Mt. Gox CEO Mark Karpeles Pleads Not Guilty As Trial Opens
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The French-born 32-year-old former head Mt. Gox, once the world’s biggest Bitcoin exchange, faces embezzlement and data manipulation charges owing to the loss of 650,000 Bitcoins.
Case Overview and Ramifications
Mark Karpeles appeared at the Tokyo District Court to face trial for his arrest in August 2015 by the Japanese Police. Although he was later released on bail, he now faces imprisonment for up to 5 years, or a fine of up to $4000 (500,000 Yen) if found guilty of the charges.
Karpeles declared himself innocent and attributed the missing Bitcoins to the work of “outside” hackers:
As the person responsible for Mt. Gox I must recover the stolen Bitcoins. To do so, I must figure out how they leaked out and where they went.
Numerous people who lost their money due to Mt. Gox’s failure are waiting for an explanation and a favorable outcome from the trial.
A Look at Both Sides of the Case
Apart from the disappearance of $460 million worth of Bitcoins, the other major point of contention was the additional $27.4 million missing from the now defunct company’s bank accounts. There was a $3 million transfer from a customer account to his own account during the final quarter of 2013. This is in addition to charges accusing Karpeles of manipulating the Mt. Gox computer system to increase the balance in an account in his name.
While prosecution paints a picture of embezzlement, the defense argues that this was done by an automated software called “Willy Bot” in order to save the bankrupted exchange in the face of its rising debts. The defense also contends that the funds transferred were actually Mt. Gox’s revenue and did not belong to customers.
Karpeles hopes to use the recovery of 200,000 bitcoins from an old, forgotten wallet (the original missing count was 850,000) as leverage and evidence for what he calls “software security flaws”.
Impact of Mt. Gox’s Failure
Mt. Gox’s debacle turned out to be a turning point in the history of the virtual currencies in many ways. Never before had authorities dealt with Bitcoin-related crimes; Bitcoins were not issued by the government which had little to no knowledge about their trading and underlying technologies. This incident left a major dent in the image of digital currencies – or cryptocurrencies – and seemed like it would push risk-averse investors and corporations further away from this new technology.
The failure of one of the biggest cryptocurrency exchanges made Japan ponder over its lack of virtual currency laws. Prompted by a local push to license such digital currency exchanges, Japan has enforced various new laws to regulate Bitcoins and other cryptocurrencies.
In an effort to stimulate the economy, Japan became the first country ever to have regulations at the national level for virtual currency exchanges. Australia followed in Japan’s footsteps to regulate and protect Bitcoins shortly thereafter.
Although such incidents are not the best for building public trust and security for virtual currencies, they are bound to happen with such a new and unprecedented form of financial technology. It is more important to learn lessons from them in order to build case studies and prevent further abuse/misuse. Belief in the technology and community is paramount to any long-term sustainability and stability for these virtual currencies.
Even the slightest bit of negative news in the crypto-world can result in high short term volatility. It perhaps explains why Bitcoin seems to have slipped into a bear market. After crossing the $3000 mark just a month ago, it opened at a rather uninspiring $2372 today.
Do you think Karpeles will walk away a free man? Does this Mt. Gox incident make you skeptical about storing Bitcoins on exchanges? What do you attribute the current Bitcoin slump to? Let us know in the comments below!
Images courtesy of Twitter, CryptoCompare, Japan Times, AdobeStock