Topic: Bitcoinica MtGox account compromised - page 10. (Read 155955 times)

Looks like Tihan's lawyers are going to own intersango going forward.

I'm not sure if this applies in this case, but... http://www.wiwd.uscourts.gov/opinions/pdfs/2003-2005/05-C-368-C-11-04-05.PDF

You'll need to retain a NZ lawyer in order to do that.

I have more than 3000btc in the bitcoinica account.
Let's start legal process.

Have you called the police yet? 

And this is why I've been urging Amir not to take any action without legal advice.


https://bitcointalksearch.org/topic/m.1041641

To badly paraphrase Melville, "Call me confused." It was your post that prompted my post, driving your post home. Yet, my post is considered "white noise" while you come across as a white knight, now on two (post) counts.

Mark might be willing to have his lawyers look over this idea as the distribution would be done by MtGox and they're going to want to make sure there'll be no legal blowback for them.

I want to emphasise that whoever takes control of this process will have legal liability.  You need to take into account all of Bitcoinica's assets and all of it's liabilities.  The users cannot be paid at the expense of other creditors without the express permission of those creditors.  If you're going to do this yourselves, you need to follow as closely as possible the procedure which an accountant/lawyer would follow if they were overseeing the payout process.

Amir, did you guys get independent legal advice before you signed the partnership agreement and shares/interest exchange document (this could actually be important down the track) or does Intersango not have a lawyer for business stuff?  If Intersango doesn't have a lawyer, do you guys have an accountant?

Do you guys have sole control of the bank account at this point in time?

I think you have to presume that the limited partner will be made aware of anything you post here.  


They publicly announced on their own website that they were taking over day to day operations of Bitcoinica on 24 April - a couple of weeks before the hack.  I have a feeling one of them even gave an interview about it (might have been a press release).  It's kind of hard to retract that, and they apparently have no funds for a lawyer to even try to get them off the hook (I'm pretty sure the limited partner would have funds for a lawyer).
Also, getting them off the hook in terms of the formation of Bitcoinica Consultancy Ltd might not be a good thing.  Without the protection of the company, they might be held personally liable and if Intersango is the only asset each them has, that's what anyone getting sue-happy will go after (and the limited partner already holds share in Intersango).

Well, the compromise of funds before finalization of the agreement would help get the Consultancy guys off the hook assuming they hadn't taken over day to day operations when it occurred. I have the impression though that they had a strong enough belief that they could recover from the incident going forward. Otherwise it would have been better to deal with the legal hassles of a failed ownership change than to take on the business.

Although, if Tihan's control of Intersango shares was of a nature to allow him to stymie development of that project, it would have been an effective stick.

Tihan was technically right.  I checked the other day on whether NZ law is the same as Australian law on this and it is.  From the time the partnership agreement was signed (or the starting date specified in the agreement) Amir, Patrick and Donald were liable as general partners whether or not the paperwork had been completed for the formation of Bitcoinica Consultancy Ltd.  This is because 1) there is a filing period for the paperwork, and 2) because even if someone is not named as a director of a company on the paperwork if they have been performing the duties of a director they are liable in the same way as a named director (I'll bet Chris Heaslip is super-pissed that this all went down while he was the only named director).

Tihan's argument was that if they didn't follow through with the formation of the company and take responsibility for the payout process, they would have abandoned their legal responsibility.  The implicit threat in that it that they could then be personally sued by just about everyone but especially the limited partner (who already had shares in Intersango, remember) - completing the formation of the company would limit their liability.

It was a carrot and a stick approach.  If I had to guess, I suspect that the threats weren't idle.  While VCs are obviously prepared for businesses to fail, this one fell at the starting gate.  I'm quite sure that the limited partner would have negotiated a harsh agreement in order to remove litigation from the table.  We'll never know for certain because even more calamity intervened.


You guys are the general partner of Bitcoinica LP - whatever you do binds the partnership.  If the limited partner wishes to prevent you from continuing the payout process, they can file an injunction to stop it happening.  What is important is that you, Donald and Patrick hold a formal meeting (effectively a director's meeting) and record your decision.  Please, PLEASE talk to you lawyer about this.  There are things the limited partner could do to interfere with this but your lawyer is the best person to assess the possibilities.

I am part in this group

This is what I suggest (and I am not suggesting "officialy" it on behalf on this group, just my own opinion) :

The group of larg holder (which I am part of ) take over the claims & process.

- The claims should be reviewed by all parties (with help from zhou, review by what's left of bitcoinica LP, etc.) for correctness. We dont need more scam and thiefs at this point.

- Once all parties agree onto the payments, all payment are done at once by MTGOX which all parties should agree we can use as a trusted executor.
No one else should have access to the accunt and it should stay frozen until then.

That doesnt mean that all issues are settled afterwards as there is still ~30% something owned but that would be a first clean great step for everyone involved in my opinion.

Again, only my opinion, but let me know what you think.

It's true! Finally it! In the ass business ethics, just take it and do as they want users (affected customers)! This is a new world, and we here write their own laws. Do as you think prudent \ rational.

Whold that mean that the legal and business questions, i.e. the question who was responsible for what, would be separated from the payout process? Thus, that "payout team" would get a clearly defined mission, while the rest will be left to the lawyers to find out? If that was the case, this sounds like a good plan.

This is a Movie or Novel plot.

I'd be reluctant to judge real world proceedings as if it was a Hollywood movie.
Because, in those fiction stuff, there allways good and bad persons, and the happenings are thrilling and interesting. Yet all the subleties and gray shades of human nature are missing.

Here we've got 5 real world people engaged into a difficult situation and partially putting their monetary foundation at stake.

In good movies, you happen to know and feel whats going on right from the start. Thats part of the joy of watching.
In real live, you rarely know what's going on and each judgment is fuzzy.

Update 19th July: payments are still stuck at 38%. Considering that those are 50% payouts, that means a good 76% of the claims. That's not 76% of claimants, but 76% of the total funds.

However given that nobody is doing anything, I've been talking with some of the people with large claims. They've proposed helping take over the process with me. I suppose we need to get written consent that Bitcoinica Consultancy doesn't exist or that if it does that the members resign. This allows Bitcoinica LP to take over and hand the payouts process to us. Technically Bitcoinica LP owns the assets.

--------

repentance: what do you mean get a lawyer? I don't have the ability to do that. I have no savings you know. I don't really take a wage (so there's more money for projects). Many of the Bitcoin developers are not in this for money... Bitcoin is something really special, interesting and quite new.

Thats an interesting and challenging question, at least for us as bystanders and/or customers of Bitcoinica, possibly bearing the losses :-/

Business is often comprised of "acting to the rules" while at the same time a lot is going on "in between the lines".
Often, some view, which, legally and by the rules is not 100% correc, is announced and repreated with great vehemence, thus putting the oposing side under pressure. It is difficult to judge the actual balance of powers from the outside. Also the personalities of the people involved do play some role (and we, as bystanders, don't know anyone of those actors in person).

Who is in the stronger position? Who was at the end of May, which seems to be the period where the further route of events basically was determined? Personally, from his insiting on the legal situation and also his urging to proceed with the payouts, it looks that Tihan was in the slightly weaker position (but not much weaker).

Btw, we don't have the slightest idea about what the situation is currently. Tihan seems to have been put out of control and doesn't represent the fund anymore (correct?). But what's with Donald, Patrick and Amir? do they still cooperate and work together? Or is everyone acting alone and talking to his lawyer??



Good point.
Worth to note that the deal was to exchange Intersango shares for Bitconica holdings plus becoming Bitcoinica G.P. and thus operating the site.

All makes total sense to me; the sister did for the butler because he knew about the secret illegitimate child, and she made sure the station master knew exactly what time he saw her at.

One thing puzzles me: if BC were brought in to deal with a known level of lax security, was the site running purely on hope before that? And if security was generally poor, what are the chances of a keylogger or similar trojan being out there from the start?

Man. And I thought Eastenders was stressful to watch.

Judging from the disclosed internal documents, its worth to note some details about the payout process.

Seemingly, Patrick was in favour of handling all claims evenly, after sorting out the obviously fraudulent ones. To the contrary, Tihan insisted to handle some known and personally trusted customers immediately. He was even ready to do so from his own personal money, assumed that the Bitcoin Consultancy guys where reluctant towards any preferred treatment of any customer.

This resulted in a compromise, which they labled the "hybid approach". The claims would be partitioned into 3 groups. The "preferred and trusted customers" group (about 5%) would get a guaranted 100% payout. The majority of claims would be processed by good faith and evenly, forcing them to take a (small and evenly distributed) loss, while the 3rd groop, the fraudulent and unprovable ones, would get nothing.

Judging from the documents, Tihan then insisted on not making this approach public, and especially not disclosing the existance of that preferred group. He did this drawing from good business practice. His argument was (assumed I judge the quoted responses correct): if we do it this way, everyone will be happy. If we disclose it, no one will win. Also judging from a response of Tihan, Donald or Patrick seemed to oppose, so there was the other proposal to do that trusted payout quickly and than allow the Bitcoin Consultancy guys to conduct the rest of the process in a fully transparent manner.

Durnig all these arguments, basically Amir din't care much for the fine points of that controversy and focussed on the doing. Also, he was in favour of just starting to pay out. Seemingly Tihan noticed that and supported that attitude, thus putting the direct opponents (Patrick and Donald) under pressure. At some pont, Donald then send a rather harsh message to Amir, telling him to stop just acting this way and thus to weaken their own position. Asside from that, the 3 Bitcoin Consultancy guys seem to have acted in accordance.

While filling in some additional details, the disclosed documents aren't complete, and especially don't cover the time since mid of June.

I just want to clarify this a bit.  The discussion where between Tihan and Zhou about the $40,000 shortfall having blown out to almost $90,000 refers to the shortfall created by the Linode hack.  The tension arises after the Rackspace hack (Bitcoinica Consultancy wrongly assuming that because some of the paperwork was incomplete they might not be regarded as general partners at the date the hack occurred and therefore might not have liability).  It's true that the Rackspace clusterfuck made Bitcoinica a less attractive proposition for them but, just as importantly, if they'd been able to back out of the deal they then Wendon/Wengon would not have shares in Intersango.

Indeed, there is still the possibility of this being a fraud.

But now, after the disclosure of a lot of the internal email traffic between end of April and start of June, this hypothesis looks even more unlikely. The visible actors just aren't acting as someone pulling off a heist. Rather, they act like people (first) trying to run a business, which was formerly highly profitable and just recently runs slightly into a loss.

Later, after the first hack, from all evidence available, those people tried to repair the situation, but run into a lot of internal differences and arguments finding out how to do it properly. Moreover, judging from the documents, there was an increasing internal tension between the two (obvious) groups

• Tihan (and Zhou Tong) wanted to proceed with the deal and wanted the 3 Bitcoin Consultancy people to take over as planned, and to have them handle the cleanup and payout and take on all responsibility.
• The Bitcoin Consultancy people wanted to back out from this deal, which, after the first hack, wasn't beneficial to their business in any way. Especially Donald and Patrick insisted on the deal not being finished completely, leaving a chance to reverse it an get out.

These are people doing business and trying to protect their own stakes, not a group of people robbing a bank.