A Texas-based federal judge granted temporary bankruptcy protection on March 10 to a digital monetary exchange facing lawsuits on two continents amid the puzzling disappearance of holdings that equate to millions of dollars because of either hacking, fraud, mismanagement or all of the above.
Judge Harlin Hale has, for the time being, allowed the Mt. Gox bitcoin exchange to pursue Chapter 15 insolvency protection through the American court system. Mt. Gox, which is based in Japan despite being founded by a US national and eventually sold to a French national whose assets were frozen by a US district court judge on March 11, is attempting to invoke the cross-border bankruptcy provision in the wake of the disappearance in more than 700,000 customer bitcoins (online currency holdings). The filing is thick with irony as those who originally spearheaded the development of bitcoin were doing so to set up an alternative to the US dollar and other major currencies, seeking to be free of almost any government regulation and oversight.
Lawsuits are now pending, including a domestic class action suit starting in Chicago, in the United States and Japan, with more expected. The case is intriguing because digital currency is so new and non-mainstream that it remains almost entirely unregulated by governments.
- Brian Shappell, CBA, CICP, NACM staff writer
See more analysis in the extended version of this story in this week's edition of eNews, available late Thursday afternoon at www.nacm.org.