MtGox CEO goes on trial over missing Bitcoins

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TOKYO: Mark Karpeles, the former CEO of collapsed Bitcoin exchange MtGox, went on trial in Tokyo on Tuesday over the disappearance of hundreds of millions of dollars worth of the virtual currency from its digital vaults.

The French national — once the high-flying head of the world’s busiest Bitcoin trading platform, who reportedly lived in an $11,000-a-month penthouse — is facing embezzlement and data manipulation charges.

The 32-year-old was first arrested in August 2015 and released on bail nearly a year later over allegations he fraudulently manipulated data and pocketed millions worth of Bitcoins — a disappearance that hammered the digital currency’s reputation.

On Tuesday, it took nearly half an hour for the indictment against him to be read aloud in a Tokyo courtroom.


Karpeles is alleged to have repeatedly manipulated computer data between 2013 and 2015 to “cover personal expenses” in a breach of his obligations as CEO, the court heard.

Among those expenses, Karpeles transferred some 6.0 million yen ($52,500) to his own bank account to pay for a canopy bed, court heard.

“I swear to God that I am innocent,” Karpeles, speaking in Japanese, told the three-judge panel hearing his case.

“The bankruptcy of MtGox caused a lot of damage for many and, as its CEO at the time, I apologise from the bottom of my heart.”

The Tokyo-based exchange, which claimed it once hosted around 80 percent of global Bitcoin trading, shuttered in 2014 after admitting that 850,000 coins — worth around $480 million at the time — had disappeared from its vaults.

The company initially said there was a bug in the software underpinning Bitcoins that allowed hackers to pilfer them.

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

‘Hacking attack’

The one-time MtGox CEO, dressed in a dark suit and tie, repeated the hacking claims Tuesday.

“The main reason for the Bitcoins’ disappearance was an external hacking attack,” he told his trial.

MtGox filed for bankruptcy protection soon after the cyber-money went missing, leaving a trail of angry investors calling for answers and denting the virtual currency’s reputation.

“The charges may not cover all the things which have been happening at MtGox, so it is really just a question of waiting to see how deep the questions go,” Kolin Burges, a British investor who lost several hundred Bitcoins in the MtGox collapse, said outside court Tuesday.

Karpeles, who said he is working as an IT engineer, is active on social media and has commented on issues concerning Bitcoin but not on details of his criminal case.

In the wake of the MtGox scandal, Japan passed a bill stipulating that all virtual currency exchanges must be regulated by its Financial Services Agency.

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

Despite the demise of MtGox and concerns about security, Bitcoin and hundreds of rival digital currencies are becoming increasingly popular and accepted by merchants worldwide.

Bitcoin has seen wild volatility during its short life, soaring from just a few US cents to around $2,500 now, more than double its value just a few months ago.

Backers say virtual currencies offer an efficient and anonymous way to store and transfer funds online.

Critics argue the lack of a legal framework governing the currency, the opaque way it is traded and its volatility make it dangerous.

There are also security concerns.

Bitcoin has suffered hacking incidents including one last year in which a major Hong Kong-based exchange Bitfinex suspended trading after $65 million in the virtual unit was stolen.

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