Coinlab files suit against MtGox

http://www.scribd.com/doc/139160091/Coinlab-v-Mt-Gox

43 42 13 years ago

zizee• 13 years ago

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

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.

rdl4• 13 years ago

No. Coinbase 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-...

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.)

gkoberger2• 13 years ago

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 :)

carbocation• 13 years ago

> This was a massive announcement; news of it alone caused a 40% increase in the value of bitcoins.

Either that, or it was announced as one of the bubbles was frothing.

But that's a nitpick; I'm interested in hearing what MtGox has to say in their defense, and I'd love to see the agreement ("Exhibit A", not attached as far as I can see).

wmf2• 13 years ago

Exhibit A: http://ia601700.us.archive.org/8/items/gov.uscourts.wawd.192...

RECAP'ed docket: http://ia601700.us.archive.org/8/items/gov.uscourts.wawd.192... (via BitcoinTalk https://bitcointalk.org/index.php?topic=193888.0;all )

hkmurakami• 13 years ago

I read the document and was quite surprised that MtGox had agreed to an exclusive agreement in the first place with Coinlab.

I would have thought that MtGox would have the upper hand in negotiations since they're really the only option given their dominance as an exchange player. Do we have any insight as to why they even agreed to an exclusive agreement for US/Canada transactions?

gkoberger2• 13 years ago

If I had to guess?

"Oh God we're so overwhelmed..."

eli• 13 years ago

Gawker has an article, but you pretty much nailed it: http://gawker.com/massive-bitcoin-business-partnership-devol...

ricardobeat• 13 years ago

Coinlab's website say the transition should be completed by May 6th[1]. Their latest update was April 10, where he mentions going to Tokyo to sort out the details[2], looks like the deal soured in the past few weeks.

[1] http://coinlab.com/transition

[2] http://coinlab.com/status-4-10

betterunix• 13 years ago

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

Are they suing in a US court? Then the damages will be stated in the currency that the court deals in, in other words, USD.

malloreon• 13 years ago

> 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• 13 years ago

man you made my day ;)

loceng2• 13 years ago

Proving $75 million in damages is going to be pretty hard IMHO, especially since, at least in Canada, you have to show you tried to limit those damages immediately upon finding out there was a breech. This will be an expensive legal battle anyway.

fnordfnordfnord4• 13 years ago

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.

xkcdfanboy2• 13 years ago

If you haven't seen censorship on HN, you haven't looked hard enough. I've seen whole threads disappear for nothing more than meta-(calling out the censorship).

sillysaurus• 13 years ago

I've seen whole threads disappear for nothing more than meta-(calling out the censorship).

Meta threads aren't allowed, so it shouldn't be surprising that those are deleted.

Please don't post on HN to ask or tell us something (e.g. to ask us questions about Y Combinator, or to ask or complain about moderation). If you want to say something to us, please send it to info@ycombinator.com.

barmstrong• 13 years ago

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

fnordfnordfnord4• 13 years ago

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

niggler• 13 years ago

I'd recommend you review what happened last time a mod edited a post involving CoinBase: https://news.ycombinator.com/item?id=5428387

lowglow• 13 years ago

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

jpdus• 13 years ago

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

oscilloscope2• 13 years ago

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

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

oscilloscope2• 13 years ago

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• 13 years ago

"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• 13 years ago

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.

berlinmonkey• 13 years ago

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.

rdl4• 13 years ago

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.

michaelhoffman• 13 years ago

"7. The Agreement provides that the Defendants “irrevocably consent to the personal jurisdiction of and venue in the state and federal courts located in King County, Washington withrespect to any action, claim or proceeding arising out of or relating to this Agreement.”"

rdl4• 13 years ago

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.

brownbat2• 13 years ago

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

brownbat2• 13 years ago

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

DanBlake• 13 years ago

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.

zopf• 13 years ago

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• 13 years ago

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.

DanBC• 13 years ago

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

Coinlab files suit against MtGox

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