Former Mt. Gox CEO Charged With Embezzlement

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The Mt. Gox and Mark Karpeles are in news again. Those who had been following the Mt. Gox saga wouldn’t be surprised to know that after nearly six weeks of his arrest, Mark Karpeles, former CEO of the bitcoin exchange, have been charged with embezzlement.

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Mt. Gox has been embroiled in speculation and controversy since its bankruptcy in early 2014. The New York office of the U.S. Attorney General reportedly issued a subpoena for determining factuality of the missing funds reports. Investigators have been trying to ascertain the whereabouts of millions of dollars and the reason for their disappearance. Also, Japanese prosecutors launched a special investigation into Mt. Gox, which resulted in the arrest and now framing of charges against Karpeles.

Alleged crime of Karpeles

MtGoxAs reported by Japan’s Kyodo News, Karpeles is suspected of moving money into his own company’s accounts from the accounts of his clients. Allegedly, he transferred the money from Gox’s bank account to other accounts in October 2013. The total amount transferred is around $2.7 million.

Apparently, he used most of the money for buying licenses for 3D-rendering software. However, some of the money was also spent on a highly expensive “custom-built bed.” Karpeles had denied any wrongdoing at his company before he was arrested in August. According to him, he did everything to prevent any wrongdoing but it still happened. He blamed hackers for the loss of bitcoins and the eventual collapse of Mt. Gox.

Although this is the first time Karpeles has been charged for a financial crime, he had been a suspect in a cybercrime before. In Feb, 2014, the Department of Homeland Security (DHS) special agent Jared Deryeghiayan disclosed that during 2012 and 2013 Karpeles was pursued as a suspected operator and owner of the Silk Road. At that time, Mark Karpeles was the CEO of Mt. Gox and the Silk Road was a massive online drug market.

Bitcoin bubble and Mt. Gox bankruptcy

BitcoinThe tech industry was captivated by the bitcoin bubble in late 2013 to early 2014. Over the period of two months the price of bitcoin rallied from nearly $118 to around $1000. Several rags to riches stories emerged, and many more people started getting interested in the quick earnings that bitcoin seemed to offer.

During this time, Mt. Gox emerged as the largest bitcoin exchange in the world. Therefore, becoming one of the most visible sign of the bitcoin bubble. Until it filed for bankruptcy citing losses of tens of millions of dollars.

Experts believe that the lack of control and regulation in the bitcoin market makes it a highly risky investment. However, Mt. Gox claimed that it fell into bankruptcy because more than $450 million disappeared. They alleged that the money was stolen by hackers. However, investigators found that another $2.7 million were absent from the company’s bank account, for which its CEO Mark Karpeles was arrested.

Conclusion

Karpeles is still in the custody of Japanese authorities, and he has the right to file for “release pending trial” petition in the court. Whether he exercises this right or not remains to be seen. Although complete details of the prosecution’s case are not yet known, the odds are stacked against Karpeles as the conviction rate in Japan is nearly 99 percent. In the Silk Road investigation, Mark Karpeles came out clean. Let us see whether Karpeles can come out clean of this case as he came out of the Silk Road investigation.

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