United States District Court, N.D. Illinois, Eastern Division
GREGORY GREENE and ANTHONY MOTTO, individually and on behalf of all others similarly situated, Plaintiffs,
MIZUHO BANK, LTD. and MARK KARPELES, Defendants.
MEMORANDUM OPINION AND ORDER
putative class action brought by Gregory Greene and Anthony
Motto seeks to hold Mizuho Bank, Ltd. and Mark Karpeles
liable for financial losses arising from the demise of the
Mt. Gox Bitcoin exchange. Doc. 245. Earlier in the
litigation, the court denied Mizuho's motion under
Federal Rule of Civil Procedure 12(b)(2) to dismiss the
claims against it for lack of personal jurisdiction. Docs.
199-200 (reported at 169 F.Supp.3d 855 (N.D. Ill. 2016)). The
court then granted in part Mizuho's Rule 12(b)(6) motion,
dismissing Greene's tortious interference claim and the
accounting claim brought by all then-named Plaintiffs. Docs.
229-230 (reported at 206 F.Supp.3d 1362 (N.D. Ill. 2016)).
After the Supreme Court issued Bristol-Myers Squibb Co.
v. Superior Court of California, 137 S.Ct. 1773 (2017),
and on Mizuho's motion, the court dismissed all claims
brought by the two non-Illinois plaintiffs, Joseph Lack and
Gregory Pearce, for lack of personal jurisdiction. Docs.
311-312 (reported at 289 F.Supp.3d 870 (N.D. Ill. 2017)).
Lack and Pearce have since filed suit against Mizuho and
Karpeles on in their respective home districts. See Lack
v. Mizuho Bank, Ltd., No. 2:18-cv-617 (C.D. Cal. filed
Jan. 24, 2018); Pearce v. Mizuho Bank, Ltd., No.
2:18-cv-306 (E.D. Pa. filed Jan. 24, 2018).
the Rule 12(b) dust now settled, the operative complaint
brings three counts against Mizuho, all on behalf of Motto
and the putative Deposit Subclass: tortious interference with
contract, Doc. 245 at ¶¶ 122-130 (Count IV); unjust
enrichment, id. at ¶¶ 131-138 (Count V);
and fraudulent concealment, id. at ¶¶
139-150 (Count VI). The Deposit Subclass is defined as those
members of the Mt. Gox class-itself defined as “[a]ll
persons in the United States who had bitcoins or money stored
with Mt. Gox on February 24, 2014”-“who deposited
money into their Mt. Gox account through Mizuho Bank after
the date [when] Mizuho Bank stopped processing
withdrawals.” Id. at ¶ 89. The operative
complaint's remaining counts, brought on behalf of
Greene, Motto, and the Mt. Gox Class, name only Karpeles as
defendant and need not be discussed for present purposes.
Id. at ¶¶ 95-121.
now moves under Rule 23 to certify the Deposit Subclass. Doc.
294. Because Motto fails on two separate grounds to show that
he satisfies the typicality and adequacy requirements of
Rules 23(a)(3) and (a)(4), the motion is denied.
a motion under Federal Rule of Civil Procedure 12(b)(6), a
motion to certify a class under Rule 23(c) is not one for
which the court may simply assume the truth of the matters as
asserted by the plaintiff. Instead, if there are material
factual disputes, the court must receive evidence and resolve
the disputes before deciding whether to certify the
class.” Priddy v. Health Care Serv. Corp., 870
F.3d 657, 660 (7th Cir. 2017) (citation, alterations, and
internal quotation marks omitted). Still, “[i]n
conducting this analysis, the court should not turn the class
certification proceedings into a dress rehearsal for the
trial on the merits.” Messner v. Northshore Univ.
HealthSys., 669 F.3d 802, 811 (7th Cir. 2012).
“The plaintiff bears the burden of proving by a
preponderance of the evidence all necessary prerequisites to
the class action.” Priddy, 870 F.3d at 660.
Mt. Gox's Relationship with Mizuho
is a digital payment system, and bitcoins are the
system's unit of account. See Beyond Silk Road:
Potential Risks, Threats and Promises of Virtual Currencies:
Hearing Before the S. Comm. on Homeland Sec. &
Governmental Affairs, 113th Cong. 3-4 (2013) (statement
of Jennifer Shasky Calvery), https://perma.cc/2TFX-6BCQ
(noting that the Treasury Department classifies Bitcoin as a
“decentralized virtual currency”). Bitcoins can
be bought and sold on exchanges. Founded in 2009, Mt. Gox was
a bitcoin exchange based in Tokyo, Japan; it declared
bankruptcy and ceased operations in February 2014. Doc. 246
at pp. 4-5, ¶ 13, p. 12, ¶ 41.
is a large Japanese financial institution, with headquarters
in Tokyo, Japan. Id. at p. 3, ¶ 9. Beginning in
September 2012, Mizuho received and processed deposits and
withdrawals of fiat currency for United States-based Mt. Gox
customers. Id. at pp. 7-8, ¶¶ 24-25; Doc.
296 at 14; Doc. 338 at 9; Doc. 339-12. Customers who wished
to purchase bitcoins on the exchange using fiat currency
would initiate an “inbound” wire transfer to
Mizuho to be credited to Mt. Gox's account, while
customers' requests to cash out into fiat currency their
bitcoin positions would cause an “outbound” wire
transfer to be initiated from Mt. Gox's Mizuho account.
Doc. 296-2 at 24-28. Mizuho did not play an exclusive role in
this regard, as Mt. Gox relied at different points in time on
other financial institutions and payment processors,
including Japan Post Bank, Dwolla, and OK Pay, to facilitate
fiat currency deposits and withdrawals. Doc. 296 at 14; Doc.
338 at 9.
March and April 2013, Japanese regulators and executives of
several large multinational banks contacted Mizuho to express
concern that Mt. Gox was being used to launder funds
connected with criminal activity. Doc. 296 at 15; Doc. 338 at
9-10; Doc. 296-2 at 37, 39-44. The next month, the U.S.
Department of Homeland Security seized assets owned by Mt.
Gox's American subsidiary for allegedly violating 18
U.S.C. § 1960, which prohibits operating an unlicensed
money transmitting business. Doc. 296 at 14-15; Doc. 338 at
10; Doc. 327-6.
wake of these events, Mizuho put pressure on Mt. Gox to find
another partner bank. Doc. 296 at 14; Doc. 338 at 10; Doc.
296-2 at 58. By late June 2013, Mizuho had stopped processing
all international outbound wire transfer requests
for Mt. Gox customers. Doc. 296 at 15; Doc. 338 at 10; Doc.
295-5 at 3; Doc. 296-2 at 72, 82; 296-5 at 2; Doc. 339-3 at
13. Neither Mizuho nor Mt. Gox announced publicly that Mizuho
had stopped processing those outbound wire transfer requests.
Doc. 296 at 17-18; Doc. 338 at 12-13; Doc. 295-12; Doc. 296-2
at 95-96; Doc. 296-17 at 2. Mizuho, however, continued to
accept and receive international inbound wire
transfers from Mt. Gox customers until Mt. Gox shut down in
February 2014. Doc. 338 at 11; Doc. 339-3 at 13. From June
2013 until February 2014, when Mt. Gox ceased operations and
declared bankruptcy, Mt. Gox account holders in the United
States could withdraw fiat currency using other
intermediaries. Doc. 296 at 14; Doc. 338 at 11; Doc. 295-5 at
opened an account with Mt. Gox in mid-January 2014. Doc.
339-20 at 11. Approximately a month later, and days before
Mt. Gox ceased operations, Motto wired $1, 000 in fiat
currency from a JPMorgan Chase Bank account he
controlled-owned by his company, Highline Technologies-to Mt.
Gox's account at Mizuho. Doc. 339-20 at 13; Doc. 339-21;
Doc. 339-22 at 7. At the time he wired the money, Motto was
aware of difficulties, including delays, in Mt. Gox's
processing of withdrawal requests. Doc. 339-20 at 30-31.
Motto testified, however, that he was not “overly
concerned” about those problems. Id. at 32-33.
As Motto explained, had he decided to make a withdrawal, he
“would have withdrawn bitcoin” rather than trying
to “turn” his investment “back into U.S.
dollars”; a withdrawal of bitcoin, as opposed to a
withdrawal of fiat currency, would not have required services
of a bank like Mizuho. Id. at 33. When asked whether
his decision to invest in bitcoin on Mt. Gox would have been
“impacted” by learning that Mizuho was “no
longer processing … fiat currency withdrawal requests,
” Motto testified that he “would have worked
another way to get funds into the Mt. Gox exchange.”
to a policy it adopted in late February 2014 after Mt. Gox
declared bankruptcy, Doc. 339-22 at pp. 2-3, ¶¶
3-4, Mizuho contacted Chase on March 7, 2014 using the
“SWIFT” interbank messaging system to ask if
Motto (as Highline Technologies) “would request this
transaction to be cancelled or not, ” id. at
10. The message noted that, “according to news reports,
the beneficiary Mt. Gox which is bit coin exchange in Japan,
is in the situation of stop operations.” Ibid.
Mizuho promised that “[i]n the case of cancellation,
” it would “return [Motto's] fund[s] less our
charges.” Ibid. Chase responded on March 10,
indicating that it would contact Motto “for additional
details” and ...