Bitcoin bust —

Mt. Gox head arrested over loss of 650,000 bitcoins

Mark Karpelès arrested in Japan, accused of falsifying bitcoin account data.

Mark Karpeles
Mark Karpeles

Mt. Gox head Mark Karpelès was arrested by Japanese police on Saturday, more than a year after the exchange folded amidst the loss of 650,000 bitcoins. Karpelès hasn't been formally charged but "police are alleging that he manipulated the company’s computer system to inflate its assets," The Wall Street Journal reported.

"Japanese media aired footage of Mr. Karpelès being led by police officers from his apartment before 7 a.m. Saturday," the Journal report said. "An official familiar with the investigation said authorities allege that Mr. Karpelès manipulated the balance of a company account and used it to counter orders from customers. Some of the coins that he said were lost may not have existed, the official said."

Karpelès, a 30-year-old from France, "is suspected of having accessed the exchange's computer system to falsify data on its outstanding balance," the BBC wrote. The exchange "claimed it was caused by a bug but it later filed for bankruptcy."

The Tokyo-based Mt. Gox, once the world's largest Bitcoin exchange, shut down in February 2014 after weeks of sustained DDoS attacks and 'transaction malleability' problems, which led the company to halt withdrawals entirely. The exchange applied for bankruptcy protection in Japan, saying it could not pay its debt of $63.6 million (£40 million).

Mt. Gox initially said it lost 750,000 bitcoins belonging to customers and another 100,000 of its own. In March 2014, Karpelès said the company found 200,000 of the bitcoins, leaving the total loss at 650,000.

At current exchange rates, 650,000 bitcoins would be worth about $184 million. (£117 million).

Karpelès has denied the allegations while "blam[ing] hackers for the vanished bitcoins and said the company’s security was weak," the Journal wrote.

Channel Ars Technica