Topic: Bitcoinica MtGox account compromised - page 14. (Read 156022 times)

Still watching with interest.  Not sure what you mean by "partnership agreement" as the NZ entity is simply a limited liability company with a single director/shareholder.  The provisions of the Companies Act 1993 will apply with regard to duties of directors.

BITCOINICA CONSULTANCY LIMITED (3715077)

I suspect that the most relevant thing in all of this is going to be the partnership agreement.  It would have specified everyone's roles and the date those roles commenced.  When corporate information changes, you generally have a specific time period in which to lodge notice of those changes - you don't have to do it immediately.  I guessing the reason that the Bitcoinica Consultancy records now show "appointment of directors pending" is because those records are now in the process of being changed.  I'm guessing that the partnership agreement had been signed before the hack but the director's consent forms hadn't - that was the paperwork which Tihan was pushing them to complete and which he said if they didn't would be an abandonment of their legal responsibilities (which were assumed via the signed partnership agreement).

Chris Heaslop could certainly provide information about exactly what formalities happened and when, but it sounds like everyone involved already knows where the paperwork was up to at any given time and they're only arguing about what it means (understandably so, given that general partners have a fiduciary duty to the limited partnership itself as well as a general duty not to trade recklessly or while insolvent and breaching that duty can lead to personal) liability.

There are a lot of intriguing questions remaining, but I suspect that the answers won't directly affect users - although they may well be relevant to legal action between the principals.  I do hope that once the facts are all known, someone creates a flowchart - I'm a big fan of Seconds from Disaster and this his been one of those perfect storms of seemingly minor issues ending in calamity.

I don't know what law applies to Bitcoinica, but typically until there's a formal declaration of insolvency, companies are still obligated to pay their debts. Their continuing failure to return depositor's funds is a continuing breach of their obligations to their depositors. I cannot believe any lawyer would say, "continue to breach your fiduciary duties". In some jurisdictions it can be a criminal offense to fail to formally declare insolvency and to continue to breach obligations.

Maybe this accountant needs to get a summons.

He's a taxation specialist who sets up NZ companies for people (NZ is a tax haven for foreign investors).  It's not especially unusual for accountants to have "shelf" companies already set up and ready to go as the need arises.  They're set up with a name, fuck all capital, and the accountant acting as director.  When someone wants a company in a hurry, they can basically change all the details after the fact - name, directors, shareholders.  The risk for the accountant is that as long as he's still listed as director, he has some liability if the company trades recklessly or while insolvent.


It's not that unusual to have a lot of overlap in the world of venture capital.  You get a lot of the same people investing in a range of different projects, but they're separate legal entities even though some of the individuals might be the same.  NZ has quite a few accounting firms which link up VCs with projects.  Someone who's soliciting capital for one project can be providing it for another.  There's a New Zealand VC who's registered three Bitcoin related entities this year but I've never heard of either him or the companies, so I suspect he's waiting for the appropriate project and other investors to launch them.

Most of this isn't going to matter in terms of Bitcoinica users getting their money back.  Still, the back story since Zhou sold the domain name and IP is pretty intriguing in itself.

'WENDON GROUP LIMITED (3837998)' - That is an interesting find! It could indeed be a coincidence (Heaslip is involved in over 44 companies) but it is good to see Wendon's name appear in a related context.

Another thing I noticed is that Christopher Heaslip also registered PUSHPAY in a similar fashion and Tihan is linked to that one as well:
http://www.business.govt.nz/companies/app/ui/pages/companies/3486194
https://getpushpay.com/
https://angel.co/pushpay-limited
https://angel.co/tseale
https://angel.co/chris-heaslip

EDIT: I see this connection was already made earlier here: https://bitcointalksearch.org/topic/m.901125

This.

Why would you give your hard earned money to people who have shown a lack of responsibility?

Insanity is defined as performing the same actions that have failed in the past and expecting different results.

no clue who that guy is but he keeps himself pretty busy; http://www.business.govt.nz/companies/app/ui/pages/companies/1217550/shareholdings

Things that make you go "hmmmm".

Probably unrelated, but it's one hell of a coincidence that the same accountant who set up the other NZ entities associated with Bitcoinica Consultancy LP recently set up another entity which just happens to have the same name as the presumed original buyer of the Bitcoinica domain and IP.

http://www.business.govt.nz/companies/app/ui/pages/companies/3837998

Bitcoinica Consultancy Ltd's record now shows "Notification of director appointment(s) pending".

Agreed. I appears Tihan set up CORE CREDIT LIMITED as the GP on 2012/02/09 (*1) However he did not find an actual party willing to act as GP until sometime before 2012/04/24 when the Bitcoin Consultancy signed the 'Bitcoinica limited partnership agreement' (*2). After this contract was signed the Bitcoin Consultancy group was pretty clear in Donald's announcement that they were acting as the new operators and managing directors of Bitcoinica (*3):



Although Bitcoinica Consultancy was not fully formed in terms of documentation, the Bitcoin Consultancy guys were assumed to bear all liabilities of Bitcoinica LP ever since the takeover on April 24.


Finally on May 30 the General Partner 'CORE CREDIT LIMITED' was renamed to 'BITCOINICA CONSULTANCY LIMITED' (*4) and a couple of days ago Genjix mentioned that they *did* finalize the formation of BITCOINCA CONSULTANCY so that would imply that they *are* the Bitcoinica GP at least at this point in time.


In the end it seems they have been playing a game of hot potato over who would be responsible at the expense of their customers. Everybody in Bitcoinica LP has been too busy covering their collective asses and pointing fingers at each other. Even at this late stage they have not been able to put on a united front and take decisive action in the best interest of their customers. There have been no police reports, no official updates on their website and previous promises such as 'All withdrawal requests will be honored.' are demonstrably false. Things have gone from bad to worse and hopefully we finally have reached rock bottom now so salvage operations can begin.

References:
(*1) http://www.societies.govt.nz/scanned-images/06/BC10060962006.pdf
(*2) https://bitcointalksearch.org/topic/m.953326
(*3) http://bitcoinmedia.com/first-licensed-advanced-trading-platform-for-bitcoin/
(*4) http://www.business.govt.nz/companies/app/ui/pages/companies/3715077/documents

Bitcoinica LP is now undeniably insolvent and that's a game changer.  It's extremely unlikely that any lawyer would advise an insolvent entity to try to handle the claims process themselves - the risk of them fucking it up in some way is just too great.  

Funds on hand aren't the only thing in play now.  All assets and all liabilities need to be taken into account.  Someone owns the Bitcoinica domain and the IP, but the question is who.  If those things are an asset of Bitcoinica LP (which would be a stupid way to set things up, but there's been no shortage of stupid in this saga), then they need to be liquidated (not that they'd have much value now).  Creditors other than users also need to be considered.  We don't know whether there were any conditions attached to the funds Tihan injected after the Rackspace intrusion.  It may well have been a loan.

Frustrating as it is for users, Bitcoinica needs to not make any public statements other than "we're consulting our legal advisers" right now.  "What next" is something which absolutely should not be decided without extensive consultation with their legal and financial advisors - deciding to "do it themselves" last time around rather than involve professionals in the refund process is partly responsible for the latest calamity.

Also, Amir's probably not the best person to take over handling the claims.



http://www.reddit.com/r/Bitcoin/comments/wbmxi/lost_bitcointalk_account_password_mod_contact/

Guess he thought using the password reset option for his forum account was too risky after what happened with Rackspace.  

I can't imagine a lawyer would advise a company that holds other people's money not to give any of it back. I could see that if it was combined with advising them to make a public statement of how much money they held, how much they owed, and where the money was being held.

That would be very different from Bitcoinica doing that unilaterally without any assurance that the funds were secure or, for that matter, actually exist.

If this was an inside job, the longer Bitcoinica holds the money without locking it down, the more risk there is that depositors will get an even lower recovery. Frankly, the funds should have been locked down securely *before* this last theft. If they were holding my money, I'd be really angry that they're not disclosing how much money they have, how much they owe, where that money is, and who is responsible for the shortfall and who is responsible for the disbursement of the remaining funds.

I think that the position of the Intersango guys was that weren't technically general partners at the time of the Rackspace intrusion because the paperwork for establishing Bitcoinica Consultancy hadn't been completed and that therefore they had neither any liability for the intrusion nor any authority to initiate the claims process.  Tihan's position was that they did have both liability and authority and that not completing the paperwork would be regarded as an attempt to avoid that liability.

While you're always liable if you're on the corporate documents, whether or not you're actively participating in the business, not being on the corporate documents doesn't necessarily protect you from liability if you've been essentially acting as a director.  The announcement had already been made that Bitcoinica Consultancy would be acting as general partner and operating the business from 24 April and as far as we know they were actually doing that when the Rackspace intrusion occurred - which may mean they would be found to have been acting as directors of the  general partner whether or not the paperwork had been signed.

The Intersango guys are essentially saying "we did everyone a favour by signing the paperwork to create Bitcoinica Consultancy so we could handle the claims process - and we weren't legally obliged to do that".  In fact, much discussion has gone on about what people weren't legally obliged to do - Tihan covering the Rackspace losses, Zhou helping rebuild records after the Rackspace intrusion, the Intersango handling the claims process.  There's been much less discussion of how each of the parties intends to proceed now and that probably won't be known until they've received legal advice on where they each stand in terms of liability, not just to users but also to each other.

You can't ToS away core responsibilities. Especially if you register as a financial service provider.

http://www.business.govt.nz/fsp/app/ui/fsp/record/liveSearchFsp.do?q=bitcoinica

Once the people who had big money and bitcoins lose hope of receiving any substantial payouts, like after another 'hack' loss as in this OP, then the lashing out begins. Seems like lawyers and LEO are starting to be engaged, so just a matter of time before the NZ regulators have to start trying to make sense of this mess.

Good question. I know Bitcoin Consultancy signed a contract before April 24. Donald wrote about that here: http://bitcoinmedia.com/first-licensed-advanced-trading-platform-for-bitcoin/


In the same post genjix mentioned that Tihan would consider it an abandonment of their legal obligations if the Bitcoin Consultancy guys would not state that they were acting as directors for the Bitcoinica LP general partner:


I think that refers to the Bitcoin Consultancy guys (Donald, Patrick, Amir)

I see there is no update from Genjix

Which Consultancy is Tihan referring to, Bitcoin Consultancy or Bitcoinica Consultancy? Should that be obvious from reading his post?

Edit: Also, who is the "we" Genjix is referring to in his OP?

So it seems that internal wrangling over who would be responsible as a GP directly caused the delay in customer reimbursements (and by extension the more recent theft of 350.000 USD from customer deposits)?


So you guys finalized the formation of Bitcoinica Consultancy, but not as the GP? Then as what? A charitable organization?


The statements of Genjix and Tihan seem to conflict here. So we still don't know who the GP is and customers continue to suffer due to corporate infighting. Or maybe it is just me that is clueless?

Until the point that one of said parties actually is served papers there is ZERO reason for them not to process claims!!  And just the idea that there is 'potential' for a judge to end up looking at a case it would be even prudent that it can be shown that they were making payments....

The last thing they need is more excuses to not move their fucking asses.

What's the first thing a lawyer will do?  Advise their client to stop talking, and stop messing with bank accounts (or the Bitcoin equivalent thereof) associated with disputed funds.

The beginning of a lawsuit might even mandate a freezing of funds by court order -- a temporary restraining order -- outside Bitcoinica's control.