UPDATE (22nd April 12:27 GMT): Article has been updated with the correct title for Mt. Gox CEO Mark Karpeles.

The next hearing in the ongoing Chapter 15 US bankruptcy case involving troubled Japan-based bitcoin exchange Mt. Gox is set to take place in a Dallas, Texas, courtroom today (1st April).

Although the hearing follows the release of more sensational news – such as a new Reuters report that suggests Mt. Gox may have mishandled client funds as far back as early 2012, Tuesday’s court case will deal with more routine aspects of the proceedings.

At the hearing, Mt. Gox will reportedly seek to extend its US bankruptcy protection until the resolution of its Japanese bankruptcy filing, while US lawyers representing former exchange’s users will try to obtain the court’s approval to hold the deposition of CEO Mark Karpeles in the US.

Speaking to CoinDesk, Steven Woodrow, the lawyer heading the US class action case against Mt. Gox, indicated that Karpeles is attempting to block this motion – instead suggesting that the US legal team, as well as former exchange users, depose him in Taipei, Taiwan. Those who could not attend, Karpeles suggested, could follow along remotely via a video conference link.

A deposition is a form of preliminary testimony that allow both sides to learn the facts that will presented by a witness in the formal court case. It usually takes place out of court, but those under questioning must answer under oath.

Woodrow, a partner at the Edelson law firm in Denver, believes that Karpeles should be physically present in the US for the proceedings, though, especially because he has visited the country in the past – most recently to meet with his US legal team prior to its bankruptcy filing.

Perhaps more importantly, Woodrow explains that his clients are entitled to straightforward answers from the embattled CEO:

“Really what this comes down to is a lack of transparency, there are things happening, bitcoins being moved, supposed proceedings that are occurring, other investigations that are ongoing and US creditors are at a real disadvantage. They receive this information piecemeal in confusing ways and they don’t know what to believe. Given that lack of transparency, we need to have Mr Karpeles come to the US to answer questions in a fluid way, not force everyone to fly around the globe to depose him through an interpreter.”

Should Karpeles not be willing to visit the US, Woodrow suggested that Karpeles, and by extension his Japan-based Mt. Gox entity, should not be entitled to the protection of the US courts.

Currently, there are three court cases pending against Mt. Gox in the US, its Chapter 15 bankruptcy filing, the US class action lawsuit as well as the still-unresolved dispute with former partner CoinLab.

Questions to answer

Though the Mt. Gox bankruptcy case has been proceeding for some time, Woodrow indicated that his team is still in the discovery process, and that bringing Karpeles to the US for questioning will help it obtain the information it needs for future aspects of the case.

For example, he said, this questioning will help resolve inconsistencies with how Mt. Gox has so far handled its filings.

Woodrow notes that in Mt. Gox K.K.’s Japanese bankruptcy filing, it wrote that its primary assets in the US consisted of accounts, while in the US filing, it indicated its assets amounted to only “backup data on a server”.

Said Woodrow:

“We’re very interested in understanding where Mt. Gox’s assets are in the US, and other information that’s relevant to them coming here and saying, ‘recognize our Japanese bankruptcy’.”

Recent case updates

Woodrow also discussed how recent events have impacted the case and clarified how his team will seek to involve Japan-based financial giant Mizuho in the proceedings. Mizuho was named a defendant in the case on 16th March, as it served as the exchange’s banking partner.

Said Woodrow:

“We view [Mizuho] in a little different light, as we told the Illinois court. We view them globally as an honest dealer, whereas we have strong reason to believe that Mt. Gox was more of a fraudulent enterprise.”

As such, he noted that his team will primarily seek to obtain information from Mizuho about its relationship with Mt. Gox.

Woodrow also touched on the recent Internal Revenue Service (IRS) decision to treat digital currencies as property, but noted that exactly how this could impact the case it unknown.

He added: “It’s something that class members are going to want to pay attention to.”

Fact-finding discussions

In addition to the question of where the deposition against Karpeles will be held, Woodrow indicated the hearing would also include unspecified scheduling discussions.

While seemingly small, a thorough examination of Karpeles at this stage could prove instrumental to the case.

Woodrow notes that his team is not allowed to seek information about Mt. Gox K.K. because the bankruptcy court has frozen all related proceedings, but that it is allowed to conduct fact-finding against Mt. Gox Inc., the company’s US entity, as well as Tibanne KK, and perhaps most importantly, the company’s lead decision-maker Karpeles.

Legal paperwork image via Shutterstock