Japanese Lender Mizuho Caught in Mt. Gox Scandal

Mizuho bank connected to Mt. Gox
Mizuho is the latest in a string of organizations facing heat over connection to MT. Gox

(Reuters)  Connection to the former leading Bitcoin exchange, Mt. Gox, has entangled another business partner in the exchange's highly publicized demise.

One of Japan's largest lenders, Mizuho Bank Ltd., was added as a defendant to an existing U.S. lawsuit against Mt. Gox.  The suit alleges that Mizuho aided Mt. Gox's fraud by providing banking services to the troubled exchange.

Mizuho held fiat currency on behalf of Mt. Gox and its customers, and the amended lawsuit claims that the lender mingled funds that belonged to the exchange and its customers.

Additionally, Mizuho is accused of knowing about Mt. Gox's fraud, even while providing services that allowed the exchange to continue defrauding its customers.  The complaint plainly states, "Mizuho profited from the fraud."

Mt. Gox is accused of fraud for inexplicably losing $400 million worth of bitcoin.  The exchange filed for chapter 15 bankruptcy this week, temporarily protecting it from U.S. lawsuits.  It had already filed for a similar motion in Japan.

Evidence

A previously leaked conversation between Mark Karpeles and a Mizuho bank official in January 2014 catalogs the lenders attempt to separate itself from Mt. Gox.  WSJ provides a clear translation of the conversation:

Mizuho Bank official: “Well, this is a casual discussion but as we've been saying many times we want to close your account.”

Mark Karpeles: “I discussed with my lawyers and they said we don’t need to close it, so we’d like to keep it.”

Mizuho: “Closing the account is actually our demand. We made various judgments and also have a certain policy. It’s possible we will forcibly ask you to close your account. As our headquarters also told you, if possible we want you to close the account voluntarily, but the chance isn't zero that we will leave you no choice.”

Mr. Karpeles: “I want to know why you’re asking us to close everything. … I need an explanation.”

Mizuho: “There’s a collection of various issues.”

Mr. Karpeles: “Your approach has been very forceful and to be honest it’s rude. That makes us unwilling to take a cooperative attitude.”

What exactly "various issues" entails is up for debate, but it is clear that Mizuho knew something was amiss at Mt. Gox, as the banking official made it clear that the bank may choose to force the account to close against Mark Karpeles' wishes.

Mt. Gox's Many Arms

Mizuho is just one of many organizations caught in the firestorm that Mt. Gox's implosion has caused, although it may be the first non-Bitcoin related organization involved.

The Bitcoin Foundation has also faced questions from the Bitcoin community in general, as Mark Karpeles was a board member of the foundation.  Many have pondered exactly how much the foundation board members knew about Mt. Gox's troubles ahead of time, and why the Foundation did not campaign to install transparency features to all Bitcoin exchanges.

With Mark Karpeles being involved in Bitcoin investment from such an early stage, and the slow nature of legal systems involved in international lawsuits, it may be a long time before the community is completely out of his long shadow.

The lawsuit case is Gregory Greene v Mt. Gox Inc et al, U.S. District Court, Northern District of Illinois, No. 14-01437.

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About the author

Jonas Borchgrevink
Jonas Borchgrevink

Founder of CCN.com and Hacked.com. Passionate about how technology can empower people to create a more just and sustainable world.

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