Mt. Gox wins temporary bankruptcy protection in US

The troubled Bitcoin exchange, which claims to have lost nearly $500 million in the crypto-currency to theft, wins a brief reprieve from a pair of US lawsuits.

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Bitcoin

Mt. Gox was granted temporary bankruptcy protection on Monday, putting on hold two US lawsuits against the troubled Bitcoin exchange.

Judge Harlan Hale of the US Bankruptcy Court in Dallas approved (PDF) the company's motion for provisional relief under Chapter 15, a classification that allows the Tokyo-based exchange to fend off lawsuits while continuing to operate internationally. Instituted in 2009, Chapter 15 bankruptcy protection was designed to provide companies in other countries the benefits of the US court system.

The ruling came a day before a court in Chicago was scheduled to hear an investor's request to freeze the exchange's US assets as part of a class action lawsuit filed last month. Another lawsuit, filed last May by Seattle-based Coinlab, accused the exchange of breach of contract and sought $75 million in damages.

Mt Gox filed its US motion Sunday after filing a similar motion last month in Japan. The exchange blamed the action on a security lapse that led to the fraudulent withdrawals of nearly 750,000 customer bitcoins, as well as 100,000 of the exchange's own bitcoins, a loss of nearly $500 million worth of the crypto-currency.

At its height, Mt. Gox was one of the largest and most popular Bitcoin exchanges. However, the troubled exchange suspended customer withdrawals on February 7, claiming a fundamental flaw existed in Bitcoin that affected all transactions. Mt. Gox later apologized for the issue and said it had developed a workaround that would allow it to resume service, but that has not yet happened.

The exchange is due back in court April 1 for a hearing to determine how the case should proceed and whether to extend protections for the company.

 

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