Mark Karpeles, former head of the collapsed bitcoin exchange MtGox, has got a suspended sentence of two and a half years Photo: AFP/File
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The former high-flying head of collapsed bitcoin exchange MtGox will learn his fate Friday as a Tokyo court hands down its verdict on charges of faking digital data and embezzling millions of dollars.

Prosecutors have called for a 10-year jail sentence for French-born Mark Karpeles, 33, who denies the charges.

Karpeles is alleged to have repeatedly manipulated computer data over several years while embezzling a total of 341 million yen ($3 million) of clients' money deposited at the company.

Prosecutors claim he splashed the embezzled money on a 3D-printing software business unnecessary for MtGox, as well as on personal expenses, including some six million yen ($54,000) for a canopy bed.

He also spent millions of yen on arranging overseas trips for his estranged wife, as well as utility bills and cleaning services at his luxury apartment that he reportedly rented for 1.1 million yen per month, prosecutors allege.

MtGox was shut down in 2014 after 850,000 bitcoins (worth half a billion dollars at that time) disappeared from its virtual vaults, a mystery that remains unsolved.

The disappearance left a trail of angry investors, rocked the virtual currency community, and dented confidence in the security of bitcoin.

At one point, MtGox claimed to be handling around 80 percent of all global bitcoin transactions.

The spectacular failure of the exchange caused a dramatic slump in the value of bitcoin but the cryptocurrency rallied to an all-time high of near $20,000 in December 2017 before dropping off sharply.

It is currently trading at around $3,900.

Japan issued new regulations after the MtGox case, but the exchange Coincheck was forced last year to refund customers more than $440 million in virtual currency that disappeared from its holdings.

During the trial, Karpeles apologized to customers for the company's bankruptcy but denied both data falsification and embezzlement.

"I swear to God that I am innocent," Karpeles, speaking in Japanese, told the three-judge panel hearing when his trial opened.

Karpeles has said the bitcoins were lost due to an external "hacking attack" and later claimed he had found some 200,000 coins in a "cold wallet" -- a storage device not connected to other computers.

"Most people will not believe what I say. The only solution I have is to actually find the real culprits," he told reporters after the hearing.

The charges against the former CEO are not directly related to how the MtGox losses came about.

Satoshi Mihira, chief attorney at Mizuho Chuo law firm, said: "If it was an outside hacker who stole the currency, it's a problem. But if he stole even part of the money, it would be embezzlement."

"His defense counsel needs a high level of evidence to win an innocent verdict," he told AFP.

"If he's found guilty, it is possible he will get a jail term considering the significant money losses (suffered by customers)," said the lawyer, an expert on cryptocurrency issues.

The odds are stacked against Karpeles as the vast majority of cases that come to trial in Japan end in a conviction.

The Frenchman was first arrested in August 2015 and, in an echo of another high-profile case against former Nissan chief and compatriot Carlos Ghosn, was re-arrested several times on different charges.

Karpeles eventually won bail in July 2016 -- nearly a year after his arrest -- reportedly paying 10 million yen to secure his freedom pending a trial, which began in July 2017.

During his time on bail, Karpeles has been active on social media -- notably voicing doubts about bitcoin and replying to some media questions about conditions in Japanese detention centers.

However, he has largely avoided commenting on his case in detail.

The court is expected to issue a verdict Friday and, if it finds Karpeles guilty, will likely hand down a sentence at the same time.

However, even if he were to lose the case, he has the right to appeal, which would keep him on bail.

? 2019 AFP

©2019 GPlusMedia Inc.


17 Comments
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Another test for J Justice. Pass or Fail? If he is innocent either way the truth will eventually come out, and miscarriages of justice revealed. Hope the court can not blunder this one too.

-7 ( +0 / -7 )

I hope the verdict explains the reasoning of the judgement based on the laws. Too often in Japan, the reasons how the judgement was arrived at based on the law is not clearly understood.

-5 ( +2 / -7 )

"His defense counsel needs a high level of evidence to win an innocent verdict," he told AFP.

This quote is the problem! The defendant does not have to prove anything!!! He may have a really bad Friday or a really good Friday.

-3 ( +3 / -6 )

I sometimes misplace my glasses or keys. I never misplace my wallet - particularly, say, if it had 200,00 bitcoins in it. Kind of a reason one entrusts assets is that they will not be misplaced. Good luck with your defense.

3 ( +3 / -0 )

@Reckless That part really stuck out for me too. It suggests that the burden of proof is on the wrong side.

1 ( +2 / -1 )

Moderator why did you delete my posts in this thread? should I report you again for deleting peoples freedom to express opinon?

2 ( +2 / -0 )

Mark is clearly guilty, he stold the money into a usb drive and went to a foreign bank account with it.

How can it be 'hacked' that large sum of money is very easy to track, if it was a 100 yen for example, it would not sound alarm bells..

0 ( +1 / -1 )

The amount stolen is close to a BIllion dollars in todays current valuation also.

1 ( +1 / -0 )

@Kenji Fujimori: Mark is clearly guilty, he stold the money into a usb drive and went to a foreign bank account with it.

I would hesitate to agree with you. All the money in the world would not tempt me if I had to spend 10 years or even 10 weeks in a Japanese prison. This guy was clearly out of his league as a manager which is very common in startups.

-1 ( +1 / -2 )

Was he "high flying"??? Also, I don't remember outrage at his treatment back in the day along the lines of the current furore over Ghosn.

0 ( +1 / -1 )

Reckless

How exactly is how out of his league? He is the first to start the crypto exchange, before local copycats. So he knows the ins and outs on how to steal and manipulate things. Crypto is just liquid at the end of the day, so it's way easier then say physical cash and because it's 'new' and hardly much regulations, he's found a niche to fudge things quite well..

-1 ( +0 / -1 )

@Kenji Fujimori:

According to the infallible source of knowledge Wikipedia "McCaleb sold the site to French developer?Mark Karpelès, who was living in Japan, in March 2011, saying 'to really make mtgox what it has the potential to be would require more time than I have right now. So I’ve decided to pass the torch to someone better able to take the site to the next level.'"

It was a jury rigged, half-arsed system in the first place to exchange fantasy based cards! Furthermore, looking at the picture of Karpeles, it was sold to a nitwit. I think it is very plausible he was simply duped and bitcoin owners NEVER should have entrusted such valuable items to him. Think of it this way, if you had had 20,000 dollars in cash a few years ago, would you have given it to Karpeles for "safe-keeping"?

0 ( +0 / -0 )

Reckless

Yep, though nothing can be proven that he stole the bit coins, but it is quite logical and obvious that he did, lawyers will blab 'hacked' and other catchphrases so he can be innocent. He also did not spend a day in jail for stealing close to a billion dollars, yet the judicial system here imprisons Carlos Ghosn who IS innocent.

Karpeles will be found 'innocent' cause the hacked bs will just be stated. Karpeles is playing the invisible man card, 'oh yeah it was hacked' while he laughs all the way to the bank..

0 ( +1 / -1 )

Yep, though nothing can be proven that he stole the bit coins, but it is quite logical and obvious that he did

Not necessarily. From the sounds of it, he was not a good business owner, and not very organized. Ever since the start he's come across to me more as incompetent more than nefarious.

lawyers will blab 'hacked' and other catchphrases so he can be innocent.

Or maybe he was hacked, and is innocent.

-1 ( +1 / -2 )

The guy is an idiot who doesn't understand coding or the law.

2 ( +2 / -0 )

Kenji Fujimori, “He also did not spend a day in jail for stealing close to a billion dollars, yet the judicial system here imprisons Carlos Ghosn who IS innocent.”

Karpeles has not been found guilty yet. Did you not notice the article tells us the verdict will be in tomorrow? He did however already spend nearly a year in detention before getting out on bail (also in the article as well as being previously well-known), far longer than Ghosn.

0 ( +1 / -1 )

Hypothetically speaking let's say Japan finds him innocent, and he leaves and moves to Switzerland and pulls the USB drive out of his arse and now has access to billions of dollars in bitcoins. Would any jurisdiction be able to get him?

0 ( +0 / -0 )

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