Bitfinex v. Wells Fargo

“A few years ago, MtGox had its international wires blocked by an intermediate bank. This caused a lot of additional costs as it was difficult to work around such blocks, and intermediate banks would also pressure our Japanese banks to close our accounts (unlike in the US, in Japan a bank cannot close a customer bank account of its own accord without a good reason).

At the time, our lawyers strongly advised against any legal action against the bank, however it seems that Bitfinex decided to go that way, and filed a lawsuit with the California Northern District being heard by Judge Hon. Maxine M. Chesney, filed as 3:17-cv-01882-MMC iFinex Inc. et al v. Wells Fargo & Company et al.

In the original complaint, Bitfinex et al explain that as of Friday, March 31st 2017 Wells Fargo stopped processing outgoing wires without providing any kind of warning or explanation, which “will cause great and irreparable harm to plaintiffs.” They ask for the transfers to not be blocked anymore, and damages in excess of US$75,000.

So far, Wells Fargo only submitted a single response (Docket 20), explaining they ask for time to file Opposition, and oppose the Temporary Restraining Order plaintiffs asked for as forcing processing of wire transfers would, among other things, “place an affirmative duty on Defendants where none currently exists.”

The following schedule has been set Friday, April 7th 2017:

  • By April 12th: Opening brief
  • By April 20th at 2:00pm: Opposition
  • On April 25th at 10:00am: Motion Hearing

This means that by April 20th at 2:00pm (usually this kind of things are filed just before they are due, so most likely around that date and time) Wells Fargo will file its opposition to the Plaintiffs’ complaint.

Under US law, a bank can choose who it is doing business with and has a lot of leeway in how it can proceed. At the time of MtGox it was not rare to hear of US customers that their bank had closed their account. They would receive a letter saying something similar to “Your bank account has been closed as <a few days ago>. We may send you a check of your balance within 60 days.”

For intermediate banks, blocking transfers is rare, and usually happens because the bank has strong reasons to believe the transfers is linked to some kind of criminal activity. MtGox processed hundreds of international wires per day for years, and we’ve had only a handful of blocked wires until we got blocked ourselves.

Anyway based on the only two pages filed by Wells Fargo so far, it seems obvious they have absolutely no intention of resuming wires. Most likely they will try to make things last as long as possible and get other banks onboard in blocking such wires, slowly strangling plaintiffs. More than anything, the complaint didn’t mention any legal precedent or basis for forcing Wells Fargo to process wires, and that might be difficult to do in the future because of the way things work in the US.