Mark Karpelès, the disgraced former CEO of defunct bitcoin exchange Mt. Gox, faces ten years in prison as a Tokyo court prepares to hand down a verdict on embezzlement charges this Friday.
Karpelès is accused of syphoning $3 million of client money to his own accounts and faking exchange data. The 33-year-old maintains his innocence on all counts.
If convicted, it will be an explosive end to the Mt. Gox saga. Bitcoin’s most notorious exchange lost 850,000 bitcoins (worth $500 million) and filed for bankruptcy in 2014. The collapse of the world’s largest crypto exchange at the time caused the price of bitcoin to plummet into a long crypto winter.
Karpelès’ Embezzlement Rap Sheet
Prosecutors have aggressively gone after Karpelès for alleged embezzlement of 340 million yen ($3 million). The prosecution claims Karpelès diverted Mt. Gox client funds to various other companies under his umbrella, including a 3D printing company.
Status: currently being flooded with emails about @MtGox civil rehabilitation. Will take a while to get through all emails, so if you've sent one please understand it'll likely take a while for a response.
— Mark Karpelès (@MagicalTux) June 27, 2018
Karpelès is also accused of spending client funds on prostitutes, overseas trips, utility bills, and an extravagant bed. According to court documents, the embezzlement occurred between September and December 2013.
Karpelès claims the movement of money was a temporary loan. In addition to the embezzlement charges, Karpelès is accused of manipulating exchange data at Mt. Gox.
Karpelès Faces Ten Years in Jail, 99% Conviction Rate
Prosecutors are asking the judges to consider a ten-year prison sentence for the disgraced CEO. Karpelès has already spent half a year in Japanese prison before being released on bail ahead of trial.
Speaking in a Reddit AMA (Ask Me Anything) he described the experience in Japanese prisons as:
“Poor service, bad food. Would not recommend.”
Karpelès is almost certain to face a conviction in Tokyo on Friday. More than 99% of all cases that go to trial in Japan end in conviction. The court will likely issue a sentence on the same day.
— The Economist (@TheEconomist) December 14, 2015
“I Swear To God I’m Innocent”
Karpelès has long maintained his innocence in the case. During the trial, he passionately told the judges: “I swear to God I’m innocent.
Karpelès has also apologized to clients who lost money in the infamous “hack.”
“I did my best trying to grow the ecosystem by running the biggest exchange at the time. It had big problems but still managed to hang in there. For a while. A quite long while, even, while the rest of the ecosystem caught up. At the end of the day, the methods I chose to try to get MtGox out of its trouble ended up being insufficient, insufficiently executed, or plain wrong. I know I didn’t handle the last, stressful days of the outdrawn and painful Gox collapse very well. I can only be humble about that in hindsight. Once again, I’m sorry.”
A History of Bitcoin’s Most Infamous Exchange: Mt. Gox
Mt. Gox was launched by Jed McCaleb (who went on to found Stellar and Ripple). It was originally an exchange forum for Magic: The Gathering cards. McCaleb turned the site into a bitcoin exchange before selling it to Karpelès in 2011.
Under Karpelès, Mt. Gox quickly became the biggest bitcoin exchange in the world. At one point, it handled 80% of all bitcoin volume.
But Karpelès was out of his depth. Early in 2014, all bitcoin transactions were halted and it emerged that 850,000 bitcoins had gone missing in an alleged hack. By the end of February, Mt. Gox filed for bankruptcy. The bitcoin price promptly crashed and didn’t recover for more than two years.