A putative class action lawsuit filed in Illinois federal court against Mizuho Bank, Ltd. on behalf of former depositors of the shuttered Mt. Gox bitcoin exchange will move forward. Prior to its collapse, Mt. Gox was the largest bitcoin exchange in the world, handling approximately 70% of all bitcoin transactions. In a recent Memorandum Opinion and Order, Judge Gary Feinerman denied, in part, the Japanese bank’s motion to dismiss. This ruling demonstrates that foreign companies can be prosecuted in the U.S. under state laws. To the extent that the plaintiffs and the class they seek to represent prevail through a settlement or at trial, this case could serve as a roadmap for U.S. consumers to pursue foreign entities that participate in virtual currency fraud. 

Plaintiffs Gregory Greene, Joseph Lack, and Anthony Motto each lost deposits in their Mt. Gox accounts and allege that Mizuho  and Mark Karpeles, former President, CEO, and majority shareholder of Mt. Gox, are liable for their losses.  The plaintiffs alleged multiple claims against Mizuho, including that: 1) Mizuho tortiously interfered with plaintiffs’ contracts with Mt. Gox by limiting withdrawals from Mt. Gox; 2) Mizuho unjustly enriched itself by accepting transaction fees in connection with incoming wire transfers after it had halted Mt. Gox withdrawals without disclosing that it had done so; and 3) Mizuho fraudulently concealed that it halted such withdrawals. All three plaintiffs also alleged that had they known that Mizuho had halted all outgoing wire transfers for Mt. Gox users, they would not have made their deposits. Since Mizuho moved to dismiss the lawsuit, claims against Karpeles are not discussed.

Early in the litigation, Mizuho moved to dismiss the lawsuit for lack of personal jurisdiction. Personal jurisdiction refers to a court’s authority to adjudicate the rights of a defendant in a lawsuit.  Before a court can exercise power over a defendant, the U.S. Constitution requires that the party have certain minimum contacts with the forum in which the court sits.  Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). The court rejected Mizuho’s jurisdictional challenge because it determined that Mizuho had sufficient minimum contacts with Illinois, including accepting deposits, knowing that it arrived from an Illinois bank and an Illinois resident and profiting from the associated fees.

After failing to get out of the case on jurisdictional grounds, Mizuho filed a motion to dismiss the claims against it on the grounds of “forum non conveniens,” arguing that the case belonged in Japan and should be decided under Japanese law.  This doctrine provides that “a district court may dismiss a case … when it determines that there are strong reasons for believing it should be litigated in the courts of another, normally a foreign, jurisdiction.” Deb v. SIRVA, Inc., __ F.3d __, 2016 WL 4245497, at *2 (7th Cir. Aug. 11, 2016). However, there is a strong presumption in favor of the plaintiff when the case is filed in his or her home forum (i.e., where he or she resides). Deb, 2016 WL 4245497, at *3 (quoting Sinochem Int’l Co. v. Malay. Int’l Shipping Corp., 549 U.S. 422, 430 (2007)).

The court rejected Mizuho’s argument, holding that state laws (not Japanese law) govern the plaintiffs’ claims and that the states where the plaintiffs reside have the closest connection to the misconduct by Mizuho alleged in their complaint:

Applying these principles here, Illinois law governs Motto’s claims, and California law governs Lack’s claims. Mizuho’s conduct occurred in Japan, but Plaintiffs’ alleged injuries occurred in Illinois (and California), leaving Illinois (and California) the forum with the most significant relationship to the tort. If this case is certified as a class action, the parties may ask the court to certify a different subclass for class members in each jurisdiction in which the law differs in a material way from Illinois and/or California, See Thomas v. UBS AG, 706 F.3d 846, 849 (7th Cir. 2013), which would result in the application of other domestic law, but not Japanese law.

Mizuho’s motion to dismiss also asserted that the plaintiffs had not alleged sufficient facts to support their three claims.[1]  For that type of motion to dismiss, a court must assume the truth of the operative complaint’s well-pleaded factual allegations, though not its legal conclusions. See Zahn v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir. 2016).  To survive a Rule 12(b)(6) motion, Plaintiffs need not plead every conceivable fact to support a claim; the complaint need only “contain sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.’” See Stapleton v. Advocate Health Care Network, 817 F.3d 517, 521 (7th Cir. 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The court denied the majority of Mizuho’s motion to dismiss, ruling that 1) plaintiffs Lack and Mott could pursue their tortious interference claim because Mizuho never sent their fiat currency deposits to Mt. Gox; 2) all Plaintiffs could pursue their unjust enrichment claims against Mizuho because they were in a transactional relationship with Mizuho that required Mizuho to disclose that it had stopped processing withdrawals while continuing to accept wire transfer deposits; and 3) all Plaintiffs could pursue their fraudulent concealment claim, as it was based on the same allegations as the unjust enrichment claim.

While this ruling only means that the plaintiffs have gotten over the first hurdle in the case, it is significant because it allows them to litigate their claims in federal court under state law, and now pursue discovery against Mizuho and third-parties concerning their claims.  This means that the plaintiffs can seek documents and take depositions, which will provide them with additional insight into the relationship between Mizuho and Mt. Gox. Additionally, the plaintiffs will be filing a motion for class certification, which, if granted, would potentially cover all U.S. residents who were damaged by Mizuho’s actions.  We will continue to follow this litigation and provide important updates.


[1] Karpeles, who is representing himself, did not file a motion to dismiss the claims against him.