The CEO of failed Bitcoin exchange company Mt.Gox has been arrested by the Japanese police and is currently being held in connection with the loss of bitcoins worth $387 million.
Mark Karpelès, former founder and CEO of Japanese-based bitcoin exchange Mt.Gox, once the biggest bitcoin exchange in the world has been arrested in Japan by the country’s police on suspicion on inflating his account by a million dollars.
Japanese police arrested Karpelès, 30, alleging that he manipulated the collapsed company’s computer systems in February 2013 to increase the cash balance in an account owned by him.
Mt.Gox, A Tumultuous Past
Japanese bitcoin exchange Mt.Gox, based out of Tokyo was once the world’s largest exchange platform for virtual currency Bitcoin in terms of trading volume. Mt.Gox went offline early last year after filing for bankruptcy in February 2014 after claiming that the company had lost 750,000 of its customers’ bitcoins besides 100,000 of its own. At the time, this accumulated to nearly $500 million. A month later in March, the company then said it found 200,000 lost bitcoins, worth around $116 million – in an old digital wallet that was formed in 2011.
It is still unclear as to how much Karpelès allegedly lost due to mismanagement or took due to personal greed, but police in Japan claim that he Mt.Gox lost $387 million under his management.
Karpelès hasn’t been formally charged yet while being held in Japan. Suspects can be detained in Japan for up to 23 days without a formal charge. Even the possibility of bail is null and void for the duration. He has been detained since Saturday. In messages to The Wall Street Journal on Friday, Karpelès sent instant messages about the “false” allegations and confirmed that he would “of course deny” them.
Mt.Gox, The Fall
A man claiming to be Ashley Barr, a former employee at Mt.Gox wrote a Reddit post claiming credit for helping Japanese police with the arrest of Karpelès.
I was hired by Mark in June 2011 to help him handle the crazy inbox at Mt.Gox during bitcoin’s initial rally. In January 2012, I was asked to become Mt.Gox’s CEO, a process which led to my dismissal in May 2012. My statement along with other ex-employees have led the Tokyo Metro Police’s arrest on embezzlement and ‘illegal manipulation of accounting.’
Among revealing other details, he concluded by adding:
The expenditures far exceeded every model we had for income… Around the same time, we learned that Mark only had one bank account, shared with Mt.Gox’s customer deposits. That was the nail in the coffin.
Proponents of Bitcoin have long argued that Mt.Gox is an exception as vehement opponents insist that the virtual currency needs to be regulated. Currently, New York has already issued rules that are pinned to oversee Bitcoin. California is also working to regulate businesses that deal and trade in Bitcoin.
Image from Twitter Shutterstock.