A partnership between Seattle tech company CoinLab and Mt. Gox, the largest Bitcoin exchange, promised to bring better stability, liquidity and customer service to people trading in the digital currency in the United States and Canada. That isn’t how it’s working out, according to a $75 million lawsuit filed by CoinLab against Mt. Gox.
CoinLab, which is backed by investors including Silicon Valley’s Tim Draper and Seattle’s Geoff Entress, alleges that Mt. Gox has failed to live up to the basic terms of the agreement, which granted CoinLab the exclusive right to use Mt. Gox’s technology to operate Bitcoin exchange services in the U.S. and Canada.
The suit alleges that Mt. Gox hasn’t provided the customer data, software, database access, passwords, network connections or other resources required by the agreement. Mt. Gox has also continued to work with North American customers in violation of the exclusivity provisions of the deal, according to the suit.
The situation is a setback to efforts by Seattle entrepreneur Peter Vessenes, the CoinLab CEO, to bring a new level of legitimacy to the Bitcoin trade. The decentralized digital currency, generated by using computer processors to solve complex equations, has suffered from a series of incidents that have raised questions about its future.
Vessenes writes in an online letter about the suit, “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.”
CoinLab is working with Silicon Valley Bank as part of its Bitcoin exchange and says it is registered and compliant with the US. Treasury Department’s Financial Crimes Enforcement Network.
Vessenes notes in a news release, “My continued hope is that Mt. Gox will do what’s best for U.S. and Canadian customers and settle this matter quickly, allowing our customers to transact in the U.S. with a fully licensed and registered company that meets American standards for service quality. It’s most important to me that customers are able to maintain uninterrupted flow of services, and I hope that Mt. Gox shares that goal and works to resolve this dispute.”
We’ve contacted Mt. Gox for comment and haven’t yet received a response. Here’s a copy of the complaint, filed yesterday in U.S. District Court in Seattle.