Customers of dead bitcoin exchange demand refunds
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Testimony is piling up in a California court seeking the returns of customer bitcoins from a U.K.-based exchange, which quit serving customers after about a year, in 2012.
Why it matters: For some of the claimants who have filed testimony in support of the case — a narrower dispute between co-founders — restitution would mean a life changing amount of money.
Catch up fast: The exchange in question was known as Intersango, founded in the United Kingdom in 2011. The person organizing the action, underway since 2017 in state superior court, is one of the company's three co-founders: Donald Norman.
- His co-founders were Patrick Strateman and Amir Taaki, a longtime crypto developer, currently working on private financial technology.
- This dispute is a fight over profits, rights of co-founders, dysfunctional leadership and loose founding documentation.
- Norman is looking for at least $200 million in damages and compensation, full access to corporate assets in this case, a detailed accounting and for the company to be placed in the hands of someone else.
Zoom out: Someone else, means someone other than Strateman. Norman's case seeks to paint Strateman as the only thing standing in the way of former Intersango customers and their assets, which they've been separated from for over a decade.
Zoom in: It's not known for certain how much bitcoin (BTC) Intersango had when it was shuttered or how much it still controls.
- In his complaint, Strateman asserts that the exchange had possession of 7,000 bitcoin (BTC) when it shut down.
- In a transcript of court testimony from July 2022, posted on a website Norman made for the case, Strateman says between 1,000 and 4,000 BTC belonging to Intersango customers remained in his control.
- Norman estimates, based on his own blockchain investigations, that it currently is something like 2,000 BTC (worth roughly $80 million at current prices).
- When Intersango shut down, that same amount would have been worth more like $10,000.
By the numbers: According to Norman, there were 5,681 accounts when the exchange shut down.
- The testimony of 10 former customers in publicly available court documents filed this month allege a total of something like 131 unreturned BTC (value, approximately $5 million today).
- Two of the customers did not state an amount still owed to them in their filings.
- Additionally, in a Dec. 1 filing from Norman, it details the cases of two customers owed a total 147 BTC owed them, though one of them may have recently been refunded 64 BTC, after filing in Norman's case.
The other side: That Strateman is in control of Intersango's former assets is not in dispute.
- Strateman has contended in legal filings that he took charge of the company in 2012 after Norman abandoned the operation in the face of regulatory pressures and a since-resolved lawsuit, a claim the third co-founder, Taaki, confirmed to Axios.
- Strateman's attorney, in a legal filing filed earlier this month, said Strateman has and continues to refund customers with "verifiable accounts."
- They claim that Norman's lawsuit, in fact, has impeded the refund process since 2016.
What they're saying: "Intersango and Mr. Strateman want nothing more than to finish refunding any remaining former Intersango customers with outstanding bitcoin balances," Strateman and Intersango said in a statement to Axios.
- "Intersango and Mr. Strateman can only continue to fight in Court against Mr. Norman to ensure that any remaining former customers are refunded as quickly as possible."
Of note: A settlement in the case was agreed to over a year ago, but Norman is balking. The court has a hearing scheduled for January 23 to decide whether to throw the case out.
Axios has spoken to two of the customers who have filed in support of Norman's case. Both confirmed that they have never been able to get in touch with Intersango management since it shut down.
- One claims to have tried both Intersango and Taaki, directly, via a personal email.
State of play: The Intersango domain went active again in 2018 (after going dark in 2014), however it offers no means for former customers to contact anyone.
- The last capture before the site shut down on The Internet Archive is stamped Feb. 13, 2014.
- Last month, in response to what it described in court filings as a "false outreach campaign" on behalf of Norman to former Intersango customers, the company sent an update to the email addresses of account holders.
- The email, which was shared with Axios by Strateman's attorney, says the company "intends to undertake a process to try to identify and refund all verifiable customer accounts and is working to put a system in place to process any such claims, once the litigation is concluded."
The bottom line: There isn't any dispute over the contention that hundreds or thousands of bitcoins that once belonged to customers remain in control of Strateman — coins that are now worth millions rather than thousands of dollars.
What we're watching: Whether or not this court, or another, orders the Intersango estate to disclose how much customer bitcoin remains and show that records of customer balances are accurate.
Norman's most recent complaint:
A December 1 filing from Strateman's counsel asking the court to enforce a settlement between the parties:
