Mt. Gox chief refuses judge's order to testify in his own U.S. bankruptcy case

The founder of the notorious bitcoin exchange Mt. Gox has told the U.S. justice system, “nah, I don’t think so,” in response to a judge’s demand that he travel to the U.S. to explain to officials how and why his cryptocurrency business went bust.

Such are the challenges of a court trying to impose requests upon a financial revolution that was started, and continues, beyond the oversight of any government or judicial institutions.

Tokyo-based Mt. Gox founder and chief Mark Karpeles has refused an order by a U.S. judge to appear in front of the Department of Treasury’s Financial Crimes Enforcement Network to answer questions about his U.S. bankruptcy case. Mt. Gox’s bankruptcy lawyers said Karpeles is not willing to travel from Japan to the U.S. despite an order from Judge Stacey Jernigan for him to answer questions under oath on Thursday from lawyers who represent customers with frozen bitcoin accounts. According to lawyers, Karpeles is still in the process of retaining counsel.

“Until such time as counsel is retained and has an opportunity to ‘get up to speed’ and advise Mr. Karpeles [on the Treasury subpoena], he is not willing to travel to the U.S.,” lawyers for Mt. Gox said in documents filed in U.S. Bankruptcy Court in Dallas.

The lawyers asked the court to delay Karpeles’ deposition until May 5.

Karpeles has not been charged with a crime. Last year, special agents from the Department of Homeland Security seized more than $5.1 million from accounts belonging to Mt. Gox under a federal money laundering statute, according to the Wall Street Journal.

Mt. Gox received bankruptcy protection from a judge in Dallas after the online exchange lost about 750,000 bitcoins in a long-running theft, and froze users’ accounts. The platform then “found” 200,000 bitcoins in a digital wallet, or digital storage file to hold cryptocurrency, it claimed to have forgotten about.

The dissolution of Mt. Gox marked one of the biggest setbacks in the digital payment system’s five-year existence, and today bitcoin entrepreneurs and investors are working to salvage bitcoin’s reputation by embracing some regulation and safer trading methods, and more consumer-friendly bitcoin buying opportunities. But bitcoin hasn’t fully recovered from the Mt Gox-induced beating — in February, it’s value fell more than 85 percent in less than two hours. While it has recovered slightly to about $500, bitcoin’s worth is still less than half the all-time high of more than $1,200 in November.

Bitcoin is a cybercurrency and payments network created in 2009 based on a mathematical formula as an alternative to banks and government-controlled currency systems. Bitcoins are added to the network by a process called mining, and most bitcoins are bought and traded on global Internet exchanges.

 

Photo of Mark Karpeles from AFP/Getty Images

Heather Somerville Heather Somerville (226 Posts)

Heather Somerville is a business reporter covering venture capital and startups for the Bay Area News Group.