We’re back, folks. And it’s time to call bullshit once again. The culprit is CoinLab’s CEO, Peter Vessenes.
Three years after this mess began, Vessenes still has a shit-eating grin on his face and creditors still have no idea when they will be repaid. But today Vessenes gave creditors a hint as to when they can expect payment. More accurately, it was a hint as to when not to expect payment — which is any time in 2017. Vessenes has since deleted this post from /r/mtgoxinsolvency on Reddit. But we saved it so you can still read it.
Did he really think this was going to discourage death threats made over the Internet? Did the guy trying to dilute MtGox creditor claims by ten percent via frivolous lawsuit really post in /r/mtgoxinsolvency to complain about a meme someone made about him? Now that you have his Reddit nick, please DM responsibly.
The real bullshit here is the notion that Vessenes even has a credible claim in the MtGox bankruptcy. As you will read in this post, CoinLab has no credible claim because their lawsuit against MtGox is bogus. CoinLab, in fact, owes creditors $5M USD worth of MtGox depositor funds it has been holding to offset their bogus lawsuit.
In short, we want our fucking money. We want it now. And Vessenes, we know your greedy ass is both holding up payment and trying to dilute us.
Coinlab v MtGox Background
In November 2012 Coinlab struck a deal with MtGox where CoinLab would be MtGox’s exclusive agent for North American sales. CoinLab would get access to all MtGox’s customers, databases, etc. and would be the party exclusively permitted to do business for MtGox in the US and Canada. Their agreement provided that CoinLab would receive 90% of the revenue for all new customers (see Section 4A).
Why would MtGox agree to such unfavorable terms? Because the process of obtaining a license to run a bitcoin exchange in the US and Canada was expensive and incredibly complex. A federal license as well as a separate license for each state was and still is needed to do business as a bitcoin exchange. Coinbase didn’t exist yet, MtGox was first to market and didn’t have the expertise. CoinLab did, or so they said, and this representation was the basis used to justify those favorable terms.
As it turned out, CoinLab did not have the licenses they needed to do business. They did not procure them and it appears they operated illegally to the extent it handled customers outside Washington state. MtGox was slow to hand over any data or cooperate. And why the hell would they? CoinLab was unlicensed, had misrepresented their qualifications to land a sweetheart deal and couldn’t legally perform what they were contractually obligated to do. CoinLab eventually sued MtGox for breach of contract in May 2013.
MtGox answered and counterclaimed, stating that (a) CoinLab was never licensed and the agreement was void because it required CoinLabs to essentially break the law, and (b) CoinLab stole USD $5,315,210.79 in MtGox customer deposits and converted them to company use.
MtGox and Tibanne later declared bankruptcy and Vessenes filed a claim for USD $75M, representing the value of their suit against MtGox. CoinLab has refused to return the $5M+ of creditor money, claiming he has to right to offset it against his frivolous lawsuit.
How the hell does CoinLab justify USD $75M in damages?
CoinLab is relying on a liquidated damages clause allowing them to sue for $50M USD if MtGox breached the agreement (see Section 1K). Of course, this assumes CoinLab is even able to enforce the agreement due to the fact it had to operate illegally to perform its duties.
CoinLab has thrown another $25M USD in damages on top of that. What did CoinLab do that could justify such damages? Prior to 2013 CoinLab was a “bitcoin business incubator” that built “infrastructure for bitcoin.” What the fuck did they incubate/build that was so valuable? Absolutely nothing. Vessenes was an early adopter who raised money from early adopters, got himself on the Bitcoin Foundation Board as president, pumped bitcoin for a few years, struck a deal with MtGox and never built anything mentionable. Present day, CoinLab is just a guy in Seattle sitting at his computer and fucking around with Ethereum.
CoinLab is pretty clearly basing their damages on what they expected to gain from their deal with MtGox. Given that MtGox appears to have been insolvent at the time the suit was filed (see chart below), there is no way CoinLab can legitimately expect to have earned much. And since Section 5C permitted the agreement to be terminated in the event of a bankruptcy, which followed ten months after the suit, Vessenes is an absolute crook for claiming tens of millions of dollars in damages.
But that’s not all. Vessenes had the gall to have CoinLab file an additional claim in the Tibanne bankruptcy (MtGox’s parent company) for JPY ¥10,787,916,194 (approx. USD $95,602,800). This likely represents a made-up number to stand in for whatever Tibanne’s obligations were. So if Vessenes has his way, Tibanne’s assets will first be divided between MtGox’s claims and CoinLab’s ¥10B claim, then MtGox gets divided between us MtGox depositors and CoinLab’s $75M claim. And he wonders why he gets death threats.
Peter, if you are reading this, how the hell can you seriously claim MtGox + Tibanne owed you USD ~$175M? What’s that? You’re experiencing a vague, uncomfortable feeling? It’s called shame. Get used to it or drop your fucking claim.
Why has CoinLab’s baseless claim not yet been thrown out yet?
We can’t be sure. The case was transferred to Japan and the relevant documents are in Japanese and locked away inside the Tokyo District Court. Rest assured, we at GoxDox are resourceful and are working on it.
Will Creditors get our $5M back from CoinLab if the baseless claim is thrown out?
You’d think that’d be a no-brainer, but the issue is whether CoinLab even has those funds. They were supposed to be customer funds, segregated into a separate account and not used for operations. But it looks to us like Vessenes spent them anyway. More on this in our next post.