Head of bitcoin exchange Mt. Gox arrested in Tokyo over the weekend suspected of using customer funds to inflate his own cash account by $1.
Mark Karpeles, 30, is head of the failed Japan-based bitcoin company and was taken into custody after suspicions of his accessing the exchange’s computer system in 2013 surfaced. According to Japanese police, he had used the funds to inflate his own account.
If Karpeles is found guilty he will face up to five years in prison or a fine up to 500,000 yet ($4,000), according to Mashable.
France-born Karpeles’ lawyer said that he denies the accusation.
The company, Mt. Gox, went offline in 2014. At that time, Karpeles claimed that tens of thousands of bitcoins equaling several hundred million dollars was unaccounted for in which he suggested that they were all stolen by hackers.
At the time this incident occurred, the details were unclear and the link between the lost bitcoins and Karpeles’ inflated bank account was fully examined.
Japanese authorities say they were baffled by the situation because there had never been any crimes previously related to bitcoins. Due to the fact there is zero precedence in this type of case, experts are worried that proper action may not be taken.
At this time, there is a complete absence of laws over virtual currencies.
A former employee of Mt. Gox, Ashley Barr, took to the Reddit platform claiming that Karpeles had stolen the currency for himself and asked for the support of the Japanese police to arrest him.
In Barr’s statement, he wrote, “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.'”
He added, “The expenditures far exceeded every model we had for income. I confronted Mark about it, told him I couldn’t take the role if he couldn’t explain this gross incompetence in spending (he was also asking employees other than myself to find investors…something impossible without knowing the financial status of the company). 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. We learned that Mark only had one bank account, shared with Mt.Gox’s customer deposits. That was the nail in the coffin.”
Now that the information and arrest are public, previous bitcoin users across the globe have been outraged by the company’s incompetence.
Bitcoins are not regulated by central banks or other financial authorities, but legislation in underway in California as well as New York to regulate businesses that partake in bitcoin and other virtual currency.