The former chief executive of Mt. Gox bitcoin exchange is in deep legal trouble. Last week, Japanese prosecutors filed embezzlement charges against French-born Mark Karpeles in connection with the disappearance of about $2.7 million in virtual currency.
Last month, 30-year-old Karpeles was arrested in Tokyo on charges of unlawfully extracting and using privabte electromagnetic records. Karpeles remains in custody, but he can petition the court for release pending trial, according to Agence France Presse.
Karpeles was first taken into police custody over allegations that he manipulated transaction records in Mt Gox’s trading system to inflate the balance of an account under his name.
“He created a false information that $1 million had been transferred into the account, when in fact it had not been,” police said at the time of his arrest.
Investigators said Karpeles accessed the exchange’s trading system, which was hosted in the United States, in 2013 and altered the data in his personal account twice.
Now, prosecutors said Karpeles embezzled a total of ¥321 million ($2.7 million) by transferring clients’ funds deposited at Mt. Gox’s bank account to other accounts, according to Reuters.
Tokyo-based Mt. Gox, once the world’s largest exchange platform for bitcoin, filed for bankruptcy last year, claiming it had lost 850,000 of its bitcoins, which are worth more than $450 million at the time.
Karpeles said his company fell victim to hackers who exploited the site’s “transactional malleability.” He later claimed that the company has found 200,000 of the missing bitcoins, but it wasn’t clear how much the exchange’s clients will be able to retrieve.
Japanese authorities are also looking at allegations that some ¥1.1 billion ($8.8 million) was transferred from Mt. Gox’s account to several account, including the exchange’s parent company that was managed by Karpeles, and a software company affiliated with Mt. Gox.
In addition, detectives said Karpeles used ¥130 million from the exchange’s account to pay for his apartment rent and furniture.
Karpeles has denied the charges and told the Japanese authorities the data falsification was done for the company and that he intended to pay back the money, Yomiuri Shimbun reported.
Karpeles bought Mt. Gox, which was then used as a trading platform for playing cards, in 2011.