“Imagine someone stole everything in your store and you reported the crime to the police,” says Nobuyasu Ogata, defense lawyer for Mark Karpeles. Karpeles, 33, is the former CEO of Mt. Gox, once the largest bitcoin exchange in the world.

“A year later,” Ogata says, “the police suddenly arrest you for breach of trust, don’t recover the stolen merchandise and let the criminal go free. That’s essentially what happened with Mt. Gox.”

In February 2014, Karpeles discovered the exchange was missing 850,000 bitcoins (around $480 million at the time). It didn’t take long for the information to become public, with Mt. Gox eventually filing for bankruptcy on Feb. 28.

At a news conference, Karpeles claimed the exchange had been hacked. He apologized and promised to recover the missing cryptocurrency. The cybercrimes unit of the Metropolitan Police Department launched an investigation into the matter and Karpeles offered to cooperate with the inquiry.

Naturally, those following the news have always wondered whether or not Mt. Gox had been hacked in the first place? Given the complexity of the issue, it was always going to be a difficult question to answer.

In 2015, agents from the U.S. Treasury Department and Federal Bureau of Investigation, as well as members of Japan’s National Police Agency, met with Karpeles in Tokyo. They asked for Karpeles’ cooperation in an ongoing investigation involving an international hacker suspected of hacking several cryptocurrency exchanges, including Bitcoinica in 2012.

By August 2015, many assumed the police were going to arrest Karpeles for some reason or another. The special investigation unit that deals mainly with white-collar offenses had taken control of the case, suggesting that the Frenchman would be arrested in order to extract some kind of confession.

Karpeles, however, didn’t confess. The police subsequently arrested him on two other charges, with none of the indictments having any direct connection to hacking. Karpeles spent 11 months in detention before bail was granted.

“I was interrogated for eight hours each day,” Karpeles recalls. “I was asked about the missing bitcoins. I was even asked if I was Satoshi Nakamoto, the creator of Bitcoin. I was asked to sign confessions and statements in Japanese. Sometimes, the prosecutor would have pre-written statements for me in the morning they wanted signed.”

Kim Nilsson, a Swedish engineer who had lost 12 bitcoins in the collapse of Mt. Gox, began sharing information with federal authorities in the United States while Karpeles was in detention. They specifically analyzed the block chain, the public ledger of all bitcoin transactions.

In September 2016, U.S. authorities received a copy of the Mt. Gox database and used it to track the stolen bitcoins.

Tigran “Blockchain Wizard” Gambaryan, an agent in the Internal Revenue Service who has extensive experience in cryptocurrency crime, led a joint task force that looked into the case.

The task force concluded that Mt. Gox had been hacked by an outsider who had siphoned off more than 600,000 bitcoins in a period between 2011 and late 2013. It was able to trace the bulk of stolen bitcoins to one individual, a Russian bitcoin exchange operator named Alexander Vinnik.

On July 25, 2017, U.S. authorities had Vinnik detained in Greece. He was indicted on 21 counts of money laundering and several other charges, some relating to Mt. Gox.

During Karpeles’ trial in the Tokyo District Court, Ogata argued that Karpeles had only been detained because the police had hoped to extract a confession from him. When Ogata tried to enter Vinnik’s indictment into evidence, prosecutors objected, claiming the Russian should be presumed innocent until proven guilty. The fallacy of such an argument was not lost on the panel of judges, who specifically referred to the indictment in their ruling.

On March 15, the court found Karpeles guilty of data manipulation and handed out a suspended prison sentence of 2½ years. He was found not guilty on a separate charge of embezzling millions of dollars through customer accounts. It’s perhaps just worth noting that the odds of a partial not guilty verdict in Japan after indictment are less than 1 percent.

Many domestic news organizations were muted in their coverage of the sentence that had been handed down.

The Nikkei Shimbun noted the indictments had nothing to do with the initial investigation of the hacking. “The Metropolitan Police Department investigation into the missing bitcoins has, in fact, been terminated,” the paper said.

Vinnik is expected to be extradited to France. And so it seems the man behind the Mt. Gox theft may have finally been identified. It’s a shame the domestic investigation into the case failed to add much to the end result.

Dark Side of the Rising Sun is a monthly column that takes a behind-the-scenes look at news in Japan.

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