As Mt. Gox trial opens in Tokyo, head of bankrupt bitcoin exchange denies embezzlement


The head of Mt. Gox, once the world’s largest exchange for bitcoin digital currency, denied embezzling hundreds of millions of yen from its customers as his trial began Tuesday in Tokyo.

Appearing at the Tokyo District Court, Mark Karpeles, the 32-year-old French-born CEO of the now-bankrupt exchange, said huge losses of the digital currency by the business were the result of hacking.

He pleaded not guilty to both data manipulation and the embezzlement of a total of ¥341 million of customers’ money between September and December of 2013.

“I swear to God I am not guilty,” Karpeles said in Japanese, reading out a prepared statement also in Japanese after listening to the charges against him through interpreters.

“I offer my sincere apology for causing inconvenience to many clients with the bankruptcy of Mt. Gox,” he said, while claiming that what the prosecutors allege as data manipulation was part of his company’s regular business operations and that the money he spent did not belong to his clients.

Dressed in a dark suit and tie, Karpeles repeated Tuesday his assertion that hacking had occurred.

“The main reason for the bitcoins’ disappearance was an external hacking attack,” he told the court.

Prosecutors argued in their opening statement that Karpeles managed the company assets and money entrusted by the company’s clients in the same bank account, and had failed to respond to requests by company associates to separate them. Of the ¥341 million allegedly embezzled, some ¥315 million was allocated to purchase a 3-D printer business while ¥6 million was earmarked for a canopy bed for his personal use, according to prosecutors.

In February 2014, Mt. Gox suddenly shut down, causing a panic among its customers who included many foreign residents. It then announced that it had gone bankrupt after having lost about 850,000 bitcoins, worth about ¥48 billion at the time. It said the bitcoins were likely stolen through hacking.

In August 2015, Karpeles was arrested for allegedly manipulating data on his company’s trading system. He was eventually indicted on charges of pocketing about ¥341 million of customers’ money, by transferring it from his company’s bank account to his own. He was released on bail in July 2016.

Asked by presiding Judge Takeshi Irie to state his occupation at the beginning of his trial, Karpeles said he is just an “IT engineer” as his company has already gone under.

“As the person responsible for Mt. Gox, I have to recover the stolen bitcoins and determine where they have gone, but this trial is not aimed at finding the cause of (the company’s) bankruptcy,” he said.

After the daylong court proceedings, Karpeles told reporters he has been cooperating with investigative authorities to find out what happened to the missing currency.

“Perhaps more details will come to light as the investigation proceeds to the next stage,” he said, without going into detail.

Mt. Gox incurred major losses and its debts exceeded assets in August 2013 after the U.S. Department of Homeland Security seized its assets in U.S. bank accounts around May 2013, prompting its American clients to withdraw their money.

The firm has been undergoing bankruptcy proceedings in Tokyo since April 2014.

The sudden shutdown in 2014 raised concerns about the credibility of virtual currencies. Since the period, Japan has revised legislation to regulate such assets, aiming to protect users and prevent their use in terrorism and money laundering. The revised law took effect in April.