(Reuters) - Mt. Gox, once the world's largest bitcoin exchange, filed for U.S. bankruptcy protection in Dallas late Sunday, a move that will temporarily halt U.S. legal action against the Japanese company.
Mt. Gox, which filed for bankruptcy protection in Japan in February, said without U.S. protection it would spend substantial funds defending itself against a U.S. lawsuit seeking class action status that was filed in federal court in Chicago.
A hearing in Dallas was scheduled for 1:30 p.m. local time on Monday to consider Mt. Gox's request to stay pending lawsuits against the company.
The plaintiff leading the Chicago lawsuit was scheduled on Tuesday to ask a federal judge to freeze Mt. Gox's U.S.-based servers and other computer equipment and to set up a trust over Mt. Gox's assets.
Mt. Gox's Japan filing last month came after it said it may have lost 750,000 of its customers' bitcoins as part of an attack by hackers.
Mt. Gox said in papers filed with the Dallas court that the hacking attack was the subject of an intense investigation that indicated so far the bitcoins were lost as a result of a flaw in the software algorithm that underlies bitcoin, the digital currency.
The Chapter 15 filing allows Mt. Gox to ask the U.S. Bankruptcy Court to recognize its foreign bankruptcy and to assist in the Japanese proceedings by protecting its U.S.-based assets. U.S. creditors can contest Mt. Gox's request for Chapter 15 protection.
Mt. Gox is defending itself against at least two U.S. lawsuits.
In late February, Gregory Greene, an Illinois resident, sued the company in Chicago on behalf of all U.S. residents who paid a trading fee to Mt. Gox and those who had bitcoins or other currency with the exchange when it halted bitcoin withdrawals on February 7.
Greene is seeking to recoup millions of dollars lost when the mtgox.com website went down, preventing traders from selling as bitcoin prices plummeted last month.
Steven Woodrow, an attorney for Greene, did not immediately respond to a request for comment.
Mt. Gox is also defending a lawsuit in federal court in Washington state filed by CoinLab Inc for breach of contract. CoinLab is seeking damages of $75 million from Mt. Gox. Mark Karpeles, Mt. Gox's chief executive officer, was scheduled to be deposed in that case later this month, according to court documents.
Mt. Gox is represented by David Parham of Baker & McKenzie.
The case is Mt. Gox Co Ltd, U.S. Bankruptcy Court, Northern District of Texas, No. 14-31229.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Jeffrey Benkoe)
(Reuters) - Prominent bitcoin entrepreneur Charlie Shrem has been indicted by a federal grand jury in New York on charges of funneling cash to the illicit online marketplace Silk Road.
Shrem, known as one of the digital currency's most visible promoters, is accused of conspiring with a Florida man, Robert Faiella, to sell more than $1 million in bitcoins to the users of Silk Road despite knowing that it would be spent on illegal uses like drug trafficking.
Both Shrem and Faiella face charges of money laundering, conspiracy and failing to file suspicious activity reports with government banking authorities, according to the indictment filed by Manhattan U.S. Attorney Preet Bharara.
Shrem's lawyer, Marc Agnifilo, and Faiella's lawyer, David Braun, did not immediately respond to a request for comment on Monday.
Federal authorities shut down Silk Road last year, and prosecutors from Bharara's office have charged Ross William Ulbricht with operating the site under the name "Dread Pirate Roberts."
Shrem, 24, was arrested in January and stepped down as vice president of the Bitcoin Foundation, a well-known trade group, soon after. He was previously CEO of BitInstant, a bitcoin exchange company that enjoyed financial backing from the twins Cameron and Tyler Winklevoss but closed last year.
Bitcoin is a digital currency, not backed by any government or central bank, that fluctuates in value according to its users' demand. Users can transfer bitcoins to each other online and store the currency in digital "wallets."
Authorities have vowed to pursue those who use bitcoin to complete illegal transactions, while regulators are still grappling with their approach to the nascent currency.
The recent failure of Japan's Mt. Gox, which filed for bankruptcy after apparently losing hundreds of millions of dollars worth of bitcoins, has underscored concerns about the currency's long-term viability.
Shrem will be arraigned on the indictment on April 29, according to Bharara's office. He faces a maximum prison term of 20 years if convicted on the most serious charge.
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