The latest in the long trail of events since the 2014 shutdown of the then-largest — but now defunct — cryptocurrency exchange Mt. Gox is a lawsuit that two former traders on the exchange brought against founder Jed McCaleb. The traders, Joseph Jones and Peter Steinmetz, allege McCaleb of fraudulently and negligently misrepresenting Mt. Gox to “induce” traders to use the exchange. The duo, who filed the lawsuit on May 19 in a court in California, allege that McCaleb was aware of “serious security risks” in the architecture of Mt. Gox back in late 2010 to early 2011, but neither followed-up to fix the issues nor disclosed the vulnerabilities to the public.
The lawsuit from Jones and Steinmetz builds on the previous findings published in a Daily Beast report, that suggests that Mt. Gox had security flaws from its early days. The lawsuit claims that in or before January 2011 — when the Mt. Gox account was compromised, leading to the unauthorized sale of thousands of users’ Bitcoins (BTC) — McCaleb was informed about the security flaws and was aware that more than 80,000 Bitcoin had already gone missing.