Crypto-drama: Mt. Gox founder Jed McCaleb is in the news again over $1M Ripple dispute
Drama, it seems, just follows some people (and companies) around.
That's been the case with Jed McCaleb, the founder of Magic the Gathering Exchange, the online trading platform that eventually became Mt. Gox and later, after McCaleb distanced himself from the company, imploded in a multi-hundred million dollar bankruptcy. McCaleb, who still owned 12 percent of Mt. Gox, found himself injected into the headlines again, joining forces with a group of investors who tried (unsuccessfully) to buy the exchange out of receivership.
In 2012, a few years after founding Mt. Gox, McCaleb co-founded Ripple Labs, maker of a promising blockchain-based bank settlements platform that promises to disrupt inter-bank transfers and international remittance. As if besieged by the need for some controversy in his life, McCaleb soon quit the company in a co-founder dispute and started a nearly identical competitor called Stellar. Along the way, he threatened to sell millions in the XRP currency native to the Ripple platform, ostensibly in an attempt to tank his former company while funding his upstart successor. A settlement between the two parties managed to avoid a catastrophe and put in place a scheduled sell-off that would see McCaleb reduce his XRP position slowly over seven years.
That more or less brings us to today, when McCaleb’s name is once again in the news -- and again, millions of dollars are at stake.
According to a report by Coindesk, McCaleb and several members of his family were involved in the sale of nearly 100 million XRP last month in a transaction valued at $1.038 million. Ripple evidently believes this act violates the above settlement and asked Bitstamp, the virtual currency exchange handling the disputed transaction via its role as a Ripple gateway, to return the funds.
The result? An interpleader complaint filed in the Northern District of California US District Court, in which Bitstamp asks the courts to settle the dispute. (While this complaint was, in fact, filed on April 1, statements by both sides suggest it is not a prank. Plus, the US District Court does not possess a great sense of humor.)
Bitstamp counsel George Frost, who represented Ripple Labs in a dispute following the resignation of former board member Jesse Powell, said in a statement:It’s too early to state who’s in the right here. The agreement between Ripple and McCaleb does not appear to be in dispute here. Rather, the question is whether these XRP in particular, which are a fraction of the 10 billion XRP he was granted as a co-founder, are subject to that agreement. McCaleb claims that he gifted these 100 million XRP to members of his family before entering into the above settlement. Ripple, not surprisingly, thinks this is BS and wants all McCaleb-related XRP to be subject to the structured sell-off.
"Bitstamp was unable to resolve this demand with Ripple Labs. Given our inability to ourselves determine the facts underlying the ownership dispute, we decided that an Interpleader filing was the proper approach. Indeed, it is only method to resolve disputes in these difficult circumstances.”
However this dispute plays out, it is becoming clear that McCaleb is a massive magnet for controversy. Perhaps he’s just had a run of bad luck. But many in the industry have cited his involvement in both Ripple and Stellar as reason to avoid both companies. It’s a difficult position for Ripple co-founder and CEO Chris Larsen, who can’t seem to distance his company from his former partner.
Stay tuned for the next installment of Crazy in Crypto-land.
[Disclosure: Michael Carney has accepted a position as an associate at Upfront Ventures that begins in April. To the best of Pando’s knowledge, the companies in this post and their competitors have no affiliation with Upfront. This post went through Pando’s usual editorial process.]