On Friday, Mark Kapelès, the CEO of now-defunct cryptocurrency exchange Mt. Gox is facing a litmus test. The Tokyo court will announce its verdict as Karpelès is most-likely to face a 10-year jail term on charges of Bitcoin embezzlement. Also, Karpelès is facing charges of manipulating exchange data and siphoning $3 million of client’s funds to his own account.
A Brief Into Mt. Gox’s History
In the early days of Bitcoin, Jed McCaleb started Mt. Gox as an online exchange for trading cards of the game Magic: The Gathering. Jed McCaleb is also the founder of popular cryptocurrencies – XRP and Stellar. In 2011, McCaleb sold the exchange entirely to Mark Karpelès who took it from there to be the earliest and one of the most popular bitcoin exchanges in the market.
At one point, Mt. Gox handled nearly 80% of the global Bitcoin volumes. However, in 2014, the exchange suffered a massive hack losing 850,000 Bitcoin tokens. Soon after that, the exchange declared bankruptcy and suspended its operations entirely. Later, investigators found out Karpelès’ involvement with the notorious activities of transferring client funds to his personal accounts.
The Japanese authorities arrested Karpelès in 2015 under several charges filed against him. The case is long pending and there have been several attempts of civil rehabilitation to help the victims get back their funds.
Last month in February, Mark Pierce presented his GoxRising plan to revive the cryptocurrency exchange and pay back the victims. Pierce’s plan involves the creation of a new crypto token Gox Coin. “The GoxRising movement aims to restore the creditors’ losses as well as the world’s faith in the cryptocurrency industry,” he said.
Prosecutors Demand 10-Year Prison.
The Mt. Gox CEO has pleaded his innocence several times, however, prosecutors have aggressively gone after him. The prosecution claims that Karpelès diverted client funds from the exchange to several companies under his control. While pleading innocence, Karpelès regards the movement of funds as a temporary loan.
While apologizing to clients who lost money in Mt. Gox exchange, Karpelès pleaded “I swear to God I’m innocent”. He said:
“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.”
If the existing charges aren’t enough, the CEO also faces charges of spending client funds on prostitutes, overseas trips, utility bills, and an extravagant bed. It looks like as the case unfolds, things at Karpelès’ end seem to be murkier than expected. Tomorrow’s announcement by the Japanese court will most likely decide the fate of Karpelès.
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