Pennsylvania Record

Saturday, December 14, 2019

Lawsuit over downfall of Mt. Gox bitcoin exchange will stay in Philadelphia instead of being transferred to Japan

Federal Court

By Charmaine Little | Aug 7, 2019

Appeal

PHILADELPHIA - The U.S. District Court in the Eastern District of Pennsylvania refused to dismiss a bitcoin dispute because of lack of jurisdiction July 26.

Gregory Pearce filed a class action lawsuit on behalf of himself and others in his situation. He sued Mark Karpeles, who responded with a motion to dismiss for lack of jurisdiction.

Senior Judge Robert F. Kelly rejected the dismissal motion.

Pearce sued after Mt. Gox, a well-known bitcoin exchange owned by Karpeles, crumpled. After the downfall of the exchange, users couldn’t access their accounts and were told via a website notification that a “decision was taken to close all transactions for the time being,” according to the lawsuit. 

Days later, Mt. Gox filed for bankruptcy protection in Japan. Karpeles then announced in a press conference that a security infiltration caused Mt. Gox to lose more than $450 million. 

Before users were notified about the breach, Pearce put $5,900 in his account. When he tried to withdraw it, he received a notification that the withdrawal was processing, but never received his money. Pearce then filed the class action.

In response, Karpeles said the court lacks personal jurisdiction, but the court disagreed.

“We find that this court has specific jurisdiction over Karpeles because he availed himself of the privilege of conducting business in Pennsylvania through soliciting business from Pearce and thousands of other Pennsylvania residents through the Mt. Gox website,” the court said.

On top of that, Karpeles “purposely availed” himself when he conducted business in Pennsylvania by email and shipping products to those who live in the state, the court said.

The court also said Illinois and California ruled in the same manner when residents of those states sued Karpeles.

Karpeles is also subject to the court’s personal jurisdiction in his individual capacity. The court said Karpeles did business with several residents across the country, so “there is nothing constitutionally unfair about allowing … a state with which Karpeles had sufficient minimum contacts to exercise personal jurisdiction over” him.

Considering this, it wouldn’t be unconstitutional for Karpeles to have to argue his case in Pennsylvania.

Karpeles argued Japan had a more efficient venue.

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