Karpeles Accused of Misappropriating ¥1.1 Billion in Deposits

Former MtGox CEO Mark Karpeles is facing fresh allegations of misusing customer funds following his arrest on Saturday.

Former MtGox CEO Mark Karpeles is facing fresh allegations of misusing customer funds following his arrest on Saturday.

Police now suspect that he funneled ¥1.1 billion ($8.9 million) in deposits for personal use and to other businesses he operates, according to The Japan Times. Police sources indicated that he will likely face further charges.

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MtGox collapsed in February 2014, taking with it an estimated 850,000 bitcoins, worth roughly $450 million at the time. It was a subsidiary Karpeles-owned Tibanne Co., the parent of several of his other businesses. Even after the exchange’s collapse, Karpeles reportedly engaged in Virtual Private Server (VPS) and VOIP (Voice over IP) services. The existence of other operations and the movement of assets between them and the bankrupt MtGox entity has complicated liquidation proceedings.

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Shortly after the collapse, Karpeles was accused of using client funds to cover business costs. One notorious example was Bitcoin Café, Karpeles’ crown jewel. It was reportedly styled as a French Bistro at the bottom of the building housing MtGox’s offices, and was to have a cash register retrofitted by Karpeles to accept bitcoin payments.

Saturday’s arrest was on suspicion that he had artificially inflated account balances by $1 million, though he has not yet been formally charged.

Karpeles has reportedly admitted to tweaking balances, but he said the tweaks were “in the range of several thousand yen or several tens of thousands of yen, because it was a test” for trading with a customer.

It is not yet known if the allegations directly tie into the disappearance of the 850,000 bitcoins. Karpeles denies all charges and claims that external hackers were responsible for the loss of funds. A police report from late 2014 suggested it was an inside job.

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