Former Mt. Gox CEO Charged With Embezzlement

ANNOUNCEMENT: Since the Silk Road 2.0 bust by the feds a few other Darknet Markets have fallen. Silk Road 3 is up and running with a big selection of goods.

>> Click here to find the Silk Road 3 Guide <<

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.

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.

Read More

Mt. Gox – $400 Million Bitcoin Theft Scandal

Something mysterious just recently happened to one of the most prominent names in the world of Bitcoin; Mt. Gox apparently vanished in thin air like a phantom. A document was leaked regarding the matter, claiming the disappearance of 744,000 customer Bitcoins along with it. Today’s Bitcoin community continues to reel and is still trying to find out what exactly happened. The accusations, rants, and conspiracy theories have only just begun. One thing is for sure, though, this serves as a wake up call for anybody who thought that Bitcoin will have an easy road to general acceptance.

Mt Gox Logo
Tokyo-based Mt. Gox started as Magic: The Gathering card exchange site. As the ardor over Bitcoin had started spreading around the middle part of 2010, the site eventually rebranded to be Bitcoin trade, one of the forerunners of the service. Mt. Gox served as a get-in-the-middle fro those who wanted to magically transform their Bitcoins into much more liquid currencies such as yen or dollars. Also, it had its very own custom wallet software which enabled users to easily manage their Bitcoins over the cloud. Based on the leaked document, this was where things began crumbling off.

The cracks began emerging the early part of this month right when Mt. Gox decided to suspend withdrawals with the claim of serious flaws regarding how Bitcoin protocol confirms transactions. Mt. Gox mentioned that it was very much possible to essentially have a Bitcoin re-spent simply by renaming the whole transaction just before it becamed synced toward the block chain (which means after it received verification.) The Bitcoin Foundation speedily contradicted Mt. Gox to point out that Bitcoin was never really at fault. The thing they so-call “transaction malleability” issues was known. However, it didn’t get enough attention to be considered as a noteworthy problem. The Bitcoin Foundation then scapegoated Mt. Gox’s utterly-customized wallet software for having compounded the bug. Ultimately, this might have been the only thread that led to the unraveling of Mt. Gox when pulled.

Mt Gox Got Robbed

Due to the faulty tracking of the software, Mt. Gox did not really hold the Bitcoins it thought to have. The stolen ones were steadily siphoned off straight from the hot wallet of Mt. Gox — the coins put to use in order to proceed with transactions. Many believe that most of Mt. Gox’s funds were in cold storage when they were all safe from the whole transaction malleability perforation. The leaked documentation claims that cold storage got wiped out, too, which simply means Mt. Gox was automatically transferring coins into the wallet as required.

The ascertainment of the leaked information’s validity will remain at hold until someone directly from Mt. Gox provides udpates, which actually makes the current situation sound worse all the more. Mt. Gox’s wallet software drawbacks prove to be severe with the 744,408 Bitcoins stolen through the course of numerous years. For now, Mt. Gox has decided to suspend operations causing the site users to cultivate a skeptical outlook, doubting that they will ever retrieve their precious Bitcoins. Virtual currencies indeed hold a vast range of appallingly negative contingencies.

Read More