Class Action Plaintiffs Back Mt. Gox Rescue Plan

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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Former Mt. Gox customers have agreed to settle two class-action lawsuits in exchange for a stake in a revived exchange under new ownership

Former customers of the bitcoin exchange Mt. Gox, which entered bankruptcy protection in February, have agreed to settle class-action lawsuits in Canada and the US as part of a controversial plan to revive the business under new ownership.

The plaintiffs of the lawsuits, which allege fraud by Mt. Gox, have agreed to support a plan that would see Sunlot Holdings take over the exchange, paying creditors the bitcoins still in the possession of Mt. Gox and giving them a share in the revived business. These creditors are based largely in the US, Canada and Europe.

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Liquidation

Mt. Gox filed for bankruptcy in the US and Japan after saying it had lost 850,000 bitcoins, or about £226 million, after being targeted by hackers. After entering bankruptcy protection the exchange said it found 200,000 bitcoins, currently worth about £53,000, in an “old-format” digital wallet.

The exchange is currently set to undergo liquidation after a Japanese court appointed a liquidator earlier in April, a process which is likely to mean former customers would get back few or none of the bitcoins they had stored with Mt. Gox.

Sunlot’s plan would split the 200,000 bitcoins, as well as another $20 million (£12.6m) in currency held by Mt. Gox’s administrators, amongst the plaintiffs of the class-action lawsuits. In exchange for dropping the legal actions, the plaintiffs, who are based mostly in the US, Canada and Europe, would also share a 16.5 percent stake in Mt. Gox after it is sold to Sunlot.

Under the terms of the deal, Mt. Gox founder Jed McCaleb and former chief marketing officer Gonzague Gay-Bouchery would be released from litigation in exchange for backing the agreement. Mt. Gox chief executive Mark Karpeles, parent company Tibanne, banking partner Mizuho Bank and others would remain liable to further litigation.

Restitution

Sunlot, backed by entrepreneurs including Jonathan Yantis and former child actor Brock Pierce, as well as venture capitalists William Quigley and Matthew Roszak, has proposed buying Mt. Gox for one bitcoin, worth about £265. The deal would potentially position Sunlot as a leading bitcoin exchange, since Mt. Gox’s former customers would have a stake in using it. The consortium has launched a website to back its plan at savegox.com.

Mt. Gox’s sale must be approved by a Tokyo court, while the settlement must be approved by the US and Canadian courts handling the class actions.

The law firm Edelson, which is leading the US case, said the deal would mean a better outcome for the plaintiffs than liquidation. “This is the customers’ best option and the only chance they have for full restitution,” said the firm’s Jay Edelson in a statement.

Sunlot first tried to take over Mt. Gox in February. Whether the current effort succeeds depends on whether bankruptcy trustee Nobuaki Kobayashi sees the backing of the class action plaintiffs as providing Sunlot’s plan with more credibility.

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