bitcoin

Mark Karpelès, CEO of failed Mt. Gox bitcoin exchange, pleads not guilty to embezzlement charges

Mark Karpelès, the CEO of former bitcoin exchange Mt. Gox, is standing trial in Tokyo, Japan. He faces charges relating to the disappearance of hundreds of millions of dollars-worth of the virtual currency, which went missing shortly before the company’s bankruptcy.

Mt. Gox was launched in July 2010 and by 2013 it had become the largest bitcoin exchange in the world. At its height, it was handling 80 per cent of all transactions in the cryptocurrency.

The company filed for bankruptcy in 2014, after losing 850,000 bitcoins and $28 million (£22 million) in cash. At the time, the bitcoins were worth approximately $450 million (£350 million). The majority of the bitcoins belonged to its customers.

Although the reasons for the disappearance were unclear, Mt. Gox blamed the lost currency on hackers exploiting a security flaw in its software. Subsequently, 200,000 of the missing bitcoins were “found”.

French-born Mark Karpelès, CEO of the now-defunct exchange, was arrested in 2015 and released on bail last year.

Since his arrest, M. Karpelès insisted that he is innocent of any wrongdoing. As his trial opened at the Tokyo District Court, he pleaded not guilty to charges of embezzlement and data manipulation relating to the disappearance of the bitcoins and cash from the exchange.

According to prosecutors, M. Karpelès transferred 340 million yen (£2.3 million) from an account intended for managing customers’ funds to an external account in 2013, inflating the balance of the external account through the “improper operation” of Mt. Gox’s exchange system.

Karpelès argues that he had remitted revenue belonging to the company, rather than customers’ funds. The increased balance, his defence said, was a result of standard, legal exchanges in bitcoin and cash.

The collapse of the exchange was a significant setback for bitcoin and other virtual currencies, cementing their reputation as risky investments. This year, Japan became the first country to regulate cryptocurrency exchanges at the national level, in order to exploit financial technology (“fintech”) for the benefit of its economy.

The regulations also aim to prevent abuse of cryptocurrency for illegal activities, and require banks and other businesses to run checks on identities, report suspicious transactions and retain a separation between customers’ assets and their own.

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