Jed McCaleb, the current Chief Technological Officer (CTO) of blockchain project Stellar and the founder of the now-defunct cryptocurrency exchange Mt. Gox is facing a lawsuit over his alleged mismanagement of the Tokyo-based trading platform, The Next Web reports, June 26, 2019.
Former Traders Sue Jed McCaleb
On May 19, 2019, two former cryptocurrency traders at Mt. Gox, Joseph Jones and Peter Steinmetz filed a complaint with a court in California alleging that McCaleb was “fraudulent and negligent” during his tenure as the owner of the shuttered digital currency exchange. According to the plaintiffs, McCaleb’s lax attitude was in part responsible for them losing their bitcoin (BTC) holdings during the infamous Mt. Gox hacking incident in 2014.
Per the document submitted in the court, Mt. Gox was already plagued with loose security measures and safety loopholes in 2011. The official complaint makes note of two security breaches that lead to the loss of “thousands of a Mt. Gox user’s bitcoin.” Reportedly, McCaleb was immediately notified about the mishap but he failed to even publicly acknowledge the supposed security breach.
The complaint states that McCaleb, along with Mark Karpeles, who took over Mt. Gox around March 2011, colluded to cover the 80,000 bitcoin loss. Jones and Steinmetz accuse McCaleb of knowingly dismissing any security concerns pertaining to Mt. Gox. Instead, McCaleb actively tried to promote the exchange as a safe and secure platform for trading digital assets.
The official complaint reads in part:
“Plaintiffs are further informed and on that basis allege, that McCaleb schemed with Karpeles about how to deal with the missing 80,000 Bitcoin and given the fact that Mt. Gox was already profitable in early 2011, that Mt. Gox would be able to easily recover or account for the missing 80,000 Bitcoin. These Bitcoin, and hundreds of thousands of more Bitcoin would either be stolen, lost, or otherwise, and never recovered by Mt. Gox.”
In their complaint, the plaintiffs have demanded punitive damages and general damages as compensation for the loss incurred by them.
Meanwhile, Karpeles Looks to Clean his Slate
Mark Karpeles, the former CEO of Mt. Gox who took over the reins from McCaleb in 2011 recently landed a 33-month suspended jail term in relation to the 2014 hacking incident which resulted in the loss of more than 850,000 bitcoin (worth $400 million at the time). However, it didn’t take long for the troubled CEO to challenge the court’s decision.