Bitcoin Lawsuit Shakes the Industry
The quest for mainstream Bitcoin acceptance hit a potentially major roadblock this week.
Mt.Gox, the Tokyo-based exhange that currently handles about three-fourths of all Bitcoin trades in the world, is suing the Seattle-based Bitcoin exchange CoinLab for about $5.3 million.
Last February, the two companies announced a partnership--CoinLab would become Mt.Gox's exclusive North American agent. The deal made sense, largely because Mt.Gox couldn't serve the American market efficiently. But by May 2013, things had gone awry. CoinLab claimed Mt. Gox breached the contract. "Defendants have breached the exclusivity provisions of the Agreement by directly servicing customers in the United States and Canada since the Agreement took effect," CoinLab alleged. The exchange announed it was suing Mt.Gox for $75 million.
While that case is still pending, Mt.Gox released its countersuit earlier this week. In it, Mt.Gox argues that when the partnership was dissolved in May, CoinLab was sitting on about $12 million of its customers' money. There are 12 counterclaims in total, but the most urgent is this: Mt.Gox says that CoinLab handed over about half of the money it received from Mt.Gox customers, but is still squatting on some $5.3 million.
According to one Bitcoin analyst, a joint status report is due on September 20, which should provide more clarifications to the current suits.
Regardless of the result, the turmoil between the two exchanges is likely a roadblock to major Bitcoin adoption. In the short term, the severed partnership has essentially made it more expensive for customers to withdraw money from their Mt.Gox accounts. But the longer-term effects of the litigation will likely hit the public's perception of Bitcoin. In other words, if Bitcoin exchanges like Mt.Gox and CoinLab can't assure the public that they'll even be operational in the next year, is it really likely that large numbers of businesses--not to mention average Americans--will consider using the crypto-currency?
Thanks to Wired.com for the full suit and countersuit.