Mt. Gox bitcoin exchange CEO Mark Karpeles was arrested on Saturday, Aug. 1, 2015 at 6:00 am on the allegation that he had manipulated the volumes of Bitcoins in Mt. Gox before the company’s demise in 2014.
Mt Gox was launched in 2010 and became one of the first bitcoin exchange.
The bitcoin exchange at its peak it accounted for up to 80% of trading volume of the whole bitcoin system.
At that time, Mt. Gox made $380,450 in revenue but in the following year it lost 13 times the same amount.
The company later suspended it operations early in 2014 this was due to speculation about the untoward activity.
The speculation was that the bitcoin exchange company lost $350M worth of bitcoin due to suspicious activity.
The French-born Karpeles, 30, first said the reason for the problem was because there was a hack or a possibility of an outside job absolving him and his company of any wrongdoing.
He claimed that online hackers were trying to manipulate the system and they are the cause of all the problems.
The bitcoin exchange CEO was arrested by Japanese Metropolitan Police Department for falsifying data to alter the outstanding balance of the exchange on the exchange’s computer system.
He is facing criminal charges for fraud and embezzlement.
A day before his arrest, Karpeles sent a message to the Wall Street Journal saying that the allegations were false and he has plans to deny them.
When he was arrested he did claim that the allegations were false and that he was innocent and a victim of circumstances.
Although there are other reports from the Japanese media saying that he has not been charged with any crimes as yet, he could be detained for up to 23 days without the possibility of bail.
Within the 23 days, the police can take their time to investigate and later formally charge him with fraud and embezzlement.
The cold wallet is a storage device just like a memory stick that was not connected to other computers prior to June 2011.
Independent reports said the exchange had lost most of it money prior to the collapse.
Later on the exchange said that more than $27M is missing from its Japanese bank accounts.
As of now, Mt. Gox is undergoing the process of liquidation.
After the loss of the bitcoins, the exchange filed for bankruptcy protection in the US and Japan.