Although the court dismissal of the class action law suit in Canada my seem like a blow to users, ultimately this is a positive thing all around for users with claims in the Mt Gox bankruptcy.
Bankruptcy is designed to protect assets and distribute them among creditors under reorganization or liquidation, Chapter 11 and Chapter 7 in the United States respectively although in this case Mt Gox filed a Chapter 15 in the United States which is for international entities.
In Canada relief was sought in 2014 (October) under this filing (link to PDF filing), which is similiar to the US Chapter 15, stating the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross Border Insolvency, which Canada largely adopted by 2009 amendments to the Companies' Creditors Arrangement Act (CCAA) and Canada's Bankruptcy Insolvency Act (BIA).
Under the BIA, Canada recognizes the "foreign proceeding" in Japan (the Mt Gox bankruptcy) pursuant to section 270(1).
Canadian Effort Misplaced
Everyone that had money involved with Mt Gox is owed money. Creditors include users, service providers, employees, and other vendors and bankruptcy in the first place explains that more money is owed than is available to pay the debt.
In the case of Mt Gox, they are no longer. That means they are also no longer making any money. In other words there's only a limited supply and this class action suit just wasted some of those funds to achieve allot of absolutely nothing.
Generally the initial legal fees paid towards bankruptcy representation are the only fees attorneys usually see in the (at least in the United States) and they are disclosed publicly. For additional funds attorney's have to essentially ask the judge over the case to approve them. That said, general expenses are going to be allowed and that costs money. Money there is already too little of to begin with.
The class action lawsuits filed against Mt Gox are basically wasting time, money, and resources to achieve absolutely nothing. Mt Gox has legal protection in Canada having filed for bankruptcy protection there just as they did here in the United States. So naturally this was dismissed.
The class action suit sought damages involved in the Mt Gox implosion and more misplaced a lawsuit there could not be. The bankruptcy under which Mt Gox is currently protected controls all assets of the organization until an agreement with, or proposal to, each of its creditors has been made to resolve the current debt. This proposal is then submitted for approval. This is generally after months, or years, after the fact and usually pennies on the dollar.
In filing a class action, the plaintiff's attempt to throw the entire legal process aside, disregard the rest of the world, and just try to take as much as they can as quickly as they can for themselves, along with a nice fat portion for the attorneys on the case.
This disregards others with claims and in a nutshell, the court recognized this and the case was dismissed.
This is not to say that Canadian users are not due their claims, they most certainly are, but look at things this way, if you have $100 available in a bankruptcy and owe 200 people $1, all 200 people deserve 50 cents of that available $100. A single class action suit doesn't deserve $30 if it represents 30 people.
Under Canadian law, the debtor's (Mt Gox) “centre of main interests” (COMI) determines recognition of "foreign proceedings", BIA § 270(1), and without evidence to the contrary, the jurisdiction in which the debtor company has its registered office is deemed to be the location of its COMI under § 268(2) and there are a number of factors that can be presented to refute the debtors COMI. The COMI is what the Canadian courts look at and have obviously agreed that Mt Gox has done everything correctly here.
The process is not perfect, and it isn't always fair, but the legal process is protection of the debtors and the creditors. It's called bankruptcy protection and does indeed initially protect the debtor from collection efforts but that is also protection for creditors in that each gets a fair share of the available claim under due process.
I'm not a judge and know nothing about the class action suit other than the basics, but it appears as if the courts did the right thing in this case and although it sounds like a win for Mt Gox, it's actually a win for Mt Gox users worldwide.
Article by Dale Henry
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