Bitcoin exchange partnership dissolves with lawsuit
A Bitcoin exchange partnership designed to smooth the trading process and show the security of the virtual currency has apparently collapsed with a lawsuit.
After struggling to crack the U.S. market, Mt. Gox, the world's largest Bitcoin exchange, announced in February that it had reached an arrangement with CoinLab in which the Seattle-based startup would manage the exchange's operations in the U.S. and Canada. Along with the support of Silicon Valley Bank and $500,000 in VC funding, it was hoped that the arrangement would help increase customer confidence in the decentralized digital currency.
However, that transfer of operations never occurred, according to a lawsuit CoinLab filed against the Tokyo-based exchange on Thursday in the U.S. District Court for Western Washington. The lawsuit (see below) alleges multiple counts of breach of contract and claims CoinLab suffered damages exceeding $75 million.
"Mt. Gox has continued to market to customers in North America and has accepted business from customers there," CoinLab wrote in its lawsuit. "Mt. Gox has also failed to provide CoinLab with account reconciliation data, server access, and other information promised in the agreement that is essential for CoinLab to market exchange services and service its customers as contemplated in the agreement."
CNET has contacted Mt. Gox for comment and will update this report when we learn more.
CoinLab CEO Peter Vessenes seems to believe the lawsuit will help facilitate the company's original goal of serving Mt. Gox's Bitcoin trades in North America.
"Our hope is that we can quickly resolve the issues and clear a path to better serve our US and Canadian customers," Vessenes said in a statement posted to the company's Web site. "While it's disappointing to file a lawsuit, we can rest assured that we tried every other avenue to resolve the issues outside of the courtroom."
The lawsuit comes as Bitcoin settles after a bubble burst that saw the virtual currency's value against the U.S. dollar skyrocket in a few weeks from the mid-teens to more than $260 before plummeting to its current $90 position. The meteoric growth also impacted Mt. Gox, which was the target of multiple distributed-denial-of-service attacks that were apparently designed to manipulate the value of the currency.