Judge rejects class certification in $400M Mt Gox fraud lawsuit

A federal judge has rejected a bid for class certification from clients of the defunct Japanese Bitcoin exchange Mt. Gox, which was forced into bankruptcy in 2014 following a major hack.

Judge Gary Feinerman made the declaration in the U.S. District Court for the Northern District of Illinois on Tuesday, June 22 saying it would require 30,000 “mini-trials” to find otherwise.

The move handed a victory to former Mt. Gox CEO Mark Karpeles, who has argued that a compensation plan in Japan would serve better than litigation in the United States.

Before a class action lawsuit can proceed, the class must be certified which ensures that the plaintiffs have enough similarities to proceed with litigation against the defendant as part of one larger case.

The judge reasoned that the lead plaintiff’s theory about fraud in the $400 million suit turned on Karpeles’ drafting and dissemination of the Mt. Gox terms of use and alleged misinterpretations, according to Law 360.

Greene originally opened an account with Mt. Gox in early 2012, and claimed to have relied on representations made in the exchange’s terms of service in assessing the platform’s security.

During a deposition in June 2018, Greene noted that he could not “remember” the terms displayed on the website. The judge argued that whether 30,000 users read or understood the contents of the terms of service “cannot yield a common answer across all or even most of the class.”

In essence, the class action cannot be certified unless there are similar circumstances for all of the plaintiffs, Judge Feinerman added:

“No reasonable fact-finder could simply assume that all or most of those users read or otherwise learned of the terms,”

He added that even if all or most Mt. Gox users were aware of the terms, that doesn’t mean all or most understood what they allegedly promised the way Greene did.

“Holding over 30,000 mini-trials to determine how each class member understood, and whether each class member relied upon a contract they accepted nearly a decade ago would present insurmountable difficulties,”

Related: Mt. Gox CEO Slams Plaintiff for Adjusting Fraud Allegations Mid-Case

This is the Mt. Gox customers’ second attempt at obtaining class certification following a rejection in 2018 by Judge Feinerman stating at the time that testimony from the lead plaintiff showed he was too vulnerable to unique defenses.

The lawsuit resulted from the shutdown of Mt. Gox in February 2014, which came after it admitted that it had lost $400 million in BTC. In March 2019, Karpeles was acquitted of embezzlement charges but found guilty of tampering with financial records.

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Mystery surrounds bizarre class-action lawsuit against Ripple over $48 loss

The Ripple community is at a loss to explain the motivation behind a class-action lawsuit filed by Florida man Tyler Toomey against Ripple Labs and Ripple CEO Brad Garlinghouse over a $48.56 loss.

In November 2020, Toomey purchased 135 XRP tokens at $0.724 each for a total value of $97.80. Following news of another lawsuit against Ripple in Dec that year, Toomey sold his investment for $49.24, suffering a loss of almost 50%. He’s now launched a class action costing eight times more in filing fees than the loss he claims to have incurred.

According to the Middle District of Florida website, where the lawsuit was filed, the cost of filing a civil action is $402.

Adding to the general weirdness of the case the amount demanded by Toomey is $5,000,001,000 and the Magistrate presiding over the case shares his unusual surname — Magistrate Judge Joel B. Toomey.

The filing states that the class-action is on behalf of Toomey (the plaintiff, not the magistrate), “and all others similarly situated against Defendants Ripple Labs,” so it’s possible his motivation is to merely enable other investors to take similar action.

Toomey is also seeking “injunctive relief” due to the amount of XRP held by the defendants which the filing claims, “they can continue to monetize, while creating substantial risk to investors.”

The Ripple community don’t seem to know what to make of the case, with some having taken offense while others believe it a joke. One Twitter user offered $200 in XRP for Toomey to drop the lawsuit.

New Jersey attorney Jess Hynes suggested the law is at fault for enabling such malarky.

“This stuff is going to keep happening and you can blame Congress and the SEC for it. @RepMaxineWaters refused to do her job last session. Let’s hope she does it this go around.”

Ripple is currently trading at $0.25, down 4% in the day, suggesting few investors are taking this lawsuit to heart.