Coinlab files suit against MtGox

http://coinlab.com/status-5-2

Full text:

I have more news on the Mt. Gox transition. Today, CoinLab regretfully filed a formal complaint in Federal Court against Mt. Gox.

In the last month, many of you have contacted me directly and asked for more details on our transition, and I would say (charitably) that I've been frustratingly vague -- I just haven't been able to talk about it.

I'm going to take this chance to talk about it. I'm not here to complain, our filing contains and accurate summary of events, but I want to talk about what I see as most important for Bitcoin right now.

Bitcoiners have, on average, lost more money due to technology difficulties, frozen / lost banking relationships and shady characters like pirateat40 than due to any part of Bitcoin's fundamental economics. I hate this fact, passionately. I have a vision in which high quality service and technology and ethics can be delivered to you, me, my kids, everyone who has a stake in Bitcoin.

It is my goal for CoinLab that we provide fundamental infrastructure to minimize these risks for everyone in our space, and I do mean everyone; from those on the Bitcoin Forums who dislike and distrust me personally, to the mom and pop cupcake makers in San Francisco, to my daughter who recently sold some knit products for .01BTC.

While I was willing to take a two year restriction on our venue (US and Canada only for two years was part of our contract), I have for a number of years now wanted to make sure that Bitcoin is properly situated for everyone's good.

When we spun up our initial alpha customers, they included companies that from one perspective could reasonably be deemed to be our competitors, some of the best companies in our space. We worked extremely hard to provide them great service, because I want to build our ecosystem; I want a robust economy and a broad base of service and product for everyone.

What tipped us into filing was our complete inability to get Mt. Gox to deliver on the few simple things left that were needed for customers to move over en-masse; we were often left just apologizing to our alpha customers while their own businesses suffered. I'm just not willing to put any of our customers in that position -- if we can't do a good job for you, I won't promise that we can.

What I hope is that Mt. Gox has this same interest in the good of Bitcoin, and Bitcoiners, and finds a way to work this out.

So, what's next? I hope that we'll be able to provide some good news on that front soon, from a financing and technology perspective at the very least, and ideally with news that we've settled this dispute. In the interim, my biggest hope is that Mt. Gox does an excellent job keeping Bitcoiners safe and liquid and trading on the exchange.

Peter Vessenes

This past February, MtGox and Coinlab announced a partnership.

Coinlab, a Silicon Valley venture-backed company, was to handle MtGox's US and Canadian transactions. This was a massive announcement; news of it alone caused a 40% increase in the value of bitcoins.

MtGox (allegedly) breached the contract, however, by not giving Coinlab exclusive access to the North American market. MtGox was supposed to transfer North American clients to Coinlab. From the doc: "Defendants have breached the exclusivity provisions of the Agreement by directly servicing customers in the United States and Canada since the Agreement took effect".

The suit is for $75 million, an amount that Coinlab claims is "likely underestimates the actual damages."

EDIT: Shame the damages they're demanding are in USD rather than bitcoin :)

The reddit thread on the subject isn't much better, get a load of this gem.

Hacker News (discussion forum for Y-Combinator which funded CoinLab) is zealously deleting any threads started to discuss this topic. They regularly surpress discussion of topics that might make them, or the companies they've funded, look bad. So, I think it's probably legit. The $75 million, on the other hand (if that's what you meant) is of course fine-cut bullshit.

Quoth a redditor who doesn't know that all gawker links are rightly and properly killed on sight.

MtGox is the incumbent and biggest, but isn't really up to the standard of financial markets.

(and, it should be an exchange for arbitrary cryptocurrencies, ideally including blinded ones, and currencies linked more explicitly to existing commodities or currencies. A BTC purchase transaction should be involve swapping a USD cryptocurrency for a BTC cryptocurrency (either BTC directly, or a BTC-backed, optionally-blinded token).

It's totally within normal VC scale investment to set something like this up -- <$10mm. The cryptocurrency market is finally basically proven. The dual US/offshore structure, using the same technical architecture, and with a developer getting licensing fees from independent operating entities, seems like the way to go.

Another example that startups should not be too dependent on other companies.

Last update from the Coinlab website (4/10) [1]:

"On the lack-of-progress side, we're still waiting for two things to be implemented. Once those are done, we'll be ready to go.

Full customer data access Working wire and Dwolla withdrawal forms Because of Gox' strong customer data protection methodologies, we aren't allowed to deliver these things directly, they have to go through the Gox process, and that's taking longer than any of us want."

[1] http://coinlab.com/status

I wonder if this is causing a run on the bank...

So this lawsuit will most probably just be thrown out regardless of merit.