TOKYO, March 12 Two months before Mt. Gox filed
for bankruptcy it was sued by a customer seeking
the return of funds in a case that highlights some of the red
flags raised in the run-up to the collapse of what was once the
world's biggest bitcoin exchange.
New York resident Marko Simovic filed a civil action at the
Tokyo District Court on Dec. 24, seeking to recover $105,000 he
had on deposit at Mt. Gox and about $14,000 in interest, court
Simovic, who described himself as a software developer who
previously managed the bitcoin operations for a hedge fund, said
Mt. Gox dodged repeated requests to withdraw funds from his
account, which as of July 1 was credited with $935,000 in cash.
Simovic could not be reached for comment.
Mt. Gox refuted Simovic's claims in a brief filed by law
firm Baker & McKenzie. It said Simovic didn't comply with online
procedures, and cited withdrawal limits that would have required
two months for him to draw down his account. That rebuttal was
submitted to the court three weeks before Mt. Gox filed for
bankruptcy protection on Feb. 28, saying it had lost bitcoins
and cash worth more than half a billion dollars to hackers.
The lawsuit was cited in a U.S. bankruptcy filing earlier
this week, which is related to the company's
Tokyo bankruptcy proceedings.
Simovic said at the time he was worried that Mt. Gox could
go bankrupt and decided on an exit strategy: he converted his
cash into bitcoin, which he then sold on Bitstamp, a rival
exchange. He managed to recoup $833,000, leaving the rest in his
Mt. Gox account, according to the lawsuit.
"Rather than leave my money at Mt. Gox as required by their
expensive, extremely slow and uncertain withdrawal procedure, I
decided to move the funds as soon as possible," Simovic wrote in
a brief that was part of the court file and dated Dec. 18. "This
was the only way I could get my money back quickly. Moreover, I
was concerned there might be a run on Mt. Gox."
The suit also shows that Simovic raised questions about
whether Mt. Gox was complying with Japanese laws.
In a Sept. 11 letter to Mt. Gox's chief marketing officer
Gonzague Gay-Bouchery, Simovic's lawyer expressed concern that
Mt. Gox may be in violation of investment and banking laws that
prohibit unlicensed companies from receiving deposits and
engaging in currency exchange services.
In a court filing, Mt. Gox said it had checked with Japan's
Financial Services Agency (FSA) and there was no need for it to
register with the banking regulator. No one could be reached at
Mt. Gox or Baker & McKenzie for comment. The FSA declined to say
whether it had spoken to Mt. Gox.
Mt. Gox's collapse has brought into focus the question of
how to regulate crypto currencies. Japan is still struggling to
craft a response. Last week, the government said bitcoin was not
legal tender, but might be taxable and subject to