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Thursday, March 6, 2014

Class Action Lawsuit Against Mt. Gox Likely

News in the world of bitcoins has been dominated by the collapse of Mt. Gox, the world's largest bitcoin exchange. Investors' bitcoins that were stored with Mt. Gox were apparently stolen by hackers, resulting in the loss of $460 million. Wired has a thorough account of the hack, and the events leading up to the collapse.

Like many hacks on bitcoin exchanges, this story has drawn the attention of news outlets across the world, and has prompted some bitcoin critics to announce the death of the currency. Bitcoin enthusiasts are quick to respond that the currency is resilient and will survive this crisis. I am inclined to agree with this view, since bitcoins have survived previous hacks of exchanges, and attempts by governments to restrict the currency.

But Mt. Gox's collapse and bankruptcy is an event worth noting and continuing to follow, especially in light of the potential for lawsuits against the exchange. The Telegraph reports that hundreds of Mt. Gox customers are seeking to launch a class action lawsuit against the exchange. And the New York Times reports on the difficulty of embarking on such a lawsuit, given the immaterial and evasive nature of bitcoins as assets.

The collapse of Mt. Gox will almost certainly lead to litigation. It will be interesting to see how this litigation proceeds, and whether the plaintiffs have any success in recovering their assets.

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