Bad news for Bitcoin: CoinLab sues Mt. Gox for $75M after partnership fails

Back in late February, top Bitcoin exchange Mt. Gox struck a deal to let Seattle startup CoinLab handle its U.S. operations. But now what looked like it would be a beautiful friendship has turned into an ugly mess.

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CoinLab is suing Mt. Gox for $75 million over failure to give CoinLab exclusive access to Bitcoin account information and to maintain an exclusive partnership. “Defendants have breached the exclusivity provisions of the Agreement by directly servicing customers in the United States and Canada since the Agreement took effect,” the lawsuit says.

The original purpose of the partnership was to give Japan-based Mt. Gox better reach into the United States market. With backing from Silicon Valley Bank, CoinLab planned to give institutional investors and wealthy individuals a way to buy and sell large amounts of Bitcoin on a platform that was safer than any other.

CoinLab CEO Peter Vessenes said in an open letter that Bitcoin buyers have lost a lot of money due to Mt. Gox’s technical difficulties and other issues in the Bitcoin system. He’s been extremely frustrated and even told us a few weeks ago that technical stability couldn’t come to Mt. Gox “soon enough.”

While these technical difficulties have frustrated him, what forced his hand was that Mt. Gox had not delivered passwords, Yubikeys, administrative logins, and other security information that was needed to facilitate U.S.-based transactions. Vessenes writes in his letter:

When we spun up our initial alpha customers, they included companies that from one perspective could reasonably be deemed to be our competitors, some of the best companies in our space. We worked extremely hard to provide them great service, because I want to build our ecosystem; I want a robust economy and a broad base of service and product for everyone.

What tipped us into filing was our complete inability to get Mt. Gox to deliver on the few simple things left that were needed for customers to move over en-masse; we were often left just apologizing to our alpha customers while their own businesses suffered. I’m just not willing to put any of our customers in that position — if we can’t do a good job for you, I won’t promise that we can.

What I hope is that Mt. Gox has this same interest in the good of Bitcoin, and Bitcoiners, and finds a way to work this out.

Check out the lawsuit documents below via Gawker.

Bitcoin screenshot via Duncan Elms/Vimeo