Judge orders Mt Gox CEO to U.S. for questions on failed bitcoin exchange

By April 1, 2014Bitcoin Business
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Judge orders Mt Gox CEO to U.S. for questions on failed bitcoin exchange

(Reuters) - The chief executive of Japan's Mt. Gox, once the world's leading bitcoin exchange, was ordered to the United States to answer questions related to its U.S. bankruptcy case, filed after the company lost $400 million of customers' digital currency.

U.S. Bankruptcy Judge Stacey Jernigan on Tuesday ordered Karpeles to appear on April 17 in Dallas at the offices of Baker & McKenzie, the law firm that represents Mt. Gox.

Mt. Gox customers want its chief executive and majority owner, Mark Karpeles, to explain why the exchange shut down in February and what happened to their 750,000 bitcoins, which the company said were stolen in a computer hacking attack.

Customers have alleged that insiders including Karpeles may have stolen the money, and employees told Reuters they were worried as early as 2012 that customers' money was being diverted for operating expenses.

Mt. Gox filed bankruptcy in February in Tokyo. Last month, Karpeles asked a Dallas court to grant Mt. Gox Chapter 15 bankruptcy protection, in part to put a stop to a class action that had been filed by U.S. customers in Chicago federal court.

Under Chapter 15, protection from creditors is not automatic. Mt. Gox must prove at a May 20 hearing that it should be granted such protection.

"If he avails himself of this court, my God, he is going to get himself over here," Jernigan said at the Bankruptcy Court hearing in Dallas at which she ordered Karpeles to appear.

John Mitchell, a Baker & McKenzie attorney, said the company may replace Karpeles as the "foreign representative" of Mt. Gox in the U.S. bankruptcy court, a suggestion that did not sit well with the judge.

"He filed this case," she responded curtly.

Karpeles' testimony could help solve the mystery of what happened to money and bitcoins that were entrusted to Mt. Gox by its clients, most of them from the United States.

Karpeles controlled the company's financial records and may be the only person who knows where the company's assets and money might be, Steven Woodrow, an attorney for U.S. customers, told the Dallas hearing.

Jernigan limited the deposition questioning of Karpeles to issues pertaining to whether the court should grant permanent bankruptcy protection to Mt. Gox.

The case is In Re: Mt. Gox Co. Ltd, U.S. Bankruptcy Court, Northern District of Dallas, No. 14-31229.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio)

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