Topic: World's First Bitcoin Lawsuit - Cartmell v. Bitcoinica - page 3. (Read 18764 times)
Heh. Among the engineering feats (purportedly) of Zhou is the ability to convert Libertarians into Socialists. It's OK. I don't mind if some of my tax dollars go toward helping seek recompense for any member of society who was wronged...even given the questionable judgement of entrusting half a million $$$ to a minor in Asia and/or a handful of bozos living under the British crown.
FYI - IEEE Spectrum now also posted an article on this topic:
http://spectrum.ieee.org/tech-talk/computing/networks/first-bitcoin-lawsuit-filed-in-san-francisco
http://spectrum.ieee.org/tech-talk/computing/networks/first-bitcoin-lawsuit-filed-in-san-francisco
One day somebody might actually write an accurate report on this...but not today, apparently. These reports consistently get the number of hacks and the amounts involved wrong. They also consistently state that Zhou sold Bitcoinica after the Linode hack, which is not the case, and that he sold it to Intersango (also not the case).
It is good, however, to see that the Chen aspect of this story is finally getting some media exposure.
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Could this be the quiet beginning of the end of the golden age of bitcoin through the first establishment of legal precedent? Or is it addressing $USD separately?
It's a pretty straight forward breach of contract action. There's not really anything regarding Bitcoin itself which needs to be determined - the plaintiffs are seeking compensation in USD. There'll probably be some argument about the value at which the claim should be liquidated - ie, for the purposes of compensation should the value of Bitcoins be established at their average price on the date Bitcoinica ceased trading or at their price when the lawsuit is heard.
Could this be the quiet beginning of the end of the golden age of bitcoin through the first establishment of legal precedent? Or is it addressing $USD separately?
FYI - IEEE Spectrum now also posted an article on this topic:
http://spectrum.ieee.org/tech-talk/computing/networks/first-bitcoin-lawsuit-filed-in-san-francisco
http://spectrum.ieee.org/tech-talk/computing/networks/first-bitcoin-lawsuit-filed-in-san-francisco
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A recent theft at Bitcoinica, one of the largest Bitcoin exchanges, resulted last week in a debut for the currency in the California court system. Four prominent members of the Bitcoin community, including Jed McCaleb—the original developer of Mt. Gox, the largest Bitcoin exchange and a competitor to Bitcoinica—filed a lawsuit on 6 August against the company, seeking reimbursement for US $460 457 in lost funds.
While there have been multiple hacking incidents since the cryptocurrency went online in 2009, this is the first time members of the community, have taken legal action.
The whole affair started in March when hackers skimmed over 46 000 BTC from the exchange with an attack aimed at the Webhost, Linode. Three months later, Bitcoinica Consultancy, which has supposedly been handling the exchange since this April, announced that it lost another 4 ,000 BTC (about $350 at the time) through an unauthorized withdrawal from a Mt. Gox account that the company had set up while disbursing refunds to its customers.
Amir Taaki, speaking for Bitcoinica Consultancy, explained that after the initial breach, Bitcoinica failed to change some of its passwords. One of those was a duplicate of the password they were using for their Mt. Gox API key. On June 12th, someone tried using this password to gain access to Bitcoinica's Mt Gox wallet, and it worked.
The announcement ignited a backlash of accusations from victims who now suspect that the theft was an inside job. While waiting for satisfaction, their losses have only increased. At the end of the July, Bitcoin was trading below $7. Today, it hit $12 for the first time since 2011.
The situation has been especially complicated by the fact that no one seems to really know who is responsible. Zhou Tong, the 18-year old Chinese developer who originally started Bitcoinic claims to have sold the company right after the March theft to the British Bitcoin exchange, Intersango. He now also claims to know who broke into the Mt. Gox account and to have squeezed a confession from a Chinese Multi-millionaire named Chen Jianhai, a story which many victims quickly interpreted as cover for his own involvement. Meanwhile, the Bitcoinica Consultancy is thought to have control over Bitcoin's legal operations, but in emails, they have declined to confirm this role, and have reportedly stopped responding to disgruntled customers.
And so, it seems that those who want to help have no power. And those who have the power aren't talking.
Under these circumstances, it will be very interesting to see what happens when many of those involved convene next month at the Bitcoin Conference in London.
While there have been multiple hacking incidents since the cryptocurrency went online in 2009, this is the first time members of the community, have taken legal action.
The whole affair started in March when hackers skimmed over 46 000 BTC from the exchange with an attack aimed at the Webhost, Linode. Three months later, Bitcoinica Consultancy, which has supposedly been handling the exchange since this April, announced that it lost another 4 ,000 BTC (about $350 at the time) through an unauthorized withdrawal from a Mt. Gox account that the company had set up while disbursing refunds to its customers.
Amir Taaki, speaking for Bitcoinica Consultancy, explained that after the initial breach, Bitcoinica failed to change some of its passwords. One of those was a duplicate of the password they were using for their Mt. Gox API key. On June 12th, someone tried using this password to gain access to Bitcoinica's Mt Gox wallet, and it worked.
The announcement ignited a backlash of accusations from victims who now suspect that the theft was an inside job. While waiting for satisfaction, their losses have only increased. At the end of the July, Bitcoin was trading below $7. Today, it hit $12 for the first time since 2011.
The situation has been especially complicated by the fact that no one seems to really know who is responsible. Zhou Tong, the 18-year old Chinese developer who originally started Bitcoinic claims to have sold the company right after the March theft to the British Bitcoin exchange, Intersango. He now also claims to know who broke into the Mt. Gox account and to have squeezed a confession from a Chinese Multi-millionaire named Chen Jianhai, a story which many victims quickly interpreted as cover for his own involvement. Meanwhile, the Bitcoinica Consultancy is thought to have control over Bitcoin's legal operations, but in emails, they have declined to confirm this role, and have reportedly stopped responding to disgruntled customers.
And so, it seems that those who want to help have no power. And those who have the power aren't talking.
Under these circumstances, it will be very interesting to see what happens when many of those involved convene next month at the Bitcoin Conference in London.
I hope the lawsuit will eventually lead to criminal charges against the officers of the corporation. They did not file a police report, even after the hacker was identified.
Zhou Tong isn't even named as a defendant in the lawsuit despite being the only person who claims to know the hacker's identity, and despite claiming to have promised the hacker that Bitcoinica LP would not start a police investigation into him. Also, who are the actual officers of the corporation in the first place? Zhou's certainly acting a lot like one, but...I believe the officers of the corporation feel they are untouchable because the corporation is a separate legal entity. In Canada at least (a commonwealth country), a director of a corporation is REQUIRED to do whatever is necessary to protect the assets of said corporation. So while they cannot be held financially responsible for Bitcoinica's debts, they can be held criminally (and hence civilly) liable for failing to do anything about the crime that was committed against their public business. Basically, they did nothing while the money was taken. I'm sure they paid themselves handsomely, however, out of what was left.
All they had to do was pick up the phone and call the police. The fact they did not do this leads me to believe they profited from the hack.
In many places - including Australia and New Zealand - someone who is carrying out the duties of a director will have the same legal liability as a director whether they're named as such on the corporate papers or not. Directors can be held personally liable for the debts of a company under certain circumstances, including - but not limited to - reckless, negligent or insolvent trading.
Bitcoinica LP is a limited partnership. Quite literally, in the case of LPs NZ law treats the limited partner/s (Wendon) as shareholders and the general partner/s (Bitcoinica Consultancy Ltd) as directors. The limited partner can only be held legally liable for the actions of the partnership if they've had a role in managing the company which goes beyond "safe harbour" activities which are specified in the Companies Act.
There is no doubt that "the Intersango guys" - either individually or as directors of Bitcoinica Consultancy Ltd - are legally on the hook in respect of Bitcoinica LP. It seems unlikely, though, given the totality of the circumstances regarding the failure of Bitcoinica that they alone would be found liable if an investigation into the failure of Bitcoinica was undertaken. A liquidator is required to establish why a company failed, but they rely heavily on information provided by the principals of the business and by creditors. A liquidator is obliged to establish whether directors (de jure or de facto) have any personal liability and to report any criminal misconduct to the appropriate authorities.
Anyone could make a criminal complaint regarding Bitcoinica right now. It's not essential to wait until the partnership has been liquidated or the US lawsuit has been heard.
Regardless of whether or not any criminal investigation arises in respect of Bitcoinica, Zhou's continued role in the business after its sale will come under scrutiny in any insolvency or civil action and that will include scrutiny of his transactions following the MtGox breach as well as his dealings with the alleged hacker. No court or liquidator is going to accept Zhou's statements regarding the AurumXchange transactions or the mysterious Chinese relic collector at face value, but we have no way of knowing whether Zhou would comply with requests from a US court or an NZ liquidator for information.
I hope the lawsuit will eventually lead to criminal charges against the officers of the corporation. They did not file a police report, even after the hacker was identified.
Zhou Tong isn't even named as a defendant in the lawsuit despite being the only person who claims to know the hacker's identity, and despite claiming to have promised the hacker that Bitcoinica LP would not start a police investigation into him. Also, who are the actual officers of the corporation in the first place? Zhou's certainly acting a lot like one, but...I believe the officers of the corporation feel they are untouchable because the corporation is a separate legal entity. In Canada at least (a commonwealth country), a director of a corporation is REQUIRED to do whatever is necessary to protect the assets of said corporation. So while they cannot be held financially responsible for Bitcoinica's debts, they can be held criminally (and hence civilly) liable for failing to do anything about the crime that was committed against their public business. Basically, they did nothing while the money was taken. I'm sure they paid themselves handsomely, however, out of what was left.
All they had to do was pick up the phone and call the police. The fact they did not do this leads me to believe they profited from the hack.
I hope the lawsuit will eventually lead to criminal charges against the officers of the corporation. They did not file a police report, even after the hacker was identified.
Zhou Tong isn't even named as a defendant in the lawsuit despite being the only person who claims to know the hacker's identity, and despite claiming to have promised the hacker that Bitcoinica LP would not start a police investigation into him. Also, who are the actual officers of the corporation in the first place? Zhou's certainly acting a lot like one, but...
I hope the lawsuit will eventually lead to criminal charges against the officers of the corporation. They did not file a police report, even after the hacker was identified.
It's a pity they picked it up from Arstechnica, which ran a story based on an Verge article which had substantial inaccuracies.
Just read it and they got at least 50% of there claim, I'm still sitting on a fat 0 on my claim.
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We'd hoped that our offer would both push Bitcoinica to resolve the claims faster, and give them more room for error. If they resolved all the claims within 6 months and paid us an equal pro rata share, they'd have immunity from us. Coincidentally, the amount of funds stolen only 2 days after this offer was made was nearly 100% of what we were owed at the time.
This would seem to be veering towards criminal. A DA might even prosecute ex officio.
From the Summons:
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
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NOTICE! You have been sued. The court may decide against you without your being heard unless you respond within 30 days. Read the information below.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
Clearly that notice isn't showing them any fucking respect, so its doubtful they will respond.
lmfao!
From the Summons:
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
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NOTICE! You have been sued. The court may decide against you without your being heard unless you respond within 30 days. Read the information below.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
Clearly that notice isn't showing them any fucking respect, so its doubtful they will respond.
From the Summons:
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
Quote
NOTICE! You have been sued. The court may decide against you without your being heard unless you respond within 30 days. Read the information below.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
I can't image that they would do nothing. Like he said, bankruptcy can go a long way, but that is just one of several possible reactions that could occur.
From the Summons:
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
Quote
NOTICE! You have been sued. The court may decide against you without your being heard unless you respond within 30 days. Read the information below.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
The plaintiffs would likely seek default judgement.
It depends on whether the defendants take other action, though. From what I've read, it's absurdly easy for foreign entities to seek bankruptcy protection in the US and such protection goes way beyond what is common in many other nations.
From the Summons:
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
Quote
NOTICE! You have been sued. The court may decide against you without your being heard unless you respond within 30 days. Read the information below.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
You have 30 CALENDAR DAYS after the summons and legal papers are served on you to file a written response at this court and have a copy served on the plaintiff. A letter or phone call will not protect you.
Is there a chance the Intersango guys might not respond within 30 days? If so, what would happen in this case?
I disagree. This lawsuit might suck up all of the US assets but if people in other countries file as well they might see something.
It depends who they file against. It's likely that a cascade of insolvencies is going to happen in the not too distant future. Even if those involved have personal assets, not all jurisdictions recognise the claims of overseas creditors in the case of personal insolvency. The issue of disputed debt also complicates some potential remedies (especially low cost ones).
This is what the plaintiffs are asking for:
So basically 100% reimbursement + reimbursement of all legal costs + interest + damages + other relief
Since the plaintiffs represent only 4 out of the approx. 5000 Customers. How will this affect the other claimants if they are successful?
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1) for the return of all monies in the accounts of Plaintiffs;
2) for all other general, special, incidental and consequential damages;
3) for attorney's fees, as alleged int the causes of action above;
4) for exemplary and punitive damages, as alleged int the causes of action above;
5) for prejudgment and post-judgement interest to the full extend permitted by law;
6) for costs of suit incurred by Plaintiffs herein; and
7) for such other and further relief as the Court may deem just and proper
2) for all other general, special, incidental and consequential damages;
3) for attorney's fees, as alleged int the causes of action above;
4) for exemplary and punitive damages, as alleged int the causes of action above;
5) for prejudgment and post-judgement interest to the full extend permitted by law;
6) for costs of suit incurred by Plaintiffs herein; and
7) for such other and further relief as the Court may deem just and proper
So basically 100% reimbursement + reimbursement of all legal costs + interest + damages + other relief
Since the plaintiffs represent only 4 out of the approx. 5000 Customers. How will this affect the other claimants if they are successful?
Basically, if you're not one of these 4, and you haven't already gotten something back, then you're not going to get anything back, ever. The good news is that this is closure for everyone else waiting around for their bitcoins/USD.
I disagree. This lawsuit might suck up all of the US assets but if people in other countries file as well they might see something.
$460k law suit! Even if that is split evenly 4 ways and you pro-rata to BTC/USD of 5 that is still at least $52k each.
Who would be so stupid to have had that much cash stored in the trust of a company/people they did not know?
This shows an amazing level of lack of due diligence that seems to be normal in the bitcoin world!
edit - added details to keep someone happy who complained for some reason.
Who would be so stupid to have had that much cash stored in the trust of a company/people they did not know?
This shows an amazing level of lack of due diligence that seems to be normal in the bitcoin world!
edit - added details to keep someone happy who complained for some reason.
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