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Out-of-pocket Bitcoin owners sue MtGox for damages

MtGox customers have started to file lawsuits against the bankrupt Bitcoin exchange with a customer in Chicago becoming the first to do so and many more cases likely to follow.

Related: MtGox files for bankruptcy protection in Japan

Gregory Greene claims in a court filing that MtGox and its CEO Mark Karpeles were negligent and he is looking for some kind of compensation for his Bitcoin stake, which had an estimated value of $25,000 [£14,926].

"MtGox intentionally and knowingly failed to provide its users with the level of security protection for which they paid," said Greene, according to Reuters.

The suit is seeking class action status on behalf of Mt.Gox users, restitution, monetary damages and various other remedies.

"This is a case of serial mismanagement, if not outright fraud, by Karpeles and Mt. Gox," said Steven Woodrow, a partner at the Edelson law firm that filed Greene's lawsuit. "Users of the exchange are collectively out millions while MtGox holds onto their bitcoins. We intend to get to the bottom of this in an American court."

MtGox has dramatically unravelled over the past couple of weeks after it first claimed that hackers using the transaction malleability vulnerability that had also affected two of its competitors had simply infiltrated its defences.

It all started to get a lot more serious this week before it decided to file for bankruptcy in Tokyo, the capital of its home country Japan. CEO Karpeles explained that a weakness in the system had allowed the huge theft with a news network in Japan putting MtGox’s debts at upwards of 6.5 billion yen [£38 million] – a figure that far outstrips its assets.

Related: Bitcoin exchanges hit by glut of US subpoenas demanding information

Authorities in both Japan and US were already investigating the exchange before it applied for bankruptcy protection with the US issuing subpoenas to a number of exchanges to try and understand the failures that are dogging MtGox.