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John Meese

Petition To Remove Mark Karpeles From The Bitcoin Foundation Board

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John Meese    7

A petition is currently circulating to gather signatures and encourage the Bitcoin Foundation (namely, us) to remove Mark Karpeles, CEO of MTGox from the Bitcoin Foundation board as an industry member. You can view the petition here: Petition to the Bitcoin Foundation. The argument is as follows:

 

"The Bitcoin foundation serves as a figure head for the Bitcoin community, one of the purposes being to educate and build trust in the protocol. It is often cited by the mainstream press who look to the foundation to provide guidance and comment.

Mark Karpeles, CEO Of Mt Gox has continually proven himself to be incompetent, causing fear in the community and damaging the trust signals that Bitcoin relies on so as to be taken seriously.

Aside from the countless other issues that Mt Gox has encountered over the previous years, this week Mark Karpeles irresponsibly released information stating that the issues the company were facing with withdrawals were due to "A bug in the Bitcoin software" something which was disputed by Gavin Andresen:

Further to this, despite having been questioned this morning, Mark refused to comment on the status of customer's money, instead leaving the customer who'd travelled all the way from The UK to wait outside in the snow. This is not the behaviour that we should expect from a board member!

We would like him to be removed from his position on the board and all association with Mt Gox to be removed from the Bitcoin Foundation website."

 

Here is the relevant section of our bylaws:

 

Section 5.16 Resignation and Removal:

 

a. Resignation. A director may resign at any time by giving written notice to: (i) the Board of Directors; (ii) the Chairman of the Board; or (iii) the Secretary of the Corporation. Such resignation is effective when notice is effective. Notice of resignation is irrevocable once delivered, unless the Board of Directors permits withdrawal prior to its effectiveness.

b. Removal for Cause. The Board of Directors may remove any director elected by the members for cause at a meeting called for that purpose, if the director has been: (i) declared of unsound mind by a final order of court; (ii) convicted of a felony; or (iii) found by a final order or judgment to have breached any duty arising under these Bylaws, the Articles, or applicable law. Only the Board of Directors may vote to remove such director by a majority vote of the remaining directors.

c. Removal Without Cause. Any director may be removed without cause at a meeting called for that purpose by the Board of Directors. The director may be removed without cause by the affirmative vote of two-thirds of the directors then in office.

 

Unless Mark Karpeles decides to resign, it appears that the Board of Directors would have to meet and two-thirds would have to advise his removal. Regardless, I would like to encourage other Bitcoin Foundation members to share their input and for the Board of Directors to—at the least—respond in some manner.

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Brad Wheeler    296

I thought section 3.6 (b ) also applies here because we are dealing with Founding Members.

 

(b ) Expulsion, Termination or Suspension.
Except for the Founding Members who shall only be removed for cause (per the requirements detailed in Section 5.16(b ))
, a majority of the Directors then in office may terminate any other membership after giving the member at least 30 days' written notice (for which email shall suffice) of the termination and the reasons for the termination, provided that (except in the case of termination for non-payment of membership dues, fees, or assessments in a timely fashion) the member has an opportunity to be heard by the Board, either orally or in writing, no less than five (5) days before the effective date of the termination. The Board's decision shall be final and not reviewable by any court.

 

 

Am I mistaken in thinking that the petitioners haven't read all the relevant bylaws -- or are the bylaws unclear in this situation?

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John Meese    7

I'm sure the petitioners haven't read the bylaws, but they do have over 500 signatures (and growing). You make a good, point, though, about the founding members clause. That means I was incorrect, even if the Board of Directors voted to remove him, they couldn't do so without "cause" because he is a founding member.

 

Cause defined above in 5.16(b ) includes a court order of "unsound mind," a felony conviction, or a breach of Board of Director duties as outlined by the bylaws. To my knowledge, Mr. Karpeles isn't of legally unsound mind (though I may disagree with his judgement), and he is not on trial for any felony. Are there any bylaws that specifically cite a Board of Director member's responsibility in this situation?

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John Meese    7

All I could find is this:

Section 3.2
( b ) Industry Members. The Industry Members of the Corporation shall be corporate entities doing business in, servicing or supporting the Bitcoin system or in a similar distributed-digital currency system. The Board of Directors, in its sole discretion, may create categories of Industry Members with special rights, privileges, or duties; however, no such categories shall have any rights, privileges, or duties inconsistent with these Bylaws

Not sure if this applies here because he is a founding member, but if Mt. Gox were to collapse then the argument could be made that Mr. Karpeles' industry member standing would be in question, because he would no longer represent a corporate entity. At least one "servicing or supporting the Bitcoin system"

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Up to now there are two reasons people are signing this petition: the (tragic) fall of price of bitcoins on mtgox and the speculation that mtgox is insolvent. For both there are no proofs or reasons and so there is no official cause of removal from the foundation.

 

If the foundation decides to remove Karpeles based upon those speculations then it will actually confirm those speculations, shading more doubt and fearmongering.

 

Wouldn't be better to wait and to take decisions based on facts?

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Ryan Parker    2

I agree with Nicola that it would be better to wait and make decisions on facts rather then speculation.

That being said Mark is not doing himself or Bitcoin any favors with the limited PR and vague comments in today's WSJ regarding the solvency of MtGox.

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The petition will bring even more uncertainty into the market. The headline would have a 'nice' effect on the market. I'm pretty sure. I can not imagine that someone who is invested seriously would like to see such a petition at the present time. At least it's pure market manipulation. Do not should relevant people have the chance to publish a counter-petition?

 

At the moment I have truly no desire for such games. It is totally unfair to us. If there is a problem with Gox, then constructive ways must be found to resolve it. If you have no constrictive proposals, then please keep out!

 

I'm a long time customer of Gox (I have not taken advantage of the panic). Many sit on the fence these days and give 'wise advice' or publish such petitions. It's sad and makes me very tired.

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Implicit in the position of board member (founding no less) is the following two items. Mark has pointed out a known issue, but did so in such a way as to ensue doubt about the protocol. Board members need to realize that they serve dual masters, and clearly the needs of MtGox over-weighed those of the Foundation. Did he do the Foundation any favors here? Or did his actions injure it? Perhaps not legal cause for removal, but certainly cause for him to resign.

 

Protect Bitcoin

Cryptography is the key to Bitcoin’s success. It’s the reason that no one can double spend, counterfeit or steal Bitcoins. If Bitcoin is to be a viable money for both current users and future adopters, we need to maintain, improve and legally protect the integrity of the protocol.

 

Promote Bitcoin

In the context of public misunderstandings, misinterpretations and misrepresentations, Bitcoin needs to be clearer about its purpose and technology. Allowing the community to speak through a single source will enable Bitcoin to improve its reputation.

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Larry Liu    6

Why can't we wait just a little bit longer until the outcome of the whole thing becomes more clear? I feel there are simply too many unknowns to all of us at this point still.

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Mike Hayes    172

I personally feel that this...

 

Karpeles irresponsibly released information stating that the issues the company were facing with withdrawals were due to "A bug in the Bitcoin software" something which was disputed by Gavin Andresen...

 

Is more of a serious issue than whether Mt. Gox has been losing customer money and trust. I have in the last several weeks seen this propagated as factual through various media sources. Yet, it is not factual. This seems to have also been the case in the past when claims of DDOS attacks were asserted.

 

Also please consider the legal differences between corporate and individual entities. Claims against the corporate entity may or may not pierce through the corporate veil to the individual.

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Todd Erickson    212

Hmmm - So a company that has supported the Bitcoin community through blockchain forks, regulatory uncertainty and a host of other large obstacles, now finds themselves with a technical issue and a PR disaster. No one to my knowledge, AT THIS POINT has actually lost any Bitcoins and in their last announcement they will be resuming withdrawals in the next few days.

 

So we want someone to resign or get kicked out for having technical problems or perhaps making some public statements that he probably regrets?

 

I dont even know Mark but I cant see any reason for him to resign or to revoke his companies Gold Membership...at least not up to this point.

 

The Foundation is filled with early adopters and most are operating in very grey legal boundaries. Until someone can show me some evidence of malice or material loss, it just seems like a bad technical issue compounded by some bad PR.

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David R Allen    318

So Todd, according to all of your very sound logic, what you are saying would mean that Mark should not step down to show respect for the Foundation.

 

I expect Mark is thinking about what he will do, regardless of what the foundation or its membership does.

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Brian Goss    554

I think a little time will make everything clear. What's the rush to judgement? I think we all realize that being down two board members puts us back in the tough spot of having too few board members to make quorum without scheduling magic...I mean, that's why we had our most recent elections only a few months ago...

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David R Allen    318

I think a little time will make everything clear. What's the rush to judgement? I think we all realize that being down two board members puts us back in the tough spot of having too few board members to make quorum without scheduling magic...I mean, that's why we had our most recent elections only a few months ago...

 

Really? Perhaps I was too new a member to realize what was going on. Did we loose a board member before the last election?

 

I was under the impression we were simply in need of another representative from the "Individual" membership status, not to meet a quorum for board voting purposes.

Fortunately Elizabeth has been able to hold her industry job and handle the Education Committee handily, and from the election announcement has taken on the Secretary position as well.

 

One would hope that each board member would be addressing the needs of the foundation this way.

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Todd Erickson    212

David - If Mark wants to voluntarily remove his gold membership and resign from the Board, for his own personal reasons, then he certainly should.

 

My point is simply that Mt Gox has supported the Bitcoin Community through years of difficult times and that if the issue at hand are truly just technical and then venting publicly, then I dont see any material reason to remove them.

 

Like it or not, Bitcoin gets bad press almost daily. I hear about ALL of it from Bank CEO's and Executives on every conference call that I do. This issue has not made my phone ring any more than the host of other news.

 

I dont believe that the Foundation's reputation (and if that matters) is in any trouble. The "Organization" is not systematically ignoring or covering up what individuals do or how Bitcoin is used. As much as I hate to say it, this will NOT be the end of bad press for Bitcoin or the Foundation, but I will withhold my "VETO" vote until there is irrefutable evidence and/or some conviction that proves wrong doing or malice.

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My reading of 3.6 ( b ) is that Mark is a Founding Member and therefore could only be removed for cause, with cause defined in 5.16. However, 5.16 refers to Directors, not Members. Does the term "Director" apply to Mark?

 

Regardless, despite my criticisms of him elsewhere in this forum, I do not think Mark should be removed from the Board unless there is proof of fraud on his part. Right now, there is plenty of circumstantial evidence to raise suspicion of fraud, but suspicion is not proof.

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It's a tough call to say when we know enough to act. The easier thing is to wait for some verdict, etc., but in the meantime a lot of damage can be done. If the bylaws don't allow for action, it may be worth a look at those bylaws to make sure they are working for us rather than against us.

 

Today's announcement is certainly troubling for many reasons, chief among them being that there's no new target date given and the uncomfortable notion that the company is in motion. I certainly wouldn't categorize Mt. Gox as a scam, but stalling tactics are so indicative of one it's hard not to see it as such.

 

Tokyo, Japan, February 20th, 2014! " " Dear MtGox Customers," " Thank you for your patience this week while we are working on re-initiating bitcoin withdrawals. In addition to the technical issue, this week we have experienced some security problems, and as a result we had to relocate MtGox to our previous office building in Shibuya (details can be found here https://support.mtgox.com/home). The move, combined with some other security and technical challenges, pushed back our progress." " As much as we didn’t want to only provide an “update on an update”, this is the current status. We are committed to solving this issue and will provide more information as soon as possible to keep everyone in the loop." " We are very sorry for the delays and deeply appreciate your kind understanding and continuous support." " Best regards," " " MtGox Team
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Tae Royle    5

As a new member I make the following observations.

 

1. The market believes Mt Gox is insolvent. This is demonstrated by the fact that the price of Gox btc is trading at 25% of the value of other exchanges indicating that the market assigns a 25% chance of recovery of those btc.

 

2. As most of you will be aware, insolvency is defined as an inability to pay one's debts as and when they fall due. It does not mean an inability to trade as an insolvent company can continue to trade for so long as it can stall its creditors.

 

3. Some market observers believe that the freezing of USD withdrawals since June by definition indicate that Mt Gox has been insolvent since at least June. While this is not proof, it is consistent with the pattern of behaviour shown by insolvent companies.

 

4. Trading while insolvent is a felony in most jurisdictions.

 

5. I do not doubt that Mr Karpeles has made enormous contributions to bitcoin in the past. However we must look to the best interests of the protocol and the users.

 

6. Mr Karpeles and Mt Gox are currently trading under a cloud. It is in the best interests of the community that Mr Karpeles be permitted to voluntarily stand down until such time as fiat and btc withdrawals are restored in full and the Gox btc price normalises against other exchanges on a sustainable basis.

 

7. We need to be aware that we operate in a market environment and that allowing a persistent cloud to hang over the bitcoin foundation leaves room for an alt coin with a stronger management team to fill the gap.

 

Thank you for your kind consideration of these matters.

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Todd Erickson    212

Tae - You make some good points but here would be my observations:

 

1 - What the market thinks is not proof of anything other than confidence

2 - If Mt Gox has not been paying its bills on time and there is public record of such, then that MAY indicate they are headed for insolvency. However the Bitcoins in their possession may or may not constitute an asset (legally speaking) so a Bankruptcy filing may or may not encumber these

3 - Freezing of USD in June was unquestionable the result of Mt Gox not promptly applying for and receiving the proper license after the FINCEN guidance.

4 - Trading a "Virtual Currency" is not regulated anywhere...yet. To my knowledge anyhow

5 - Why do you think that Mr Karpeles is NOT looking out for the best interest of his customers? He stopped the exchange for the purpose of protecting his clients.

6 - The cloud I think you are referring to "a technical issue" with their customized wallet. Compounded by some inflammatory statements about a previously cured transaction malleability exploit

7 - What sources indicate that the Foundation is in any way implicated in Mt Gox's issue?

 

Thank you in advance for any data that you can share.

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We should take into consideration the fact that in the digital years we live in, and given the magnificent invention called blockchain, it is very easy to prove to the public that you hold X amount of bitcoins (and are indeed solvent). Not doing so in a situation like the current one, when thousands of users are panicking, the price is currently trading at 18-20% of its value on other exchanges, and the entire ecosystem is in turmoil, means that either A. you do not really care about bitcoin at all, or B. you don't have the X amount of bitcoins in your possession and are running some form of a Ponzi scheme.

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