World's First Bitcoin Lawsuit - Cartmell v. Bitcoinica

[kwukduck]

Oh that's  great, so now instead of bitcoinica victims a few guys have decided to take all Intersango customers down the drain with them? Sharing is caring?

[Bitcoin Oz]

Oh that's  great, so now instead of bitcoinica victims a few guys have decided to take all Intersango customers down the drain with them? Sharing is caring?

Its a race to see who can clean them out first and get hold of the chinese relics.

[repentance]

Oh that's  great, so now instead of bitcoinica victims a few guys have decided to take all Intersango customers down the drain with them? Sharing is caring?

Intersango customers can pull their funds out and use another exchange while this plays out.  It's Intersango itself which might end up being the sacrifice offered to appease the angry gods.  Intersango was always going to get dragged into this.  The only question up until now has been when and by whom.

[kwukduck]

Oh that's  great, so now instead of bitcoinica victims a few guys have decided to take all Intersango customers down the drain with them? Sharing is caring?

Intersango customers can pull their funds out and use another exchange while this plays out.  It's Intersango itself which might end up being the sacrifice offered to appease the angry gods.  Intersango was always going to get dragged into this.  The only question up until now has been when and by whom.

Yea i suppose so, but since there seem to be a lot of people complaining about funds being stuck in intersango i have the feeling they will never get it back now that this is going on.
Just hoping it won't cause many more people losses.

[Bitcoin Oz]

If the wendon group owns shares in intersango does that make them liable ?

[btcx]

Oh that's  great, so now instead of bitcoinica victims a few guys have decided to take all Intersango customers down the drain with them? Sharing is caring?

I can only assume the 'few guys' you're referring to are Donald, Patrick and Amir.  Let's not forget who is actually responsible for this situation.  What they've done is criminal and anyone who continues to use Intersango is taking a piss on all of Bitcoinica's victims.

Hate to say it but after the latest debacle with Bitcoinica's Mt. Gox account, any sane person with money in the possession of Intersango should have made a mad dash to get that money back.  You clearly can't trust them to take even minimal measures of security to protect your money, and they've shown that if your money does get stolen, they won't be there to help.  In fact, if things get slightly uncomfortable, they're likely to walk away and leave you to wait months for someone to sue for receivership to return it.

Get your money out now or get in line behind the ranks of Bitcoinica victims.

If the wendon group owns shares in intersango does that make them liable ?

Not simply by virtue of owning shares.  DOEs are named in the complaint to cover additional parties who may be found to be liable after all the facts have been revealed.  This could include Zhou, Tihan, Wendon, xWayLab, Bitcoin Consultancy, other unknowns. 

[Bitcoin Oz]

Oh that's  great, so now instead of bitcoinica victims a few guys have decided to take all Intersango customers down the drain with them? Sharing is caring?

Intersango customers can pull their funds out and use another exchange while this plays out.  It's Intersango itself which might end up being the sacrifice offered to appease the angry gods.  Intersango was always going to get dragged into this.  The only question up until now has been when and by whom.

People have been complaining that its impossible to withdraw there via bank accounts and the price of bitcoin on their exchange is becoming too high to cash out that way.

[repentance]

I'm surprised that people aren't commenting on the fact that the plaintiffs tried to negotiate a settlement which gave them an advantage over other creditors and were intentionally trying to prevent involvement of other Bitcoin depositors, courts, criminal and civil authorities.  Had they been paid 100% of their claim in priority over other creditors, that fact would only have come to light in other legal proceedings (whether litigation or insolvency proceedings).  Bitcoinica would have been prohibited by the terms of the settlement from disclosing that information, even though it would have meant there were less funds available with which to refund other users.  

Tihan and Zhou (unfortunately, powerless) were again keen to take the offer, however, Donald Patrick and Amir declined.

This actually confirms what was said by either Amir or Patrick regarding discussion about paying those most likely to sue first.

Should the plaintiffs prevail in the lawsuit, it would wipe out all known assets of Bitcoinica and then some - leaving nothing else for other creditors.  It is likely, however, that Bitcoinica will have been liquidated by that time.  I assume that some of the DOE defendants are expected to have deep pockets.

While I fully understand why the plaintiffs made the settlement proposal they did, I also understand why it was rejected by the Bitcoinica Consultancy guys - it's the kind of preferential payment to a creditor which makes liquidators have fits.

[Bitcoin Oz]

If nothing else it might establish a legal precedent regarding the status of bitcoin.

[repentance]

If nothing else it might establish a legal precedent regarding the status of bitcoin.

Unless the defendants are going to mount a very expensive legal battle which seeks to prove that Bitcoin isn't a thing of value and seek to have this heard as a complex matter under California rules, the nature/status of Bitcoin isn't going to be an issue in the case.  Although successful business people, I doubt that the plaintiffs have unlimited funds at their disposal with which to litigate this matter either - no-one is going to want to be paying expert witnesses to explain derivatives, contracts for difference and why Bitcoin should or should not be regarded as an underlying security.

[btcx]

I'm surprised that people aren't commenting on the fact that the plaintiffs tried to negotiate a settlement which gave them an advantage over other creditors and were intentionally trying to prevent involvement of other Bitcoin depositors, courts, criminal and civil authorities.  Had they been paid 100% of their claim in priority over other creditors, that fact would only have come to light in other legal proceedings (whether litigation or insolvency proceedings).  Bitcoinica would have been prohibited by the terms of the settlement from disclosing that information, even though it would have meant there were less funds available with which to refund other users.

Our first offer was to accept back 80% of our claims immediately, and we'd simply forfeit the rest as an additional buffer to the rest of the claimants.  This was proposed in response to Patrick's statement about having no margin for error, not being able to pay out any claims beyond 50% until all claims had come in, yet not being ever able to close the claims process.  20% of our claims should have been enough of a buffer to speed up the return of 100% of everyone else's claims.  We'd still face the risk of clawback during receivership if it ever got to that but we were hoping our settlement offer would allow them to avoid that entirely.

The settlement offer that I posted was our final offer after all communication had broken down.  At this point we had no trust at all in Bitcoinica/Intersango and we simply wanted to get as much money back under our control as we could before anything else stupid happened (like more funds being stolen).  Again, if they went in to receivership, we could be forced to return any overpaid share of the money but at least it'd be safe with us during the process.  We'd hoped that our offer would both push Bitcoinica to resolve the claims faster, and give them more room for error.  If they resolved all the claims within 6 months and paid us an equal pro rata share, they'd have immunity from us.  Coincidentally, the amount of funds stolen only 2 days after this offer was made was nearly 100% of what we were owed at the time.

The confidentiality provision in the document was there to protect Bitcoinica, who expressed concern over public perception of 'unfair' treatment.  To us, it made more sense to pay back people who you were 100% sure of, and then take the time sorting out everyone else, especially if you intended to return 100% of all claims.  Why take the extra risk holding on to all that extra money?  All terms were negotiable but they weren't interested at all in anything other than their mission to spend the next 10 years returning small percentages of claims.  We definitely weren't trying to get away with a larger cut of the total claims.. we were willing to sacrifice a huge chunk of money but we didn't want to wait forever.

  

Tihan and Zhou (unfortunately, powerless) were again keen to take the offer, however, Donald Patrick and Amir declined.

This actually confirms what was said by either Amir or Patrick regarding discussion about paying those most likely to sue first.

Should the plaintiffs prevail in the lawsuit, it would wipe out all known assets of Bitcoinica and then some - leaving nothing else for other creditors.  It is likely, however, that Bitcoinica will have been liquidated by that time.  I assume that some of the DOE defendants are expected to have deep pockets.

Bitcoinica has no assets to speak of.  The only things possibly of value--the brand and the source code--were destroyed and given away.  We can't win other customers' deposits.  It's our expectation that a receiver will take over and distribute the claims and we'll get our cut of that, and anything we're short will have to come from the people found responsible.

[Bitcoin Oz]

Coincidentally, the amount of funds stolen only 2 days after this offer was made was nearly 100% of what we were owed at the time.

Funny that.

[repentance]

Bitcoinica has no assets to speak of.  The only things possibly of value--the brand and the source code--were destroyed and given away.  We can't win other customers' deposits.  It's our expectation that a receiver will take over and distribute the claims and we'll get our cut of that, and anything we're short will have to come from the people found responsible.

Maybe you can pursue the mysterious Chen for some of the deficiency.   

[btcx]

Bitcoinica has no assets to speak of.  The only things possibly of value--the brand and the source code--were destroyed and given away.  We can't win other customers' deposits.  It's our expectation that a receiver will take over and distribute the claims and we'll get our cut of that, and anything we're short will have to come from the people found responsible.

Maybe you can pursue the mysterious Chen for some of the deficiency.   

hah!  Unfortunately, Chen doesn't owe me anything.  If the defendants don't want to come out of pocket for the missing money, they oughta pursue him.

[repentance]

Maybe you can pursue the mysterious Chen for some of the deficiency.   

hah!  Unfortunately, Chen doesn't owe me anything.  If the defendants don't want to come out of pocket for the missing money, they oughta pursue him.

He's allegedly responsible for some of the shortfall you'll suffer and he allegedly has deep pockets - looks a lot like a DOE to me (but then so do Linode and Rackspace).

[apetersson]

why is the document talking about DOES 1-20 and sometimes 60 ? who are they referring to?

[MagicalTux]

hah!  Unfortunately, Chen doesn't owe me anything.  If the defendants don't want to come out of pocket for the missing money, they oughta pursue him.

He's allegedly responsible for some of the shortfall you'll suffer and he allegedly has deep pockets - looks a lot like a DOE to me (but then so do Linode and Rackspace).

Actually, btcx points the fact that as far as they (as Bitcoinica customers) are concerned, they are only in contact with Bitcoinica.

If funds were stolen from Bitcoinica, then it's up to Bitcoinica to initiate the appropriate legal actions, which seems to have not happened (most likely because of the fact the Bitcoinica structure in NZ was still in transfer process - transfer process which has been on hold since Bitcoinica was taken offline - resulting in most of the involved people to be unsure as to if they are actually in charge or not, while hoping they are not), resulting in the current situation.

It's difficult for any of us to know exactly who's in charge in there, however hopefully bringing the issue to a court will shed light on this issue. Note that if because of inaction from the people in charge funds were lost, the court is likely going to require from those in charge to cover for the lost parts.


(NB: this is my personal opinion based on the documents and information posted here, I'm not a lawyer and what I write here has no legal value, it's just a point of view)

[Vladimir]

Oh that's  great, so now instead of bitcoinica victims a few guys have decided to take all Intersango customers down the drain with them? Sharing is caring?

Intersango customers can pull their funds out and use another exchange while this plays out.  It's Intersango itself which might end up being the sacrifice offered to appease the angry gods.  Intersango was always going to get dragged into this.  The only question up until now has been when and by whom.

As advised long ago. Intersango is not safe to use due to significant legal risks and uncertainty it faces. Whoever continues to use it given all the known facts... well... do not come here to cry later.

Edit: Uncertanity and risks due to it being run by the same team that is allegedly responsible for Bitconica's fiasco and because they were going to be sued (now are). It is well above usual "bitcoin exchange" risks and these risks have escalated AFTER bitcoinica went down.

[lonelyminer (Peter Šurda)]

As advised long ago. Intersango is not safe to use due to significant legal risks and uncertainty it faces. Whoever continues to use it given all the known facts... well... do not come here to cry later.

I withdrew my Intersango funds. To Bitcoinica. Feel free to have a laugh at my expense.

[Fiyasko]

Im gonna watch this...