Mark Karpeles, Former CEO of collapsed Mt.Gox bitcoin exchange arrested in Japan: reports

Arrested: Mark Kapeles the former head of defunct bitcoin exchange Mt. Gox, was arrested on Saturday

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  • Mark Karpeles was filmed being led into a police car in Tokyo on Saturday 
  • Suspected of falsifying data on the outstanding balance of the exchange
  • Karpeles denies wrongdoing, but could be facing five years in jail

 

The former head of a collapsed Bitcoin exchange has been arrested in connection with the disappearance of hundreds of millions of dollars of the virtual currency.  

Mark Karpeles, the former head of defunct Bitcoin exchange Mt. Gox, was arrested on Saturday in Tokyo, Japanese media reports have said.

The French-born Karpeles, 30, is suspected of falsifying data on the outstanding balance of the exchange, at one point the world's largest hub for trading the digital currency. 

 

Police were unable to immediately confirm the reports, but footage on local television showed the former chief executive being led away from his home and into a police car, with a baseball cap pulled low across his face.

If found guilty, the France-born Karpeles could face up to five years in prison, or a fine of up to 500,000 yen ($4,000).

Karpeles' lawyer said his client denies wrongdoing, the Kyodo News agency reported. 

Mt Gox  said 750,000 customer Bitcoins and another 100,000 belonging to the exchange were stolen due to a software security flaw when it filed for bankruptcy in February 2014.

Denial: Police (pictured leaving the former bitcoin exchange head's home) are understood to have arrested Karpeles at his Tokyo home. He denies wrongdoing in the case which officials have admitted baffles them

Denial: Police (pictured leaving the former bitcoin exchange head's home) are understood to have arrested Karpeles at his Tokyo home. He denies wrongdoing in the case which officials have admitted baffles them

The lost funds represented the equivalent of £307million ($480million) at the time of the bankruptcy filing. 

Mt. Gox also said more than £17million ($27million) was missing from its Japanese bank accounts. 

WHAT IS BITCOIN? 

Bitcoin is a distributed peer-to-peer digital currency that functions without any central authority, such as the Bank of England.

The currency was launched in 2009 and is traded within a global network of computers.

Bitcoins can be bought with near anonymity, which supporters say lowers fraud risk and increases privacy.

But critics say that also makes Bitcoins a magnet for drug transactions, money-laundering and other illegal activities.

Karpeles, who had blamed hackers for the disappearance, later said he had recovered 200,000 of the lost Bitcoins. 

The relationship between the lost Bitcoins and the inflated account was not immediately clear. 

Known as a self-proclaimed geek who said he was uncomfortable in his native France and hadn't been back in years, Karpeles became interested in Bitcoin when a customer of his web-hosting services wanted to pay in the virtual currency.

Mt. Gox subsequently shot from obscurity to dominate global trade in Bitcoin, but as early as 2012 employees at the Tokyo-based exchange challenged Karpeles on issues such as whether client money was being used to cover costs.

Japanese authorities have previously acknowledged they were baffled by the Mt. Gox case because they had never dealt with possible crime dealing with Bitcoin. Experts also said it might be difficult to take action because of the absence of laws over virtual currencies. 

BITCOIN: THE HIGHS - AND THE LOWS 

January 2009: Officially launches - but the value of a Bitcoin is virtually nothing

July 2010: Mt Gox (Bitcoin currency exchange) is launched in Tokyo 

January 2011: One Bitcoin is the equivalent to $1

March 2011: Karpeles buys Mt Gox from founder Jed McCaleb

December 2011: One Bitcoin is the equivalent to $2 

December 2012: One Bitcoin is worth $13

December 2013: Bitcoin is briefly worth $1,000 - and rebounds to $1,000 again in January

February 2014: Mt Gox ceases trading and files for bankruptcy

March 2014: Mt Gox announces it has found 200,000 Bitcoins ($115million) 

April 2014: Karpeles refuses to attend a bankruptcy hearing in Texas, USA 

April 2014: Worth drops to just $340 a Bitcoin

August 2015: One Bitcoin worth $277.82 

August 2015:  Mark Karpeles is arrested by police in Tokyo

 

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Larry White
By Larry White 01/08/2015 11:48:00