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Japan’s Mizuho Bank: The Latest Defendant in Mt. Gox Bitcoin Suit

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Japan’s Mizuho Bank: The Latest Defendant in Mt. Gox Bitcoin Suit

Class action lawsuits in the U.S. and Canada target a Japanese banking juggernaut.

It’s only March, but 2014 has already been a rocky year for Mizuho Financial Group: Japan’s second-largest bank by assets and third-largest by market capitalization. In January, the lender shuffled its top executives following a $2 million yakuza loan scandal  that surfaced in late 2013. Now, Mizuho is being named as a defendant in class action lawsuits surrounding the half-billion dollar collapse of Tokyo-based Bitcoin exchange Mt. Gox.

The suits were filed in Chicago federal court and the Ontario Superior Court of Justice. Mt. Gox officially shut down on February 25 after losing an estimated 750,000 Bitcoins, including 100,000 of the company’s own. Combined, the total loss amounts to $567 million and represents roughly seven percent of all Bitcoins in circulation.

Mt. Gox subsequently filed for “Chapter 11-style bankruptcy protection” with a Japanese court on February 28. Yesterday, the troubled company also filed for Chapter 15 bankruptcy in the U.S.

“Mizuho held non-Bitcoin currency on behalf of Tokyo-based Mt. Gox and its customers, according to the amended U.S. complaint by Gregory Greene, an Illinois resident who [allegedly] lost $25,000 when [the exchange] shut down,” said Reuters. “The U.S. suit accuses Mizuho of knowing of Mt. Gox’s fraud, of not segregating funds that belong to Mt. Gox from those of its customers and of continuing to provide banking services that inflated losses for Bitcoin customers.”

Although Mark Karpeles – the Mt. Gox CEO – claims that the disappearance of the virtual currency stemmed from external attacks by hackers, many customers attribute the disaster to a combination of incompetence, lax security measures and deception.

Greene’s complaint states that Mizuho “directly benefited [from Mt. Gox’s] fraudulent and unfair conduct” and inflated losses by continuing to do business when a crash was imminent. It also references reports from earlier this month that indicate the bank pressed Karpeles to close his account.

According to a recorded conversation between Karpeles and a Mizuho Bank official, translated by the Wall Street Journal, the financial institution told the Mt. Gox CEO to shut it down in late January.

The Bitcoin saga took yet another strange turn this week when the man Newsweek claimed was the cryptocurrency’s creator hired a lawyer to clear his name. Dorian Satoshi Nakamoto, 64, released a statement denying any involvement with Bitcoin, even claiming that “financial distress” led him to cancel his Internet service last year.

“My prospects for gainful employment have been harmed because of Newsweek’s article,” read the statement. “Newsweek’s false report has been the source of a great deal of confusion and stress for myself, my 93-year-old mother, my siblings, and their families.”