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Mark Karpeles/MtGox CEO arrested after Bitcoins disappear

http://cointelegraph.com/news/11502...tm_source=fb&utm_medium=post&utm_campaign=alx

Mark Karpeles Soon To Face Mt. Gox Criminal Fraud Charges
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Former Mt. Gox CEO Mark Karpeles has been under investigation by Japanese authorities since February of 2014 and is soon expected to face charges of fraud at Mt. Gox. A new report in Japan has been released and can be seen in its entirely (in Japanese) here. A general, but not exact translation is available here.

Mt. Gox (Magic: The Gathering Online Exchange) collapsed in spectacular fashion in February of 2014 after several months of internal mismanagement, all under the stewardship of Mark Karpeles. Ever since that time, the Metropolitan Police Department in Japan has been working on cracking this case and they look to charge Karpeles with fraud shortly.

According interviewed officials within the investigation, the former CEO of Mt. Gox looks to face legal counts related to fraudulently creating and using private electromagnetic records. These were allegedly used by Karpeles to manipulate the exchange and increase the actual balances of phony Bitcoin accounts. This would indicate that there were actually fewer btcoins than originally thought in the exchange.

The officials believe the CEO misappropriated deposited funds by covering incoming bitcoin buy orders with fake accounts. The Metropolitan Police Department may end up charging Karpeles with corporate embezzlement.

Karpeles’ stated account of the collapse has been that cyber attacks by hackers were the reason for the loss of as many as 700k bitcoins, which at the time was worth approximately US$420 million. If these new allegations are true, many of the accounts and amounts were frauds of Karpeles’ making. Now Japan looks to begin a precedent of their first-ever criminal case brought forth for potential crimes within the digital currency realm.

In April of 2014, Japan’s District Court ruled to commence bankruptcy proceedings. Then Karpeles was summoned by a US judge to appear for questioning in Dallas, Texas for a potential extradition. He has remained in Japan ever since.

At its peak, more than two-thirds of all Bitcoin transactions ran through Mt. Gox’s exchange.

 
NY Times !
http://www.nytimes.com/2015/08/02/business/dealbook/mark-karpeles-mt-gox-bitcoin-arrested.html?_r=0

TOKYO — Since the collapse last yearof Mt. Gox, the Bitcoin exchange that served as the largest hub for storing and trading the virtual currency, law enforcement officials and angry clients have been asking what happened to nearly half a billion dollars in Bitcoins that the company said had vanished from its computer systems.

On Saturday, the Japanese police arrested the head of the Tokyo-based exchange, Mark Karpeles, on suspicion that he misused the popular online financial platform he developed to illicitly add $1 million to an account under his control.

But the arrest, and the small amount of information divulged by Japanese law enforcement officials, shed little light on the larger mystery of the missing Bitcoins.

Television news footage showed officers from the Tokyo Metropolitan Police leading Mr. Karpeles, a 30-year-old French national, from his apartment early Saturday morning. In a statement, the police said they believed Mr. Karpeles had “unjustly inflated the balance” of an account held under his name, by manipulating transaction records on a system that Mt. Gox used to swap Bitcoins for dollars.

“He created false information that $1 million had been transferred into the account, when in fact it had not been,” the police said in a short statement.

The implosion of Mt. Gox, which Mr. Karpeles nurtured from humble beginnings as a platform for trading collectible cards from the game Magic: The Gathering, shook the still developing world of virtual currencies. The sophisticated encryption that makes it possible to use Bitcoin conveniently and anonymously did not, the affair seemed to show, necessarily protect it against theft, or the incompetence of one’s virtual bankers.

Before it filed for bankruptcy in February last year, Mt. Gox said 850,000 Bitcoins, mostly belonging to its clients, had been either lost or stolen by hackers, an amount worth more than $450 million at the time. The company also said it had lost $27 million in cash.

It subsequently said it recovered 200,000 of the missing Bitcoins from an overlooked part of its computer systems. With its accounting in disarray, however, it said it could not be sure what happened to the rest, or even verify exactly how many Bitcoins it had actually held to begin with.

Mr. Karpeles has apologized for “weaknesses in the system” but denied that he took any of his clients’ assets himself. On Friday night, in response to reports in the Japanese news media that he would soon be arrested, he sent instant messages to The Wall Street Journal saying the allegations made by the police were “false” and that he would “of course deny” them, The Journal reported.

Attorneys at a law firm that has represented Mr. Karpeles did not respond to calls seeking comment. Mr. Karpeles has not been formally charged. Japanese law enforcement authorities can hold suspects for several weeks before deciding whether to bring charges.

The police did not say where they thought the $1 million that they say was falsely shown in Mr. Karpeles’s account came from, or what he intended to do with it.

After the exchange’s collapse, former employees came forward to accuse Mr. Karpeles of dipping into client accounts to cover the exchange’s operating costs. The practice, they said, was common at Mt. Gox well before the mass disappearance of Bitcoins that ultimately sank it.

The Yomiuri Shimbun, Japan’s largest newspaper, citing unnamed police sources, said the money was suspected to have been siphoned from accounts held by Mt. Gox users.

In any case, the amount cited by the police represents only a tiny fraction of the value of the Bitcoins that went missing from Mt. Gox.
 
So the short version is Mark lived it all up in posh resturants and high living, spending the btc when it was only worth a few dollars, and when the price went up there was a large gap in the accounts, and of course he could never get his rather large bitcoin market position back because he would never afford it even if he had the same money to buy back in, and so had to dodge any company accounting for the next 2 years as the price and his position got worse and worse :eek:
 
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