In an extraordinary development Monday, former Chief Executive Officer and Founder of the now bankrupt Mt. Gox Bitcoin exchange, Mark Karpeles, has admitted to Japanese police that he had indeed created fake Bitcoins.
According to The Japan Times Karpeles, who was arrested over the weekend following reports Friday that local police were filing charges, is alleged to have manipulated data on the exchange’s computer system in 2013 to artificially create about $1.0 million in bitcoins; Karpeles admits to having created fake Bitcoins, but claims the actual amount was “in the range of several thousand yen or several tens of thousands of yen, because it was a test,” and that he used the account to test-trade the currency with a customer.
In new allegations, police are also said to believe to have evidence that Karpeles embezzled ¥1.1 billion ($8.9 million) worth of funds from the company and are expected to rearrest him on suspicion of professional embezzlement.
Karpeles is reported to have denied the allegation and is still maintaining that the missing Bitcoin from the exchange was stolen after the site was hacked, a spurious claim that has already been debunked by experts in the field, with one report pointing out that the Bitcoin’s started disappearing from Mt. Gox as early as 2011.
It’s not clear from reports out of Japan how far local police have progressed in their investigations into the missing Bitcoins, although reports do note that investigators suspect Karpeles knew details about the missing Bitcoins, which were transferred by his exchange to a separate account, without notifying depositors, suggesting that the actions were intentional and within the organization, not by a bad acting hacker who had gained entry into Mt. Gox’s systems.
Once one of the largest and most popular Bitcoin exchanges online, Mt. Gox famously closed its doors back in February 2014 but not before lying about what was going on at the time, including claims of system issues and other delaying tactics, before finally claiming that they’d been hacked and that an astonishing 850,000 Bitcoins, worth $480 million at the time of the collapse, had been stolen.
Police have been investigating the alleged hack, and the whereabouts of the missing Bitcoins since Mt. Gox collapsed, and these charges come about from that investigation.
Under Japanese law, suspects can be held for up to 3 weeks for questioning before formal charges are bought before a court.