Mt Gox’s Karpeles Is Beyond U.S. Court Reach, Lawyer Says

Mt. Gox Co. principal Mark Karpeles is beyond the reach of a U.S. court where he and the bankrupt Bitcoin exchange are being sued for consumer fraud by two American depositors, his attorney told a federal judge.

Karpeles and Tibanne KK, another of his companies named in the lawsuit filed in Chicago federal court in February, will submit papers asking U.S. District Judge Gary Feinerman to rule he has no jurisdiction over them, defense lawyer Eric Macey said in court today.

Karpeles, who lives in Japan, has never been to the U.S. and wasn’t properly served with the complaint that started the suit, Macey said after today’s proceeding. Feinerman gave the lawyer until April 28 to file papers making his arguments.

Once the world’s biggest Bitcoin exchange, Mt. Gox filed for bankruptcy in Tokyo on Feb. 28, after announcing it couldn’t account for more than 700,000 customer bitcoins plus 100,000 of its own and halted client withdrawals. The company has since said it located about 200,000 of the missing coins and that the balance, valued at more than $268 million at today’s price, may have been stolen.

Each unit of the virtual currency is worth $446.83 today, according to the value-tracking website CoinDesk.

“We think there’s jurisdiction,” Jay Edelson, the depositors’ attorney, told Feinerman today.

Fraud Allegation

Depositors Gregory Greene of Illinois, who claims he lost access to about $25,000 worth of currency, and Joseph Lack, who allegedly lost about $40,000, have accused Shibuya-ku, Japan-based Mt. Gox, its U.S. affiliate, Karpeles and Tibanne of fraud.

Mt. Gox filed papers on March 9 at the U.S. bankruptcy court in Dallas seeking American court recognition of its status in Japan and temporarily preventing its pursuit by creditors in the U.S..

Feinerman last month said he’d block the Chicago plaintiffs from proceeding against the Japanese business, while allowing them to move forward against the U.S. affiliate, Karpeles and other defendants.

The judge also issued an order freezing those defendants’ U.S. assets.

U.S. Bankruptcy Judge Stacey Jernigan last week ordered Karpeles to Dallas on April 17 to answer questions related to his company’s request for recognition of the Japanese bankruptcy.

The Illinois case is Greene v. Mt. Gox Inc., 14-cv-01437, U.S. District Court, Northern District of Illinois (Chicago). The American bankruptcy is In re MtGox Co., 14-bk-31229, U.S. Bankruptcy Court, Northern District of Texas (Dallas).

To contact the reporter on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Joe Schneider, Mary Romano

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