Stellar co-founder getting sued by ex-Mt Gox traders for losing 80,000 BTC

Jed McCaleb, the co-founder of Stellar and the creator of the infamous Mt Gox exchange, is getting sued over his handling of the exchange. Former Mt Gox traders Joseph Jones and Peter Steinmetz have accused McCaleb of being negligent in his administration of the exchange before selling it to Mark Karpeles. The exchange was hacked in February 2014, resulting in losses of 850,000 BTC, at the time worth more than $400 million.

The lawsuit states that McCaleb was aware of the Mt. Gox’s security issues back in late 2010 or early 2011 and “rather than secure the exchange, McCaleb sold a large portion of his interest in the then sole proprietorship, and provided avenues to the purchases to cover-up security concerns at the time without ever informing or disclosing these issues to the public.”

The plaintiffs described themselves as experienced cryptocurrency traders and they said that McCaleb reassured them about the exchange’s supposed security. The complaint also reads:

“Plaintiffs are further informed and on that basis allege, that McCaleb schemed with Karpeles about how to deal with the missing 80,000 Bitcoin and given the fact that Mt. Gox was already profitable in early 2011, that Mt. Gox would be able to easily recover or account for the missing 80,000 Bitcoin. These Bitcoin and hundreds of thousands of more Bitcoin would either be stolen, lost, or otherwise, and never recovered by Mt. Gox.”

Jones said he owned 1,900 BTC at the time of Mt. Gox’s bankruptcy in February 2014 (worth $24 million) and Steinmetz said he held 43,000 BTC (worth more than $542 million at today’s rates). Both men are still in pursuit of their lost funds and they said that they wouldn’t have used Mt. Gox if they were aware of its “significant security concerns.”