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Author Topic: World's First Bitcoin Lawsuit - Cartmell v. Bitcoinica  (Read 10548 times)
Maged
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August 08, 2012, 06:21:14 AM
 #1

Not to be confused with the current actions being taken by Tihan.
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/

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August 09, 2012, 02:04:37 AM
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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.

  
Quote from: btcx
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.

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August 17, 2012, 02:14:04 AM
 #3

Posting this link for accuracy. It looks like Amir did respond to contact by the plaintiffs and was willing to consider the idea of them taking over Bitcoinica and the claims process.

Quote
That sounds like a good plan. I also would be willing to help you verify and vet claims.

However the problem is that now Patrick and Donald have said they're done. They feel like we had no legal responsibility to take on the claims, and that we took it on so people's payments would simply get done. Now that they've walked away, they aren't dealing with this mess. They are also unlikely to hand over the funds to any third party.

http://privatepaste.com/0c4b934417
Contents of the above link:
Quote
Hi,

That sounds like a good plan. I also would be willing to help you verify and vet claims.

However the problem is that now Patrick and Donald have said they're done. They feel like we had no legal responsibility to take on the claims, and that we took it on so people's payments would simply get done. Now that they've walked away, they aren't dealing with this mess. They are also unlikely to hand over the funds to any third party.

Don't take this as legal advice, but we would need to get Bitcoinica LP to do it. I'm not sure how it would work (written consent or what?) but that's what I imagine. I myself never had access to any funds as I'm not a responsible person, and can be careless in real life. So I don't have access to anything (like Intersango). My role is mostly writing code and organising things (like our community projects, the conference or writing articles).


Relaunching Bitcoinica though is a stupid idea though. I detailed why here:

  https://bitcointalk.org/index.php?topic=93319.msg1038189#msg1038189

And also see the email between Zhou and Tihan:

  http://pastebin.com/8XKZaPK6

i.e that Bitcoinica was losing money in its last months. By putting it back up, you are taking a huge risk, especially with the current platform. We were building a new platform from scratch for this reason. Two requirements for relaunching Bitcoinica:

1 - a new codebase and system from scratch that you control and understand fully. I realise this was a mistake now. At the time I did have concerns, but didn't speak up as everyone around me seemed capable and full of initiative.


2 - a better hedging algorithm that depends not on a person tuning values, but on a mathematical algorithm that is assessing risk. I would recommend a stochastic random walk that measures risk movements to an acceptable certainty to tell you whether to trade or not. A good book I recommend is Evidence Based Technical Analysis.

Otherwise if you don't follow that advice above, then the community is in for a whole lot more heartache and disaster. I really don't want anyone to lose money, or suffer more.



----- Original Message -----
From: Jesse Powell <jpowell@gmail.com>
To: Amir Taaki <zgenjix@yahoo.com>; Jed McCaleb <jed2000@gmail.com>; Brian Cartmell <brian@cartmell.co.nz>; Roger Ver <roger@memorydealers.com>
Cc:
Sent: Thursday, July 19, 2012 5:16 AM
Subject: can we work out a deal?

Hey Amir,

We've been trying to contact Patrick and Donald with no response.  Are
you the only one left at Bitcoinica?  We'd like to work out a deal that
would allow you guys to walk away from it, leave the claims process and
responsibility with us.  We'd likely attempt to relaunch Bitcoinica and
eventually get our money back that way but in the meantime at least all
the other users would get repaid and a lawsuit could be avoided.

Let us know what you think.

Jesse

Maged
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February 05, 2013, 02:30:08 AM
 #4

UPDATE 25/Jan/2013:

Defendant Intersango escapes.  

Other Defendants' motion to dismiss for lack of personal jurisdiction is denied.  Case allowed to proceed against Bitcoinica, Patrick Strateman, Amir Taaki and Donald Norman in California.

Quote
"Moving Defendants have failed to show that New Zealand is a suitable forum."

"The language of the Terms and Conditions allegedly on the website, even if it is enforceable, states only that 'you [meaning a customer] agree to submit to settle any dispute,' not that customers could not file actions against Bitcoinica outside New Zealand."

"In addition, the fact of a liquidation proceeding against Bitcoinica in New Zealand is not sufficient grounds to stay this action."

https://docs.google.com/file/d/0B_ECG6JRZs-7SDBhU2ducWM5eEU/edit



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