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Economy

MtGox CEO goes on trial in Japan over missing Bitcoins

AFP | Tue,2017-07-11

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The former CEO of collapsed Bitcoin exchange MtGox goes on trial Tuesday in Tokyo over the disappearance of hundreds of millions of dollars worth of the virtual currency from its digital vaults.

Frenchman Mark Karpeles – once the high-flying head of the world's busiest Bitcoin trading platform, who reportedly lived in an 11,000-US-dollars-a-month penthouse – is facing embezzlement and data manipulation charges.

The 32-year-old was first arrested in August 2015 and released on bail nearly a year later over allegations he fraudulently manipulated data and pocketed millions worth of Bitcoins.

MtGox, which claimed it once hosted around 80% of global Bitcoin trading, shuttered in 2014 after admitting that 850,000 coins – worth around 480 million US dollars at the time – had disappeared from its vaults.

The company initially said there was a bug in the software underpinning Bitcoins that allowed hackers to pilfer them.

Karpeles later claimed he had found some 200,000 of the lost coins in a "cold wallet" – a storage device, such as a memory stick, that is not connected to other computers.

Tokyo-based MtGox filed for bankruptcy protection soon after the cyber-money went missing, leaving a trail of angry investors calling for answers and denting the virtual currency's reputation.

Karpeles, who said he is working as an IT consultant, is active on social media and has commented on issues concerning Bitcoin but not on details of his criminal case.

In the wake of the MtGox scandal, Japan passed a bill stipulating that all virtual currency exchanges must be regulated by its Financial Services Agency.

Virtual currencies are generated by complex chains of interactions among a huge network of computers around the world, and are not backed by any government or central bank, unlike traditional currencies.

Despite the demise of MtGox and concerns about security, Bitcoin and hundreds of rival digital currencies are becoming increasingly popular and accepted by merchants worldwide.

Bitcoin has seen wild volatility during its short life, soaring from just a few US cents to around 2,500 US dollars now, more than double its value just a few months ago.

Backers say virtual currencies offer an efficient and anonymous way to store and transfer funds online.

Critics argue the lack of legal framework governing the currency, the opaque way it is traded and its volatility make it dangerous.

There are also security concerns.

Bitcoin has suffered hacking incidents including one last year in which a major Hong Kong-based exchange Bitfinex suspended trading after $65 million in the virtual unit was stolen.