Mt Gox CEO de­nies em­bez­zling mil­lions of dol­lars of bit­coins

Kuwait Times - - BUSINESS -

The head of the failed Ja­pan­based bit­coin ex­change Mt. Gox pleaded not guilty Tues­day to charges of em­bez­zle­ment and data ma­nip­u­la­tion. France­born Mark Karpe­les said he had tried to save the bankrupted ex­change by us­ing a kind of au­to­mated com­puter soft­ware called a “Willy bot,” also de­scribed as an “obli­ga­tion ex­change,” to help cover its ris­ing debts by push­ing bit­coin val­ues higher. “I am in­no­cent of all the charges,” he said. “I did not in any way dis­hon­estly ma­nip­u­late data or mis­use the cus­tomers’ money,” he said.

Mt. Gox shut down in Fe­bru­ary 2014, say­ing it had gone bank­rupt af­ter los­ing about 850,000 bit­coins, pos­si­bly to hack­ers. Speak­ing af­ter the hear­ing, Karpe­les said he was not guilty and that he was still an­a­lyz­ing data, try­ing to track down the miss­ing bit­coins. He said the main cause of the bank­ruptcy was “hack­ing of bit­coins by out­siders.” “As the per­son re­spon­si­ble for Mt. Gox I must re­cover the stolen bit­coins. To do so, I must fig­ure out how they leaked out and where they went,” Karpe­les said.

The “Willy bot” trans­ac­tions were le­gal, he said, and in­tended to save the com­pany. “I faith­fully per­formed those obli­ga­tion ex­changes, but not for my own per­sonal profit,” he said. Karpe­les was ar­rested in Au­gust 2015 and re­leased last year. If found guilty of em­bez­zle­ment, he could face up to five years in prison, or a fine of up to 500,000 yen ($4,000).

Stunned com­mu­nity

Pros­e­cu­tors have ar­gued that money Karpe­les ob­tained from Mt Gox was the prop­erty of the cus­tomers. Karpe­les and his de­fense team contend that the funds were rev­enues of Mt Gox. Peo­ple af­fected by Mt. Gox’s fail­ure are still try­ing to get back funds they lost and are hop­ing the trial will help ex­plain what hap­pened. Mt Gox was one of the world’s big­gest bit­coin ex­changes and its fail­ure stunned dig­i­tal cur­rency com­mu­nity. Crit­ics said the de­ba­cle high­lighted the risks of bit­coin trans­ac­tions, while bit­coin pro­po­nents con­tended Mt. Gox was just an ex­cep­tion. The case has posed a chal­lenge for author­i­ties un­fa­mil­iar with dig­i­tal cur­ren­cies and the tech­nolo­gies in­volved in their cre­ation and trad­ing.

Ja­pan has en­acted new laws to reg­u­late bit­coins and other cryp­tocur­ren­cies, whose use has been rapidly ex­pand­ing. One of the coun­try’s big­gest elec­tron­ics re­tail­ers, Bic Cam­era, has be­gun al­low­ing bit­coin pay­ments at its out­lets. The govern­ment also has spelled out reg­u­la­tions to help pre­vent mis­use of bit­coins and other vir­tual cur­ren­cies for ter­ror­ism or other il­le­gal ac­tiv­i­ties, in­clud­ing re­quir­ing banks and other busi­nesses to ver­ify iden­ti­ties, keep records and re­port sus­pi­cious trans­ac­tions. The reg­u­la­tions im­ple­mented in April re­quire vir­tual cur­rency traders to keep cus­tomers’ as­sets sep­a­rate from their own, partly be­cause of the losses suf­fered in the Mt Gox bank­ruptcy. — AP

TOKYO: French na­tional Mark Karpe­les (C), for­mer CEO of col­lapsed Bit­coin ex­change MtGox, bows with his lawyers at the end of a press con­fer­ence held af­ter his first hear­ing. — AFP

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