Mt. Gox 'Substandard' Security Left Bitcoins Vulnerable, Class Action Lawsuit Says

Mt. Gox 'Substandard' Security Left Bitcoins Vulnerable, Class Action Lawsuit Says
MtGox CEO Mark Karpeles bows during an apology at a press conference at the Justice Ministry in Tokyo Friday night. Photograph: i/AP

Like many bitcoin enthusiasts at the time, Gregory Greene in late 2011 came upon the Mt. Gox exchange website.
He read the exchange’s stated commitment to secure transactions and was sold on its reliability.
So says a class action lawsuit filed with the Northern District of Illinois, U.S. District Court, apparently the first such case brought against the Tokyo-based exchange that collapsed this week, with its chief, Mark Karpeles, seeking bankruptcy protection in Japan.
“Mt. Gox breached its contracts with Plaintiff and the Payment Class by failing to safely and adequately protect their bitcoins and Fiat Currency,” the suit claims.
Back in 2011, when Mt. Gox represented 80 percent of all bitcoin transactions, Greene signed up for an account on Mt. Gox’s website, transferring U.S. Dollars into the account, and then using Mt. Gox’s services to convert those funds into bitcoins.
Mt. Gox CEO Karpeles announced this week the loss of 850,000 bitcoins at Mt. Gox, which puts the total estimated value of bitcoins lost or stolen at more than $475 million at today’s market prices.
“Had Greene known of Mt. Gox’s substandard security procedures that left his bitcoins vulnerable to theft, he would have paid substantially less for Mt. Gox’s services or would not have paid at all,” the lawsuit states.
The suit claims Greene lost $25,000.
“Worse yet, at the time Mt. Gox shut down, Greene had used Mt. Gox’s services to store and protect bitcoins with a present value of approximately $25,000 dollars,” the suit says. “Despite his repeated attempts, Greene has been unable to withdraw his money from Mt. Gox since early February 2014.”
Before Feb. 7, 2014, Greene’s bitcoins had a market value of nearly double their value, but Mt. Gox’s prohibition on withdrawals and eventual shutdown “undeniably caused a sharp decline in the market value of bitcoins,” the suit says.
Green’s lawyer is Steven Woodrow, a partner at the Edelson law firm in Denver, Colorado.
On its Facebook page, the law firm welcomes other Mt. Gox victims to potentially join the plaintiff class.
“Our lawsuit against Mt. Gox has hit the presses! Let us know if you’ve been affected by the closing of the exchange,” the firm says.

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