Mt. Gox Founder Jed McCaleb Stands Accused of Misrepresentation in New Lawsuit
- Mt. Gox filed for bankruptcy in 2014 after a hack worth millions of dollars.
- Two former traders are going after the former CEO for misrepresenting the issues faced by the exchange.
Mt. Gox is one of the most notable failures in the cryptocurrency industry, and the troubles were thought to be over a long time ago. However, for the founder, the troubles are still present. Jed McCaleb is now being faced with a lawsuit, based on his mishandling of the exchange.
Reports from CoinDesk confirm that that the legal action was filed on May 19th by Joseph Jones and Peter Steinmetz, adding that the former CEO knew about the “serious security risks” imposed on the exchange at the end of 2010 and the beginning of 2011.
The lawsuit was filed by two former traders of Mt. Gox, who say that McCaleb was not truthful about the financial situation of Mt. Gox after the hack occurred. The court filing said that the defendants were made aware of the risks that Mt. Gox took that let hackers get into the exchange in the first place. The filing adds:
“Rather than secure the exchange, McCaleb sold a large portion of his interest in the then sole proprietorship and provided avenues to the purchasers to cover-up the security concerns at the time without ever informing or disclosing these issues to the public.”
Towards the end of 2011, Mt. Gox was the largest Bitcoin exchange for their trading volume when it was hacked. The attack took 850,000 Bitcoin with it, which was valued at $400 million at the time.
However, this theft was preceded by a missing 80,000 Bitcoin on the exchange, which was not as highly publicized. As a result, the exchange ended up shutting down all trading operations by 2014 when it filed bankruptcy. At the time, Steinmetz said that he personally owned 43,000.
The complaint claims that McCaleb decided to sell most of his interest in Mt. Gox to Mark Karpeles, rather than have the publicity around the lack of refund to users. Court documents indicate that Karpeles was placed in charge of the exchange in 2011 and happened to hold 88% of the shares for the exchange.
In comparison, McCaleb only held 12%. He was charged with data manipulation in the exchange, prosecuted in the courts in Japan, and found guilty.
Despite being eight years since the hack, there are still creditors of the exchange that are working to get back the funds that they lost. However, the trustee of the exchange was ultimately accused of taking the wrong steps when they liquidated the assets, even extending the deadline in April to continue their efforts.
McCaleb appears to be doing rather well for himself at the moment. After all, he ended up founding Ripple, and he co-founded Stellar, which are both flourishing. Unfortunately, no matter the progress that he has made since the travesty of Mt. Gox, these problems seem to keep following him.