

Coinlab files suit against MtGox - fnordfnordfnord
http://www.scribd.com/doc/139160091/Coinlab-v-Mt-Gox

======
oscilloscope
Coinlab released statement on their site about the suit.

<http://coinlab.com/status-5-2>

Full text:

I have more news on the Mt. Gox transition. Today, CoinLab regretfully filed a
formal complaint in Federal Court against Mt. Gox.

In the last month, many of you have contacted me directly and asked for more
details on our transition, and I would say (charitably) that I've been
frustratingly vague -- I just haven't been able to talk about it.

I'm going to take this chance to talk about it. I'm not here to complain, our
filing contains and accurate summary of events, but I want to talk about what
I see as most important for Bitcoin right now.

Bitcoiners have, on average, lost more money due to technology difficulties,
frozen / lost banking relationships and shady characters like pirateat40 than
due to any part of Bitcoin's fundamental economics. I hate this fact,
passionately. I have a vision in which high quality service and technology and
ethics can be delivered to you, me, my kids, everyone who has a stake in
Bitcoin.

It is my goal for CoinLab that we provide fundamental infrastructure to
minimize these risks for everyone in our space, and I do mean everyone; from
those on the Bitcoin Forums who dislike and distrust me personally, to the mom
and pop cupcake makers in San Francisco, to my daughter who recently sold some
knit products for .01BTC.

While I was willing to take a two year restriction on our venue (US and Canada
only for two years was part of our contract), I have for a number of years now
wanted to make sure that Bitcoin is properly situated for everyone's good.

When we spun up our initial alpha customers, they included companies that from
one perspective could reasonably be deemed to be our competitors, some of the
best companies in our space. We worked extremely hard to provide them great
service, because I want to build our ecosystem; I want a robust economy and a
broad base of service and product for everyone.

What tipped us into filing was our complete inability to get Mt. Gox to
deliver on the few simple things left that were needed for customers to move
over en-masse; we were often left just apologizing to our alpha customers
while their own businesses suffered. I'm just not willing to put any of our
customers in that position -- if we can't do a good job for you, I won't
promise that we can.

What I hope is that Mt. Gox has this same interest in the good of Bitcoin, and
Bitcoiners, and finds a way to work this out.

So, what's next? I hope that we'll be able to provide some good news on that
front soon, from a financing and technology perspective at the very least, and
ideally with news that we've settled this dispute. In the interim, my biggest
hope is that Mt. Gox does an excellent job keeping Bitcoiners safe and liquid
and trading on the exchange.

Peter Vessenes

~~~
milkshakes
"for the sake of bitcoin" mt gox, a japanese company running an anonymous
currency exchange should hand over full account, holdings, and trade details
of all of their north american customers to a company under US jurisdiction?
how does that make sense?

~~~
kevingadd
Well, Mt. Gox agreed to do it, and given that they've repeatedly demonstrated
their complete inability to operate a functioning exchange, you certainly
couldn't do any worse by handing their customers over to Coinlab.

~~~
loceng
Allegedly agreed to it? Not sure we really can know all of the terms at this
point.

------
gkoberger
As I understand it, for those who don't want to read the legal docs:

This past February, MtGox and Coinlab announced a partnership.

Coinlab, a Silicon Valley venture-backed company, was to handle MtGox's US and
Canadian transactions. This was a massive announcement; news of it alone
caused a 40% increase in the value of bitcoins.

MtGox (allegedly) breached the contract, however, by not giving Coinlab
exclusive access to the North American market. MtGox was supposed to transfer
North American clients to Coinlab. From the doc: "Defendants have breached the
exclusivity provisions of the Agreement by directly servicing customers in the
United States and Canada since the Agreement took effect".

The suit is for $75 million, an amount that Coinlab claims is "likely
underestimates the actual damages."

EDIT: Shame the damages they're demanding are in USD rather than bitcoin :)

~~~
malloreon
_> EDIT: Shame the damages they're demanding are in USD rather than bitcoin
:)_

I'm guessing their lawyers prefer to be paid in real money and not internet
funbux.

~~~
camus
man you made my day ;)

------
fnordfnordfnord
As far as I can tell Gawker / Adrian Chen broke the news, that's the only
press coverage I can find so far. It's a bog standard Chen/Gawker production,
but I guess there isn't much to say yet anyway.

The reddit thread on the subject isn't much better, get a load of this gem.

 _Hacker News (discussion forum for Y-Combinator which funded CoinLab) is
zealously deleting any threads started to discuss this topic. They regularly
surpress discussion of topics that might make them, or the companies they've
funded, look bad. So, I think it's probably legit. The $75 million, on the
other hand (if that's what you meant) is of course fine-cut bullshit._

Quoth a redditor who doesn't know that all gawker links are rightly and
properly killed on sight.

~~~
barmstrong
Ycombinator didn't fund Coinlab. You are probably thinking of Coinbase, which
is unrelated to this story.

~~~
fnordfnordfnord
You are correct, but I was quoting another poster. Thanks for pointing it out.
It is easy to get confused.

------
rdl
Again I really wish there were someone doing a US-regulated (CFTC) bitcoin
exchange in the US, as well as a non-US but non-"normal business" exchange
somewhere else in the world -- a real commodities exchange somewhere like Hong
Kong or Luxembourg. MtGox is essentially a normal Japanese business operating
due to the grey area of financial regulation around BTC in Japan.

MtGox is the incumbent and biggest, but isn't really up to the standard of
financial markets.

(and, it should be an exchange for arbitrary cryptocurrencies, ideally
including blinded ones, and currencies linked more explicitly to existing
commodities or currencies. A BTC purchase transaction should be involve
swapping a USD cryptocurrency for a BTC cryptocurrency (either BTC directly,
or a BTC-backed, optionally-blinded token).

It's totally within normal VC scale investment to set something like this up
-- <$10mm. The cryptocurrency market is finally basically proven. The dual
US/offshore structure, using the same technical architecture, and with a
developer getting licensing fees from independent operating entities, seems
like the way to go.

------
jpdus
Without knowing the actual content of the agreement between Mt.Gox it is
difficult to judge - but for me this seems like a shady move from coinlab. The
loss calculation is laughable and this behaviour reminds me of patent trolls.
(Not to mention that this case could hurt the whole Bitcoin ecosystem at the
moment).

Another example that startups should not be too dependent on other companies.

Last update from the Coinlab website (4/10) [1]:

"On the lack-of-progress side, we're still waiting for two things to be
implemented. Once those are done, we'll be ready to go.

Full customer data access Working wire and Dwolla withdrawal forms Because of
Gox' strong customer data protection methodologies, we aren't allowed to
deliver these things directly, they have to go through the Gox process, and
that's taking longer than any of us want."

[1] <http://coinlab.com/status>

~~~
oscilloscope
They just updated the status page in the past 3 minutes. The one you
referenced is now here:

<http://coinlab.com/status-4-10>

------
zopf
Coinlab needs to hire some more attentive lawyers... at least a couple times,
the document refers to "beach of [contract]". Unless that's a sunny California
thing :)

~~~
gamblor956
I was also shocked by the general shoddiness of the document in general. So
many ambiguous issues, and so many areas where potential disputes were left
unaddressed.

------
DanBlake
What did mtgox get in return for promising to hand off their US customers?
Whatever that is, I believe that would be about the liability they have in
this case.

------
brownbat
Login on mtgox down for anyone else?

I wonder if this is causing a run on the bank...

~~~
brownbat
Apparently he /login page works, only the front page doesn't.

------
zizee
Anyone in the know care to give a tl;dr for this, or even a bit of background?

~~~
fnordfnordfnord
Coinlab, a who is NOT a YC backed company _, aimed to partner with MtGox and
provide a point of exchange in the US to ease the difficulty of transferring
money to and fro for US customers. Sorry, that's the best I can do at the
moment.

_ I originally posted that Coinlab was a YC startup, because I was confused.

~~~
rdl
No. Coin _base_ is a YC backed company (hn user barmstrong and an ex-Goldman
dude). Coinbase is not involved in this shit at all, except by virtue of being
a Bitcoin business.

Coinlab is a company with Draper investment and some other angels, not YC, and
did the weird marketing/sale deal with MtGox.
[http://arstechnica.com/business/2012/04/coinlab-
gets-500000-...](http://arstechnica.com/business/2012/04/coinlab-
gets-500000-in-vc-for-bitcoin-related-gaming-startup/)

Coinbase is tiny compared to MtGox/Coinlab. I'm sure YC wishes it were an
investor in MtGox/Coinlab too!

(Adding to the confusion: the founder of MtGox left a while ago and created a
company in the Bay Area called OpenCoin, Inc. (opencoin.com) which is creating
RipplePay, a weird p2p debt currency, also non-anonymous. There's a great open
source project doing a blinded token anonymous cash system called OpenCoin
(opencoin.org) too, entirely unrelated, who complained about their name
getting jacked.)

~~~
fnordfnordfnord
Scheisse! Thanks for pointing that out!

------
lowglow
It feels like they should at least be suing for bitcoins.

------
berlinmonkey
Since MtGox is a Japanese company and they probably drafted the contract it's
most likely under Japanese jurisdiction.

So this lawsuit will most probably just be thrown out regardless of merit.

~~~
rdl
That's not really how international commercial disputes happen. You generally
sue in the most favorable jurisdiction where you have some presence/nexus (a
US business always can use the US). The issue is that any judgment will then
need to be taken to Japan to perform, although it's possible/likely MtGox has
assets in the USA, so you wouldn't need to go to Japan. There also may be
US/Japan treaties which are relevant.

I am not a lawyer, and international disputes are even more complex.

------
DanBC
How is that a legal agreement? Isn't it a clear cartel?

