site, get hacked left and right and now this Lawsuit, crazy.

[Phinnaeus Gage]

I'm sure appropriate lawyers have already answered this, but would the Californian courts hold any jurisdiction over a UK incorporated company (and/or directors) and the NZ main entity?  What action could this court realistically impose on the company?

xWaylab is incorporated in the US.

[btcprophet]

This is good.

this is epic  

this really sucks for BITCOINICA they buy the site, get hacked left and right and now this Lawsuit, crazy.

Here, I fixed it for you: they buy the site, get hacked left and right, abandon their customers and now this Lawsuit, crazy.


Epic indeed. I've said goodbye to my 50btc but I would like to see some justice. Now if only the police would get interested in Zhou's little thieving scheme, the Bitcoinica story would go straight to r/justiceporn

[repentance]

This is good.

what will be even better is seeing how the courts handle this

will their be a live feed of the trial?

this is epic  

this really sucks for BITCOINICA they buy the site, get hacked left and right and now this Lawsuit, crazy.

It's generally not in the interests of either party for the matter to go to trial, especially when the defendants don't have deep pockets.

The Notice to Plaintiff states that participation in some kind of alternative dispute resolution process is required before the matter can proceed to trial.

[mem]

I'm sure appropriate lawyers have already answered this, but would the Californian courts hold any jurisdiction over a UK incorporated company (and/or directors) and the NZ main entity?  What action could this court realistically impose on the company?

Its AU/NZ, our governments bend over goatse style for America. 
Now if only we were talking about downloaded mp3s or movies - FBI with NZ police would have already raided these guys. 

[Rarity]

This is excellent news.  Trying to handle this matter as individuals and self-interested businesses was never going to work, it just turned into a mob going after innocent people.  Only the government can fix this Bitcoinica situation and set everything right for us so the Bitcoin community can get back on track.  I only hope this is a sign of things to come and soon the governments of the world will play an even larger role in regulating the Bitcoin economy.


v @btcx, It seems a tremendous shame Zhou isn't in charge, he has handled this entire situation with the utmost professionalism and candor despite some really off base personal attacks pointed in his direction.

 Soon, those three stopped responding to communications altogether

A very wise man said, “Communication is the universal solvent” and this lawsuit will mean they are finnaly gonna have to start communicating.  It's about time.

[btcx]

It's generally not in the interests of either party for the matter to go to trial, especially when the defendants don't have deep pockets.

The Notice to Plaintiff states that participation in some kind of alternative dispute resolution process is required before the matter can proceed to trial.

Added this to the OP:

It should be known that the four plaintiffs had previously attempted to expedite the claims process and proposed a settlement agreement with Bitcoinica that would have granted a limited period of time to complete the claims, a much larger margin for error, and immunity: https://docs.google.com/open?id=0B_ECG6JRZs-7SXFtdG1QXy1uSnM

Discussions began at the end of June, and while Tihan and Zhou were very cooperative and seemed to genuinely want what was in the best interest of the Bitcoinica users, Donald, Patrick and Amir were not taking the situation seriously.  Soon, those three stopped responding to communications altogether and on July 9th, 2012, we presented them with the settlement offer.  Tihan and Zhou (unfortunately, powerless) were again keen to take the offer, however, Donald Patrick and Amir declined.

Whether it's relevant or not, I don't know:
July 7th - Amir released the Bitcoinica source code
July 11th - Amir announces Mt.Gox account theft.

[repentance]

I'm sure appropriate lawyers have already answered this, but would the Californian courts hold any jurisdiction over a UK incorporated company (and/or directors) and the NZ main entity?  What action could this court realistically impose on the company?

Its AU/NZ, our governments bend over goatse style for America.  
Now if only we were talking about downloaded mp3s or movies - FBI with NZ police would have already raided these guys.  

None of "these guys" are in NZ - there's literally nothing for the NZ police to raid.  Nor will any US legal action have any material effect on the liquidation of an NZ company.  This is all about being able to pursue remedies which may allow them to recover amounts above and beyond those which they might receive in any pro-rata distribution of Bitcoinica funds (whether informally through the previous refund process or through liquidation).  Their complaint specifically states that they never agreed to a pro-rata refund.  (They were somewhat willing to accept a pro-rata refund under the proposed settlement agreement if certain conditions were met, but the agreement was never ratified by Bitcoinica LP so there was no agreement to accept less than 100%).

Ironically, it's possible that the NZ liquidator will find that the actions of those involved in Bitcoinica LP give rise to personal liability - which would bolster the US case.

The complaint has not been filed as a "complex case" under California Rules, which means that they're not seeking to raise difficult/novel issues such as the nature of Bitcoin and whether or not it has value.

[Shadow383]

It seems a tremendous shame Zhou isn't in charge, he has handled this entire situation with the utmost professionalism and candor despite some really off base personal attacks pointed in his direction.

What, you mean when it became clear that he was responsible for the recent MtGox theft and he came up with some bullshit excuse involving some mysterious chinese crook?

[Phinnaeus Gage]

It seems a tremendous shame Zhou isn't in charge, he has handled this entire situation with the utmost professionalism and candor despite some really off base personal attacks pointed in his direction.

What, you mean when it became clear that he was responsible for the recent MtGox theft and he came up with some bullshit excuse involving some mysterious chinese crook?

Wait till you find out which Bitcoiner is into Chinese archaeology (read relics).

~Bruno~

[repentance]

At least Zhou's comments about secret documents and Patrick walking away from the refund process make sense now.