The popular cryptocurrency Bitcoin has been in the news for one reason or another over the past few months.
The current hot topic is the legal proceedings going on in Tokyo—the trial of deposed CEO Mark Karpeles of Mt. Gox, the Bitcoin exchange that went under.
He has been accused of having swindled thousands of Bitcoins that belonged to investors from across different continents.
The case relates to the disappearance of over 850,000 in Bitcoin from the virtual treasury of then-popular Mt. Gox exchange.
Following this loss, the exchange was declared bankrupt and pulled down from the web.
It was claimed that the funds were lost due to a hack of the exchange, but people who lost Bitcoin don’t believe this.
Mark Karpeles was at the helm of these affairs and has already been arrested once and let out on bail subsequently.
As one would expect, he is in absolute denial of any wrongdoing on his part. On Tuesday, he pleaded not guilty to his charges of embezzlement and data manipulation.
Japanese Authorities Were Perhaps Not Ready in 2014
The Bitcoin exchange under discussion was headquartered in Tokyo, and though the alternative currency was not as popular as it is now, large transactions took place on the Mt. Gox exchange.
In fact, it is believed that four out of every five transactions in Bitcoin were done on this very exchange.
It therefore came as a rude shock when one day in February 2014, the site closed and the business collapsed.
The amount of Bitcoin currency held by the exchange was equivalent to a whopping $480 million at the exchange prices prevailing then.
Bitcoin has had a massive leap in value since then, jumping from around a $1,250 to $1,300 range nearly a month or two ago, to $2,500 now.
However, the Japanese authorities were not so sure how to go about the case as they were new to the very concept of Bitcoin and the digital exchange where it was being traded.
They would have been at a loss to understand how to frame the charges and under which statute.
Perhaps that was the reason it took almost a year before they could take Karpeles into custody and obtain confinement orders.
The Japanese government then brought in a special law to cover the operations of digital currency exchanges.
The Financial Services Agency was made the nodal entity to deal with any violations, and it is this agency that is prosecuting the CEO of Mt. Gox.
The Charge on the CEO
The trial Karpeles is facing in Tokyo includes charges of Bitcoin embezzlement and of manipulating accounts to declare the exchange bankrupt.
He has already spent about a year in prison before being released on bail.
Those watching the trial in a court in the Japanese capital claim he was cool and relaxed, even as the trial was underway before his eyes.
Observers point out that the Mt. Gox CEO, a French national, enjoyed a high-flying life—paying as much as $11,000 a month in rent for a penthouse he was occupying.
After the scandal broke out and the exchange closed down, Karpeles is said to have claimed that he stumbled upon 200,000 of the 850,000 Bitcoin funds that disappeared, from a USB type external storage device.
It was called a cold wallet, and he claimed it was independent of the computer network.
The anger among the people whose Bitcoin funds got swindled was palpable, and they wanted the perpetrators brought to book.
Life Goes on for Cryptocurrencies
After the Mt. Gox imbroglio, many observers felt Bitcoin would lose its charm.
These virtual currencies are out of the normal banking system and are under no checks and controls regime.
But Bitcoin has only grown in strength over time. It is reported that the currency’s market cap is in the region of $39 billion.
There are more exchanges that trade in Bitcoin and the currency has found acceptance in many business verticals.
However, the risk does remain and cannot be understated.