Bitcoin exchange head arrested over missing $390 million

Bitcoin exchange head arrested over missing $390 million

Founder and former head of collapsed bitcoin exchange Mt Gox, Mark Karpelès, has been arrested over the disappearance of digital currency worth nearly $390 million.

After being arrested in Japan, Karpelès will be questioned about the loss of money as there are suspicions arising that he added $1 million to his account in February 2013 by making the system memorise false transaction records, according to the Financial Times.

The Tokyo metropolitan police believe that Karpelès believe this to be true. “He created false information that $1m had been transferred into the account even though there was no such fact,” as quoted in the FT.

Alongside this, an investigation is taking place into how Karpelès was involved when millions of dollars were lost when the exchange collapsed last year. Despite denying any wrongdoing, the Guardian also revealed that if found guilty, Karpeles would face a 500,000 yen fine and five years in prison.

When what the FT calls “the world’s biggest bitcoin exchange”, Mt Gox, went bankrupt in 2014, the company also claimed that 850,000 bitcoins valued at $500 million owned by the exchange and customers were stolen because of a security flaw.

Around the world, creditors, cyber specialists and law enforcement agencies are requesting for more information about what happened when the company collapsed, which could be the greatest hacking robbery in the digital industry, as the FT reports. Although, due to a lack of virtual currency laws in Japan, crimes are difficult to identify.

The first employee that Karpelès hired, Ashley Barr, has used discussion board Reddit to disclose that his boss spent company money lavishly. “I felt Mt Gox was an RPG to Mark, as he didn’t quite grasp the reality that the money being in deposited into his bank account meant more to other people than just numbers on his screen,” Barr said. As well as this, the company and Karpelès’ personal account were the same.

Kim Nilsson, chief engineer at consultancy WizSec highlighted that the disappearance must have occurred over a number of years but the way the company operated was a high security risk. Regardless of this, Nilsson hoped that the Mt Gox investigation would not end in prosecution, but the company has the potential to represent a new genre of cyber-crime.

 

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