Mark Karpeles, the former head of defunct bitcoin exchange MtGox, has been arrested in Japan, and is reportedly to be questioned over the 2014 disappearance of nearly $390m (£250m) worth of the virtual currency.
A spokesman for the Tokyo police said French-born Karpeles, 30, was suspected of accessing the exchange’s computer system in February 2013 and inflating his cash account by $1m.
But local media reported that police are also investigating his possible involvement in the vanishing of hundreds of millions of dollars of the virtual currency when the exchange collapsed in 2014. It was not immediately clear if Karpeles was set to be charged with any offences.
After the Japanese news website nikkei.com reported that he was going to be arrested, Karpeles told the Wall Street Journal that the allegations were false and he would “of course deny” them. Kyodo News service quoted Karpeles’s lawyer as saying his client denied any wrongdoing.
If found guilty, Karpeles could face up to five years in prison, or a fine of up to 500,000 yen (£2,650).
When it filed for bankruptcy in February 2014, MtGox said 750,000 customer bitcoins and another 100,000 belonging to the exchange were stolen due to a software security flaw.
Karpeles, who had blamed hackers for the loss, later said he had recovered 200,000 of the lost bitcoins in a “cold wallet” – a storage device such as a memory stick that is not connected to other computers.
Known as a self-proclaimed geek who said he was uncomfortable in his native France and hadn’t been back in years, Karpeles became interested in bitcoin when a customer of his web-hosting services wanted to pay in the virtual currency. MtGox subsequently shot from obscurity to dominate global trade in bitcoin, but as early as 2012 employees at the Tokyo-based exchange challenged Karpeles on issues such as whether client money was being used to cover costs.
Investors had called on MtGox to publicise its data so that hackers around the world could help analyse what happened. “They say it’s under investigation. That’s all they say,” a French investor told AFP last year at a creditors’ meeting in Tokyo. “They seem to refuse to make public more precise information about MtGox’s own [information] and how and when it was stolen, if it was really stolen.”
Karpeles had reportedly refused to travel to the US, where he had been asked to appear for questioning in connection with MtGox’s collapse.