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Bitcoins lost in Mt. Gox debacle ‘not subject to ownership’ claims: Tokyo court

Kyodo

The Tokyo District Court on Wednesday dismissed a lawsuit by a man seeking repayment for bitcoins he kept in an account at the bankrupt exchange Mt. Gox Co., with the ruling saying the virtual currency is “not subject to ownership” claims.

Last June, the Kyoto resident had 458 bitcoins worth around ¥31 million in an account with Mt. Gox, the Tokyo-based exchange that filed for bankruptcy protection from creditors in February after claiming that tens of millions of dollars worth of the virtual currency and client funds disappeared from its computer system.

Its CEO, Mark Karpeles, was arrested by Tokyo police last week for allegedly inflating his personal account by manipulating virtual currency data.

At the Tokyo court, the plaintiff challenged the bankruptcy receiver of Mt. Gox without representation by a legal professional.

A lawyer closely following the Mt. Gox affair said: “It will be difficult to simply seek to refund (bitcoins) under law. You have to consider a lawsuit from a different legal perspective.”

Presiding Judge Masumi Kurachi said the Civil Code envisages proprietorship for tangible entities that occupy space and allow for exclusive control over them.

The judge said it is evident bitcoins do not possess the properties of tangible entities and acknowledged that they also do not offer exclusive control because transactions between users are structured in such a way that calls for the involvement of a third party.

Following Mt. Gox’s bankruptcy, some Mt. Gox clients have filed civil lawsuits seeking damages, arguing that the exchange was negligent in properly managing the system, in place of demanding a refund of the bitcoins they held in their accounts.

Many customers have also joined the bankruptcy proceedings as creditors, hoping for some repayments from what is left of Mt. Gox’s assets.

On Wednesday, investigative sources alleged that Karpeles, a 30-year-old French national, told his lawyer that the accounts under his name in the company’s system were also used for corporate business.

Karpeles was arrested on Saturday for allegedly padding his dollar accounts with the exchange by $1 million. He has denied the allegations leveled by Tokyo police.

  • zer0_0zor0

    Interesting. If that ruling stands, it should serve to put an end to the “crypto currency” farce.

    • Andre

      As well as to the proprietorship of everything that is intangible.

      • zer0_0zor0

        Not quite, some Constitutional rights are defined as “property rights”.

  • GBR48

    If bitcoins are too ‘intangible’ to be protected by the legal system, then so are digital music and video files.

    • Avery

      If bitcoins are tangible, then WoW gold is also tangible and you could sue Blizzard for closing your account.

      • GBR48

        You probably can if you haven’t breached the terms of service. The theft of anything of tangible value is usually actionable. Bitcoins represent tangible wealth in the same way that banknotes do.

      • Avery

        I guess WoW gold is not a good example because, as you said, it depends on whether virtual objects are actually your property according to the company’s ToS. But the essence of the judge’s ruling is that a bitcoin is nothing more than the conviction that you can combine your private key with a software mechanism to manipulate the ledgers of participating peers. That conviction doesn’t take up physical space and therefore it can’t be owned in the same way a physical banknote is.

      • GBR48

        But the Bitcoins were owned, and they cost the guy seeking redress real money. The judgement is legally flawed. If it sets a precedent (which it may not in Japan, depending on how the legal system works) then there would be serious consequences for the digital economy. Since we stopped using gold and silver, all currency has merely represented wealth. Cheques and banknotes are just bits of paper. Mainstream online banking has no more physicality than Bitcoins.

        In replying I was assuming that you were referring to an in-game currency. These are actionable over if theft takes place.

        In truth, those who lose money to a bankrupt company are usually at the back of the queue for obtaining redress and only get it (typically a very small proportion of it, if anything) by due process. His suit was unlikely to have succeeded but not for the reason given in the judgement, which is ridiculous.

        If someone can take something, regardless of its tangibility, the case is actionable. Compensation payments for medical negligence are basically for the theft of physical or mental abilities and future prospects. In some countries, a broken promise is actionable.

      • zer0_0zor0

        Currency is based on the nation state, not some cryptographic programming scam.

    • zer0_0zor0

      No, they are copyrighted materials.

      • GBR48

        And how tangible is copyright? Can you pick it up and put it in your pocket?

      • zer0_0zor0

        Yes, it is a legal certificate vesting the owner in a limited scope of protected rights.

      • GBR48

        There is no ‘certificate’ for copyright. It simply exists as a legal status.

      • zer0_0zor0

        OK, let’s just say that it is an officially registered legal property right.
        A crypto-currency is not secured by the state in any way shape or form.

      • GBR48

        Something doesn’t have to be ‘secured by the state’ for it to be theft to steal it.

      • zer0_0zor0

        If its intangible it does.