Mt Gox founder Jed McCaleb has landed in legal trouble, as a fresh lawsuit has been filed against him, accusing him of fraudulent misrepresentation. The case is related to the handling of the crypto exchange, which is now defunct.
The lawsuit was jointly filed by Joseph Jones and Peter Steinmetz, on May 19, in a court in California. The complaint accuses founder of the infamous exchange of fraudulent and negligent misrepresentation of the crypto exchange, which allegedly resulted in a partial loss of Bitcoin during a major hack Mt Gox suffered in 2014.
Mt Gox was once considered as the world’s bitcoin exchange in terms of trading volumes. However, it crashed down severely after a major cyberattack, which led to a loss of over 850,000 BTC to the exchange, which at that time were valued at over a whopping $400 million. Though a fraction of the stolen Bitcoins were recovered, the vast majority remains untraced even today.
The complainants have alleged that McCaleb, the founder, was aware that there existed serious safety issues on the exchange, way back from January 2011. Two security breaches took place back then, which McCaleb knew but didn’t inform the users about it. Also, they allege that McCaleb did not take enough measures to fix the issues, and didn’t even follow up on the two breaches from January 2014. The complaint read as follows:
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. 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.
The plaintiffs have accused that McCaleb had intentionally concealed the security, and still continued to promote the exchange. Three after Karpeles took over from McCaleb; he had to file for bankruptcy after the severe cyber attack. Earlier in March this year, Karpeles was himself found guilty of misrepresentation by a court in Japan, though he was released from the charges of embezzlement and breach of trust.