Category Archives: Mark Karpeles

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Mt Gox Founder Guilty of Data Manipulation, No Jail Time

Mt Gox Founder Guilty of Data Manipulation, No Jail Time

Mark Karpeles, former head of the collapsed bitcoin exchange M tGox, at one time the largest Bitcoin intermediary and the world’s leading Bitcoin exchange, has been convicted by a Japanese court.

The Tokyo District Court sentenced Karparles to a suspended jail sentence of two and a half years for date manipulation for his role in the disappearance of 850,000 Bitcoins, but acquitted the French one-time-IT-engineer of the charge of embezzlement.

Mt Gox filed for bankruptcy on 28 February 2014. Some 750,000 of customers’ Bitcoin had been lost along with 100,000 BTC of the exchange’s own funds — at the time equivalent to USD 473 million. Karpeles blamed the loss on internal fraud at the time. Over a year later, he was arrested by Japanese authorities and formally indicted for embezzling customer funds by November.

Japanese prosecutors were looking for a punitive sentence of up to 10 years for Karparles, so clearly the sentence passed down would have been a disappointment to investors affected by the affair. In Karparles’s defence, the District Court judge maintained that business owners often borrow funds without clear accounting, and felt that the ex-owner had every intention of returning the funds. He added that no financial damage had been caused to the company as a result of the missing Bitcoin.

At one stage in the trial which began in 2017, Karpeles apologized to customers but stated:

“I swear to God that I am innocent.”

He claimed that he had found 200,000 bitcoins later in a cold wallet unconnected to the company’s computers. “Most people will not believe what I say. The only solution I have is to actually find the real culprits,” he told reporters at his trial hearing in July 2017.

During his time on bail, Karpeles was active on social media, criticizing Bitcoin, until raising bail of JYP 10 million in 2016, pending trial.

 

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10-Year Prison Sentence Requested for Mt Gox’s Mark Karpeles

10-Year Prison Sentence Requested for Mt Gox's Mark Karpeles

Prosecutors in the Tokyo District Court are requesting that Mark Karpeles, former CEO of defunct exchange Mt Gox, be sentenced to prison for ten years. This request occurred during the final argument of the trial; it is not a plea deal. Therefore, an official sentence will be issued soon.

There exists some misconception in the crypto space that the Karpeles got away with his alleged illicit activities during the collapse of Mt Gox. The reality is that Karpeles has been on bail since July 2016, after spending less than a year in jail. His court case continues to be active.

Karpeles is accused of embezzling JPY 340 million from Mt Gox accounts in the final four months of 2013, and using that money for business acquisitions and rent. The prosecutors specifically said: “There was no documentation of loans and there was no intention of paying back… His responsibility… is severe.” Further, they accuse Karpeles of manipulating account data to cover up the fact that the money was no longer there.

Mt Gox was the biggest Bitcoin exchange in the world when it collapsed in 2013. In total, it lost BTC 850,000 worth USD 450 million at the time, although BTC 200,000 were later found. The loss of the biggest Bitcoin exchange and funds caused a serious disruption to the entire crypto space, leading to Bitcoin’s price crashing from USD 1,100 to less than USD 200 in the following two years.

Fortunately for the customers, the drastic increase in Bitcoin’s price since the collapse of Mt Gox will ensure that they get full refunds and then some in terms of fiat, although not in terms of Bitcoin. This is because the 200,000 recovered Bitcoins are worth USD 660 million at this time. The court-appointed custodian actually cashed out a significant fraction of the Bitcoins at a much higher price earlier this year. Refunds to Mt Gox customers are expected to begin in Q1 2019.

 

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