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Meanwhile Tokyo Court rules that Mt. Gox can't be rehability, and that Mr. Karpelès must be investigated

Bitcoin robber baron Mark Marie "MagicalTux" Robert Karpelès has reportedly "lawyered up" according to a report by Reuters.  Mr. Karpelès needs all the legal advice he can get as he is currently under investigation in the U.S. by the Financial Crimes Enforcement Network (FinCEN), the law enforcement wing of the U.S. Department of the Treasury.

I. Pleading the Fifth

Weeks after having his U.S. assets frozen and having "magically" found 200,000 of the 850,000 Bitcoins that he claimed hackers stole, Mr. Karpelès continues to face tough questions about whether he still holds the remaining missing Bitcoins (which he continues to insist are stolen).  His opponents in court believe he stole their coins in a shameless cash grab and are fighting to try to prevent the Tokyo Court from authorizing Mr. Karpelès' bankruptcy and proposed liquidation of Mt. Gox KK as it currently stands.

The FinCEN has subpoenaed Mr. Karpelès, demanding he travel to the U.S. to appear in court to answer questions under oath.  His answer is simple, according to his lawyers -- no way.

Karpeles
Mark Karpelès has refused to come to the U.S. to testify about his possible financial crimes.
[Image Source: Mark Karpelès on Flickr; Fair Use clause TITLE 17 > CHAPTER 1 > § 107]

Mr. Karpelès has indicated that he will fight any sort of extradition effort, according to Reuters.

In a court filing his lawyers write:

Mr. Karpelès is now in the process of obtaining counsel to represent him with respect to the FinCEN Subpoena. Until such time as counsel is retained and has an opportunity to 'get up to speed' and advise Mr. Karpelès, he is not willing to travel to the U.S.

The FinCEN had requested in their subpoena that Mr. Karpelès travel to Washington D.C. on Friday to testify.

II. No Rehabilitation Possible

The Tokyo High Court dealt a key blow to Mt. Gox KK on Tuesday.  The court ordered that so called "civil rehabilitation proceedings" -- basically, Mr. Karpelès' proposed plot to avoid liquidation by rebranding Mt. Gox and selling it to an investor -- would be impossible due to the business' tarnished image and potentially criminal conduct.  The court also ruled that for the bankruptcy to proceed, Mr. Karpelès must be investigated for fraud.

Tokyo High Court
The Tokyo District/High Court [Image Source: Atom Tokyo]

The court writes on Mt. Gox's website (translated by Reuters and Cryptocoins News from Japanese):

MtGox Co., Ltd., applied on February 28, 2014 for commencement of a civil rehabilitation procedure at the Tokyo District Court (Tokyo District Court 2014 (rehabilitation) no. 12, the “Civil Rehabilitation Procedure”).

During the following 1 month and a half, an investigation has proceeded with regard to the past factual elements related to the disappearance of bitcoins and missing funds which were the cause of said application, but it is expected that said investigation will still require some time and at this time, there are no prospects for the restart of the business.

Further, MtGox Co., Ltd. is continuing the negotiations with sponsor candidates but the concrete selection process has not yet started.

Taking into account this situation and the fact that the drafting of a rehabilitation plan and its adoption or approval appear difficult, after consultation with the Court and the Supervisor on the continuation of the procedure, the Tokyo District Court decided today to dismiss the application for commencement of a civil rehabilitation and at the same time, an order for Provisional Administration was issued and Attorney-at-law Nobuaki Kobayashi (Supervisor and Examiner under the Civil Rehabilitation Procedure) was appointed Provisional Administrator.
....
It is expected that, if the bankruptcy proceedings commence, an investigation regarding the liability of the representative director of the company will be conducted as part of the bankruptcy proceedings.

Mt. Gox KK's assets -- and Tibanne KK and Mr. Karpelès assets, it appears -- are under the control of Nobuaki Kobayashi, the court-appointed administrator, at least for now.

III. Mt. Gox for $1?

It's possible under the court order that Mt. Gox could still be sold as part of the liquidation process.  Brock Pierce -- a child actor from films such as The Might Ducks series who today works as an investor -- offered a token bid of $1 USD last week, along with a coalition of other investors, according to the news agencies.  Hopes of a large bid, though, have faded fast.

Brock Pierce
Former Mighty Ducks actor Brock Pierce led a group of investors who submitted a bid of $1 USD for Mt. Gox this week. [Image Source: Disney]

If Mr. Karpelès proves unwilling or unable to "find" more of his "missing" bitcoins, then it seems likely that creditors to Mt. Gox -- including its users -- will lose a large portion of their holdings.

In his lawyers court filings, Mt. Gox KK and Mr. Karpelès have been careful to use ambiguous language, so that if indeed he has absconded with his customers coins, at least he hasn't lied in court -- not in a technical sense, at least.

Karpeles smirking
Mark Karpelès will also face a fraud investigation in Japan, according to the Tokyo Court.
[Image Source: Mark Karpelès on Flickr; Fair Use clause TITLE 17 > CHAPTER 1 > § 107]

Mt. Gox KK's U.S. subisidiaries -- which are also under fire from breach of contract lawsuits -- are scheduled to appear in court this month, but its lawayers are requesting that Judge Harlin Hale of the U.S. District Court for the Northern District of Texas push the hearing to May 5.  However, they can't promise will be there, even if the court orders the delay.

Mr. Karpelès, who currently resides in a luxury Tokyo high rise, is fighting to shield Mt. Gox's parent company Tibanne KK from the bankruptcy.  That way he can keep much of his assets and potentially keep Mt. Gox KK's headquarters building as well -- which is technically owned by Tibanne KK.  It appears likely, however, that he will lose the French coffee shop/wine bar/bistro "The Bitcoin Cafe" that he had poured millions into building.

Sources: Mt. Gox [1, PDF], [2, PDF], Reuters, Cryptocoins News



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Why should he?
By Solandri on 4/16/2014 5:48:31 PM , Rating: 2
As much as I think bitcoins are a joke and dislike this guy, what possible reason is there for him to travel to the U.S. to testify? He's a French expatriate living and doing business in Japan. This has nothing to do with the U.S.

Any U.S. investors who sent their money or bitcoins to MtGox knew the risk they were taking by using an overseas company to manage their wealth. If they didn't know the risk, then the fault is theirs for doing insufficient research. "A fool and his money are soon parted."




RE: Why should he?
By okashira on 4/16/14, Rating: -1
RE: Why should he?
By Solandri on 4/17/2014 6:13:45 AM , Rating: 3
I'm not blaming the victim. I'm saying in this type of international relationship, responsibility lies entirely with the person choosing to interact with an overseas business entity. You're conducting business in a foreign country. It is your responsibility to learn and abide by the laws of that country; it is not the responsibility of the foreign business to comply with your country's laws. Unless there is some sort of bilateral agreement between the two countries standardizing business and criminal conduct, it cannot be any other way.

Are you arguing that he falls under U.S. jurisdiction simply because some of the people using his business were U.S. citizens? If you are, then you're saying you could be hauled off to China for violating their censorship laws just because some Chinese citizen happened to post on your blog. If someone sends their money, property, writing, whatever to your country to conduct business with your company operating under your country's laws, in no way should that constitute your consent to fall under the jurisdiction of the laws of that person's country. If you go to their country to conduct business, then yeah, sure, of course you should fall under their laws. But if they come to you, then they fall under your laws, not vice versa.

Japan and France are close allies to the U.S., so there may in fact be some grounds for extradition to the U.S. based on criminal conduct. But until that determination is made, he's a French citizen residing in Japan, and beyond the reach of U.S. law. Did he defraud U.S. citizens? Probably. But by our own laws he's innocent until proven guilty. If they want to question him, all they can do is ask, and he has every right to refuse. If they want to force him to come here, they're going to have to build a case, have a grand jury indict him, file an extradition petition with Japan, and hope the Japanese courts agree with the indictment and extradition.


RE: Why should he?
By MrBlastman on 4/17/2014 2:47:48 PM , Rating: 2
The Chinese have violated my right to free speech by censoring my forum posts in their country! They should be hauled into American courts and prosecuted!

Now do you see how asinine your reasoning is?


RE: Why should he?
By peterrushkin on 4/16/2014 6:29:09 PM , Rating: 3
Probably because US law trumps everyone else's laws?

I don't get it either. No crime was committed on US soil. Therefore, there is nothing to extradite him over.

As someone else said. US investors knew what they were doing when investing in a foreign company. If they lost their money, oh well live and learn....


RE: Why should he?
By Samus on 4/16/2014 7:05:49 PM , Rating: 1
A crime was committed against US citizens.

Nuf' said. Pleading ignorance of the law doesn't make it legal.


RE: Why should he?
By Tunnah on 4/16/2014 9:10:15 PM , Rating: 1
You seriously believe that anyone who wrongs an 'mericun should be dragged to the US to face eagle-justice ? Wow, such arrogance.

As someone who lost money to MtCox I gotta say....it sucks. It sucks long hard and painfully. However anyone with an IQ of at least double-digits knew the risk.

However, everyone knows this is fishy and some fraud is going on, you can't misplace that sort of anything...hell if 850k skin cells leave my body, I notice it. So hopefully he will be punished in some form or other...but it's doubtful


RE: Why should he?
By C'DaleRider on 4/16/2014 9:47:55 PM , Rating: 2
quote:
hell if 850k skin cells leave my body, I notice it.


No, you don't, as you lose upwards of a million skin cells every day and I doubt you notice it at all.

Nice hyperbole, tho.


RE: Why should he?
By maugrimtr on 4/17/2014 7:18:53 AM , Rating: 1
Here's how ridiculous the attitude of the Americans can be: It means that every nation with citizens who lost money to Mt Gox would also have the right to extradite and try him. Exactly how would that work in practice? Answer: It doesn't.

If a Polish citizen shot a US citizen in France, then that person would be tried in France. I would not be extradited to the US or Poland to face trial.

For the US to have jurisdiction, they'd need to establish if Mt. Gox operated within the US and was subject to US law. That's entirely possible, but it doesn't exist magically just because some US citizens may have been defrauded by a French person running a company in Japan (noting that this is merely a speculative allegation for which no evidence has been seen).

Speaking of speculative allegations, DT really should get over insinuating that. The facts are that Japanese authorities want to rule out fraud before granting any bankruptcy. The magic transforming that into an assumption of guilt is hideously at odds with "innocent until proven guilty". Makes for great excitement, but it's morally questionable - I really dislike the media's need to jump to conclusions generate fake controversy where there is none.


RE: Why should he?
By StevoLincolnite on 4/17/2014 7:54:58 PM , Rating: 2
Well, it's not as simple as that, unfortunately it never is.

The USA claims that any website, anywhere in the world, using a US-originated domain name (com/org/info/net etc) is subject to US law, the last good example would have to be Megaupload in New Zealand.

Whether that will hold any weight when it comes to this case, remains to be seen. (I'm not sure what domain they used.)

Conversely, the USA has oft-requested extradition of people for downloading a song, then throwing them in Jail.
Thus they are willing to give it a shot for even the smallest of crimes.


RE: Why should he?
By Reclaimer77 on 4/18/2014 12:09:02 PM , Rating: 2
Yup. I also love how the USA is the tax collector for the entire planet. If you pay taxes in the US, but make a dollar in Europe for example, the US Government somehow feels they have a right to tax you for that dollar.


RE: Why should he?
By BRB29 on 4/16/2014 9:47:02 PM , Rating: 2
If you are stupid enough to fall for a Nigerian Prince or this guy, the government doesn't have to rights to reach into any other country's jurisdiction to defend your stupidity. Your parents are supposed to teach you common sense, not the government.

What is with people on this site? blaming the government for everything under the sun. I'm sure if the US sent agents over there to cuff him, people will scream the government is overreaching again. The rest of the world will claim bullying and whatever they come up with.


RE: Why should he?
By drycrust3 on 4/18/2014 5:07:19 PM , Rating: 2
My late father's accountant stole his tax money and ran off to America. The accountant hasn't been brought to trial to date. There is almost no difference between my father's accountant and Karples: Both were trusted, both were dishonest, and both are in another country. Karples' investors knew they were speculating in a commodity that has no legal status in America, they bet they would make big money and not be obliged to pay taxes in America ... and they lost their bet.
Like it or not, the simple fact is Karples isn't in America, he is in Japan, so he can't be touched unless there is a legal framework that says he can, and now we find that framework is suspect. The fact that there are Mt Gox subsidiaries in America still doesn't mean Karples has anything more than a moral obligation to go to America. As I understand it, a moral obligation isn't as solid as a legal obligation.


RE: Why should he?
By hpglow on 4/16/2014 7:23:30 PM , Rating: 2
Try reading the story genius. He had US based subsidiaries.


RE: Why should he?
By peterrushkin on 4/16/2014 9:17:40 PM , Rating: 2
Then thats his stupid damn fault.

Seriously, if he was going to scam anyone. He should put his head-quarters in Russia and then got on with it.

He'd be getting away scott free by now! haha.

What are Murricans gonna do with Russia? Nada.... LMAO!


RE: Why should he?
By drycrust3 on 4/19/2014 9:56:22 AM , Rating: 2
So what? Having subsidiaries in the USA doesn't mean you can be forced to go the USA to stand trail.


RE: Why should he?
By Flunk on 4/16/2014 7:31:10 PM , Rating: 2
He applied for bankruptcy protection in the USA, that's why they're asking him to appear.


RE: Why should he?
By NesuD on 4/17/2014 6:48:34 AM , Rating: 2
quote:
Mt. Gox KK's U.S. subisidiaries -- which are also under fire from breach of contract lawsuits -- are scheduled to appear in court this month - See more at: http://www.dailytech.com/Mt+Gox+CEO+Refuses+to+Com...


Mt Gox has incorporated US subsidiaries. that is what this has to do with the US.


RE: Why should he?
By Argon18 on 4/17/2014 10:33:48 AM , Rating: 5
"As much as I think bitcoins are a joke and dislike this guy, what possible reason is there for him to travel to the U.S. to testify? He's a French expatriate living and doing business in Japan. This has nothing to do with the U.S. "

Yes it does. He registered MtGox with the US Treasury as a Currency Exchange in the US. He operates a US subsidiary to serve US customers. And he has a US FinCEN MSB license to provide monetary services within the US.

You're claim that "this has nothing to do with the US" is ignorant nonsense.


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