Mark Karpelès, the former CEO of Mt. Gox, the exchange that closed down five years ago after losing 850,000 of its customer Bitcoin, will be sentenced tomorrow on charges of embezzlement and faces up to ten years in prison. Karpelès is accused of embezzling $3 million of client money to his own accounts, alongside other counts of faking exchange data. The 33-year-old maintains his innocence on all charges.
Embezzlement and Bot Running
Karpelès is alleged to have siphoned off the money between September and December 2013, and is also accused of spending client funds on prostitutes, overseas trips, bills, and other luxuries. Karpelès claims the money was a temporary loan which he intended to pay back. The exchange data manipulation charges relate back to the existence of the ‘Willy bot’, a trading algorithm has admitted to running from September 2013 to February 2014, which artificially raised the Bitcoin price, helping it grow from $25 to over $1,000. Karpelès has argued that this activity was “for the good of the company, so not illegal.”
The embezzlement claims do not actually relate to the Mt. Gox event, but rather emerged during investigations into it. Karpelès’ trial ended in late 2018, since then he has been in a Japanese jail awaiting sentencing. The chances of a conviction are good, as Japan has a 99% conviction rate, and prosecutors have urged the judges to consider a ten-year stint inside.
Illinois Trial to Go Ahead
Yesterday saw more legal trouble for Karpelès, when the Illinois District Court denied a motion he brought forward to dismiss a lawsuit against him. The plaintiffs, Gregory Greene, and Anthony Motto, hold Karpeles responsible for financial losses caused by the Mt Gox collapse, stating that he had purposefully misrepresented both the security and stability of the exchange. They also allege that his negligent or intentional failures in designing and operating the exchange allowed the loss to occur.
The judge ruled that Mt. Gox had a virtual presence in Illinois, given that some 7,000 addresses were associated with individuals within the state, and so Karpelès can, and will, be tried by the Illinois Northern District Court. Unless the Japanese courts find him innocent of all charges however, he could be tried in absentia.
