A judge in Philadelphia has ruled that a class-action suit brought against Mark Karpeles, the reviled former CEO of the Mt Gox bitcoin exchange, can proceed in Pennsylvania.
Karpeles had asked for dismissal claiming Pennsylvania courts did not have jurisdiction, but the judge determined that Mt Gox, based in Japan before its collapse, solicited investors in the region.
Complainants led by Gregory Pearce allege that Karpeles’ negligence and incompetence enabled a successful of $500 million USD hack of bitcoins from the exchange in late 2013.
An unnamed programmer who worked at Mt Gox once told author Brian Patrick Eha that trading systems on Mt Gox were constituted from ‘spaghetti code.’
Complainants in the Pennsylvania case say Karpeles was the, “sole controlling force behind the exchange and designer of its software.” They also claim he knew about bugs in the system and failed to disclose them to customers trading and storing bitcoins on the platform.
Judge Robert F Kelly’s memorandum denying the motion to dismiss says that Karpeles handled all aspects of the business, including contract negotiation, “statements and representations,” and accounting.
Mt Gox terms of service also promised to, “hold all monetary sums and all Bitcoins deposited (and safeguard them),” according to the memo.
Karpeles beat incredible odds earlier this year (Japan boasts a standard 99.9% conviction rate) earlier this year when he was found not guilty of embezzlement and breach of trust.
He was found guilty of one charge related to falsifying exchange data but is appealing that conviction.
Karpeles was sentenced to time-served plus a year of monitoring by Japan authorities- about 4 years in total.