Defunct bitcoin exchange boss denies wrongdoing as trial opens

Mark Karpeles, the chief executive of a now-defunct bitcoin exchange, has been charged with embezzlement and data manipulation that prosecutors claim caused the loss of about $500M.

Photo by: AFP
Photo by: AFP

Mark Karpeles, former CEO of collapsed Bitcoin exchange Mt. Gox, attends a press conference after his first hearing in Tokyo on July 11, 2017.

Mark Karpeles, the chief executive of the defunct Mt. Gox, pleaded not guilty on Tuesday to charges relating to the loss of hundreds of millions of dollars worth of bitcoins and cash from what was once the world's biggest bitcoin exchange.

Karpeles, a 32-year-old French national, filed the plea in response to charges of embezzlement and data manipulation at the Tokyo District Court.

"I swear to God that I am innocent," he said in Japanese to the three-judge panel hearing his case, according to the pool report.

Mt. Gox once handled 80 percent of the world's bitcoin trades but filed for bankruptcy in 2014 after losing some 850,000 bitcoins – then worth around half a billion US dollars – and $28 million in cash from its Japanese bank accounts.

In its bankruptcy filing, Tokyo-based Mt. Gox blamed hackers for the lost bitcoins, pointing to a software security flaw.

Mt. Gox subsequently said it had found 200,000 of the missing bitcoins.

Karpeles was indicted for transferring 341 million yen ($3 million) from a Mt. Gox account holding customer funds to an account in his name during September to December 2013.

He also allegedly boosted the balance of an account in his name in Mt. Gox's trading system.

Karpeles' defence had told a pre-trial consultation that the remittance was within the scope of the firm's revenue and not the embezzlement of customer funds, the Nikkei Business Daily reported on Tuesday.

Regulation of exchanges

The collapse of Mt. Gox represented a major setback for bitcoin and badly damaged the image of virtual currencies, particularly among risk-averse Japanese investors and corporations.

But the bankruptcy also prompted Japan's government to decide how to treat bitcoin, and preceded a push by local regulators to licence virtual currency exchanges.

Japan this year became the first country to regulate exchanges at the national level, part of a government effort to exploit financial technology as a means of stimulating the economy.

Interest in bitcoin among Japan's legions of individual investors – encouraged by Tokyo's recognition of the virtual currency as legal tender –  has spiked in recent months.

Still, institutional investors remain wary, say those running virtual currency exchanges in Tokyo.

The value of bitcoin is highly volatile. It hit a record high of $2,980 last month.

Source: 
TRTWorld, Reuters