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Mizuho accused over Bitcoin losses
Last Updated: 2014-03-16 23:33 | Global Times
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One of Japan's largest lenders, Mizuho Bank Ltd, has became ensnared in the legal fallout from the collapse of MtGox Co, the Bitcoin exchange that lost more than $400 million of customers' digital currency.

The Japanese bank was added as a defendant on Friday to an existing lawsuit against MtGox for allegedly aiding in a fraud by providing banking services to the exchange.

Mizuho held non-Bitcoin currency on behalf of Tokyo-based MtGox and its customers, according to the amended complaint by Gregory Greene, an Illinois resident who has said he lost $25,000 when MtGox shut down last month.

MtGox said in February it may have lost 750,000 of its customers' Bitcoins in a hacking attack and filed for bankruptcy in Tokyo. Some customers suspect a massive fraud has taken place.

The company filed for US Chapter 15 bankruptcy on Monday, which shielded it from lawsuits in US courts. Canadian Bitcoin traders filed a class action against MtGox and Mizuho on Friday in the Ontario Superior Court of Justice.

The amended US class action complaint was filed in a Chicago federal court. It accused Mizuho of knowing of MtGox's fraud, of not segregating funds that belong to MtGox from those of its customers and of continuing to provide banking services that inflated losses for Bitcoin customers.

"Mizuho profited from the fraud," said the complaint.

Mizuho seemed to be trying to distance itself from MtGox in January, according to a recording of a conversation between the bank and Mark Karpeles, MtGox's chief executive, that was published by the Wall Street Journal.

A bank official leaned on Karpeles to close the account voluntarily, citing "various issues." But the bank official also warned the account could be closed without notice.

Karpeles told the Mizuho official MtGox was unwilling to cooperate.

While the US bankruptcy stopped American courts from issuing orders against the Tokyo company, it did not protect Karpeles, the parent company Tibanne or MtGox's US affiliate. On Tuesday, the US assets of those three were temporarily frozen by the federal judge overseeing Greene's lawsuit.

The amended US complaint said that despite the asset freeze, "evidence suggests" defendants continue to receive Bitcoins in the US.

The amended complaint also added as defendants two executives of MtGox, Jed McCaleb and Gonzague Gay-Bouchery.

A Baker & McKenzie attorney who represented MtGox in its US bankruptcy did not immediately respond to a request for comment.

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