Business

Ed Drake

New lawsuit accuses Mt. Gox founder of fraudulent misrepresentation

The founder of the collapsed Mt. Gox cryptocurrency exchange is facing a fresh lawsuit in California over allegations of fraudulent misrepresentation, in the latest twist in the Mt. Gox saga.

Jed McCaleb, who founded Mt. Gox before later handing over the exchange to Mark Karpeles, is being sued for “fraudulent” and “negligent” misrepresentation contributing in part to losses suffered by users of the exchange, CoinDesk reported.

The world’s one-time largest crypto exchange by trading volume, the collapse of Mt. Gox left countless customers out of pocket, with the majority still waiting to recover funds from the company, currently being administered by a trustee in bankruptcy.

According to the details of the complaint, the plaintiffs, two former Mt Gox traders, allege that McCaleb was aware of security issues at the exchange as early as 2011, and failed to take steps to rectify the problems, nor make details of hacks public.

“Rather than inform the public that these users were not refunded, nor stay to repair the security issues, McCaleb sold a majority of his interest in Mt. Gox to Mark Karpeles,” the plaintiffs claimed. “In deciding to use Mt. Gox as offered by Defendants, Plaintiff accepted as true the totality of representations and omissions made by representatives from Defendants that Defendants were uniquely qualified to properly provide the services needed to operate a successful and secure exchange per the needs of Plaintiffs and that Mt. Gox was properly funded.”

Karpeles assumed control of Mt. Gox in 2011, with the company filing for bankruptcy just three years later, following the now infamous $400 million hack.

Karpeles himself has been found guilty on charges of data manipulation, though was cleared at trial on separate counts of embezzlement. The action against McCaleb is the latest legal action to arise from the Mt. Gox affair, with users still trying to recover lost funds to this day.

The case means the courts will have yet another chance to pour over the details leading to the hack and subsequent collapse of the firm, in a bid to bring all those involved to justice.

McCaleb, who subsequently went on to launch the cryptocurrency Stellar, has yet to comment on the filing.

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