Mt. Gox Bit­coin CEO ‘mis­used cus­tomer funds’ of US$8.9 mil., says Ja­panese media

The China Post - - BUSINESS -

Mark Karpe­les, the head of the col­lapsed Mt. Gox Bit­coin ex­change who was ar­rested in Tokyo, is fac­ing fresh al­le­ga­tions that he mis­used US$8.9 mil­lion in cus­tomers’ de­posits, Ja­panese media re­ported Sun­day.

French-born Karpe­les, 30, was ar­rested on Satur­day af­ter a se­ries of fraud al­le­ga­tions led to the Tokyo-based ex­change’s spec­tac­u­lar col­lapse last year and ham­mered the dig­i­tal cur­rency’s rep­u­ta­tion.

Karpe­les is sus­pected of ma­nip­u­lat­ing data on the ex­change’s com­puter sys­tem in 2013 to ar­ti­fi­cially cre­ate about US$1.0 mil­lion in Bit­coins, while po­lice were also in­ves­ti­gat­ing his pos­si­ble in­volve­ment in a mas­sive loss of the vir­tual cur­rency in 2014.

He was sent to the Tokyo Dis­trict Public Pros­e­cu­tors’ Of­fice Sun­day morn­ing for fur­ther ques­tion­ing, public broad­caster NHK said.

Po­lice now sus­pect that he il­le­gally spent cus­tomer de­posits worth about 1.1 bil­lion yen (US$8.9 mil­lion), ac­cord­ing to NHK and the best- selling Yomi­uri news­pa­per.

He is sus­pected of mis­us­ing the funds pri­vately and send­ing them to his other firms, the news re­ports said.

Po­lice are ex­pected to re­ar­rest him on sus­pi­cion of pro­fes­sional em­bez­zle­ment over the sus­pected mis­use of funds, the Yomi­uri said, quot­ing po­lice sources.

Un­der the Ja­panese crim­i­nal jus­tice sys­tem, po­lice can hold a sus­pect with­out charge for up to three weeks, dur­ing which time they may carry out vig­or­ous in­ter­ro­ga­tions in an at­tempt to ex­tract a con­fes­sion.

Karpe­les re­port­edly de­nied all al­le­ga­tions. Im­me­di­ate com­ments from his lawyers were not avail­able.

The global vir­tual cur­rency com­mu­nity was shaken by the shut­ter­ing of Mt. Gox, which froze with­drawals in early 2014 be­cause of what the firm said was a bug in the soft­ware un­der­pin­ning Bit­coins that al­lowed hack­ers to pil­fer them.

The Mt. Gox ex­change — which once boasted of han­dling around 80 per­cent of global Bit­coin trans­ac­tions — filed for bank­ruptcy pro­tec­tion soon af­ter the cy­ber-money went miss­ing, ad­mit­ting it had lost 850,000 coins worth 48 bil­lion yen (US$387 mil­lion). They were worth about US$480 mil­lion at the time of the dis­ap­pear­ance.

Karpe­les later said he had found some 200,000 of the lost Bit­coins in a “cold wal­let” — a stor­age de­vice such as a mem­ory stick that is not con­nected to other com­put­ers.

Ja­panese media, cit­ing po­lice, have said in­ves­ti­ga­tors sus­pect Karpe­les knew de­tails about the miss­ing Bit­coins — which were trans­ferred by his ex­change to a sep­a­rate ac­count — with­out no­ti­fy­ing de­pos­i­tors.

Bit­coins are gen­er­ated by com­plex chains of in­ter­ac­tions among a huge net­work of com­put­ers around the planet and are not backed by any gov­ern­ment or cen­tral bank, un­like tra­di­tional cur­ren­cies.

In­vestors have de­manded an­swers from Karpe­les and called on the firm’s court-ap­pointed ad­min­is­tra­tors to pub­li­cize its data so that hack­ers around the world can help an­a­lyse what hap­pened at Mt. Gox.

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