Mizuho Bank, one of Japan’s largest lenders, has lost a bid to escape a lawsuit that is part of the legal fallout from the collapse of the Mt. Gox bitcoin exchange in 2014.
Mizuho argued that the class action in which Mt. Gox customers claimed it concealed problems at the exchange belonged in Japan. But a federal judge ruled Monday that U.S. courts had jurisdiction over the case, at least in California, where one of the two lead plaintiffs lives.
Although Mizuho would face some burden in having to defend a case in California, “out-of-state defendants always face such a burden, and there is no suggestion that [Mizuho’s] hardship would be any greater than that routinely tolerated by courts,” U.S. District Judge Gary Feinerman said.
Mizuho provided banking services for Mt. Gox and handled all deposits for U.S. customers. The exchange filed bankruptcy in February 2014 after losing an estimated half a billion dollars worth of customers’ digital currency.
The class action was filed in Illinois by Mt. Gox customers Gregory Greene, an Illinois resident, and Joseph Lack, a California resident, who alleged Mizuho inflated customers’ losses by limiting withdrawals from their accounts in mid-2013 following reports of a U.S. government investigation into the exchange. At the same time, Mizuho continued to accept deposits from Mt. Gox users, the suit said.
In court filings, the bank has said it had nothing to do with Mt. Gox.’s collapse or its customers’ losses and that U.S. courts did not have jurisdiction over the case because the disputed activities took place in Japan.
Judge Feinerman agreed there was no jurisdiction in Illinois because Mizuho had “no transactional contacts” with Greene but found the bank could be sued in California.
“Mizuho created the necessary relationship with California by accepting Lack’s deposit, knowing that it arrived from a California branch and a California resident, and profiting from the associated fees,” he said.
Rather than immediately transfer the case to California, the judge gave plaintiffs’ lawyers until April 4 to find an Illinois resident to replace Greene as a class representative.