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On Monday Mt. Gox filed for Chapter 15 bankruptcy in the United States to protect itself from a class action lawsuit that was recently filed in Chicago as well as a year-old case involving CoinLab Inc., which sued Mt. Gox for breaching a contract.
A Chapter 15 bankruptcy only allows a business to protect its U.S. assets by recognizing a foreign bankruptcy. Mt. Gox filed for bankruptcy in Japan, where the Bitcoin exchange was based, on Feb. 28, after saying that hackers had stolen 750,000 customer bitcoins from its accounts.
When the exchange shut down, customers lost any money they still had in their Mt. Gox accounts.
The attorney for the class action suit, Steven Woodrow, had harsh words in the Dallas courtroom.
“This case involves a massive fraud,” Woodrow told Judge Harlin Hale. “They claim incredibly that they will preserve assets and protect assets by entrusting the servers and other property to [Mt. Gox CEO Mark] Karpeles. Respectfully, your honor, that is the definition of the fox guarding the henhouse.”
Meanwhile, a U.S. federal judge in Chicago temporarily froze Karpeles’ U.S. assets on Tuesday. The freeze also applies to Mt. Gox’s U.S. affiliate as well as the parent Japanese company, Tibanne.
Victims involved in the class action suit said they believe Karpeles still possesses millions of dollars’ worth of bitcoins.
Despite the flurry of legal action, it remains very unlikely that any of the Mt. Gox victims will ever get even a portion of their money back.
Other Bitcoin news this week focused on regulation…
The Latest Bitcoin News – Regulators Still Finding Their Way
Regulators spent another week contradicting each other, raising concern they will find it hard to agree on the actual creation of Bitcoin regulations.
The Financial Industry Regulatory Authority (FINRA), a brokerage regulator, issued an “investor alert” on Bitcoin on Tuesday, pointing to the Mt. Gox bankruptcy as an example of the risk of owning the digital currency.
“Speculators drawn to Bitcoin trading should understand that Bitcoin prices have fluctuated widely, and wildly,” said Gerri Walsh, FINRA’s vice president for investor education. “Investors looking to get in on the ground floor of a Bitcoin-related company should realize that fraudsters may see the latest digital currency trend as a chance to steal their money.”
While it’s true that investing in Bitcoin is risky, it’s hardly the only investment in which you can lose all your money. Stocks can be very risky as well, even supposedly “safe” blue chips. Just ask all the folks who owned General Motors Co. (NYSE: GM) stock in 2009.
Not all regulators view Bitcoin so negatively, however.
On the very same day FINRA was warning investors to avoid Bitcoin, the head of the Commodities Futures Trading Commission (CFTC) said his agency is “looking into” regulating the digital currency. Specifically, the CFTC is looking at whether Bitcoin should be treated as a commodity.
The biggest issue blocking the path to Bitcoin regulation is that government officials in the United States and elsewhere can’t decide which agency has jurisdiction.
That hasn’t slowed down New York state’s Superintendent of Financial Services Benjamin M. Lawsky from holding hearings earlier this year and this week issuing a public order saying that he is now accepting applications for digital currency exchanges.
Lawsky said he plans to have New York’s Bitcoin regulations nailed down by July of this year. While other regulators have voiced concern, Lawsky sees a job that needs to be done.
“Turning a blind eye and failing to put in place guardrails for virtual currency firms while consumers use that product is simply not a tenable strategy for regulators,” Lawsky said in his press release.
Can we clone this guy?
The Latest Bitcoin News – Quick Hits
- Bidding in Bitcoin? An eBay Inc. (Nasdaq: EBAY) patent application turned up this week that deals with “managing transactions in a digital marketplace” and specifically mentions Bitcoin. Given eBay’s position as a leader in both ecommerce and online payments via its PayPal subsidiary, the company’s adoption of Bitcoin would be a major step toward integrating digital currency into the U.S. financial system.
- Let 100 Bitcoin Startups Bloom: Boost VC, a Silicon Valley venture capital firm, announced that over the next three years it plans to accelerate 100 Bitcoin startups. Boost VC has accelerated 10 Bitcoin companies already and is now looking for companies with “next-generation” ideas that will take Bitcoin beyond the exchanges, miners, and payment processors. Boost has its sights set on becoming the largest Bitcoin incubator in the country.
- Convert Old Tech into Bitcoin: A startup called Mintspare this week started offering Bitcoin for old electronics. Mintspare has a database that determines the value of a given gadget, the converts that to Bitcoin. The idea behind the project is to help introduce those unfamiliar with digital currencies to their first bitcoins.
Digital currencies aren’t the only exciting tech investing trend. Wearable technology is going to explode over the next few years. Here are our five favorite wearable tech stocks – and we’re not talking about Apple or Google.
The post Latest Bitcoin News: More Mt. Gox Fallout, Contradictory Regulators appeared first on Money Morning – Only the News You Can Profit From.
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