Mt Gox CEO Mark Karpelès Prepares for Bitcoin Trial in Japan

The former CEO of the now-defunct bitcoin exchange Mt Gox is preparing to head to trial in Japan next week where he faces embezzlement charges relating to the disappearance of around 650,000 bitcoins.

French-born Karpelès, who was released on bail last year from a Tokyo detention house on the condition that he didn’t leave Japan, is expected to plead innocent, according to his lawyer. In a report from the Japan Times, his lawyer Kiichi Iino said ‘he is keeping calm as the trial gets underway.’

It was back in August 2015 that Karpelès was first arrested with allegations that he had manipulated bitcoin volumes at Mt Gox. The following month he was charged with the embezzlement over the loss of hundreds of millions of dollars worth in bitcoin. It was reported, at the time, that Karpelès had stolen 321 million yen in the digital currency.

The Background to the Failure of Mt Gox

Launched in 2010, Mt Gox quickly became a popular bitcoin exchange for the countless enthusiasts of the digital currency seeking a place to buy and sell the currency. However, throughout its existence it was blighted by troubles, suffering a hack as early as the summer of 2011 and a lawsuit filed against Mt Gox alleging a breach of contract.

Despite this, though, by 2013 and into 2014 it was claimed that the exchange was handling around 80 percent of all global bitcoin trading as it became the world’s leading bitcoin exchange.

However, it wasn’t until November 2013, when bitcoin trading reached a new high of $1,300, that the exchange’s troubles took on a new level, bringing the community and the digital currency’s price crashing down.

At the beginning of February 2014, Mt Gox halted all bitcoin withdrawals, stating that it would continue indefinitely after detecting ‘unusual activity.’ On the 10th of February, the team at Mt Gox released a company statement, saying the issue was because of a transaction malleability.

“A bug in the bitcoin software makes it possible for someone to use the bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur. Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent.”

Yet, by the 20th of February, bitcoin withdrawal services had still not resumed. By the 23rd, Karpelès had resigned from the board of the Bitcoin Foundation and on the 24th Mt Gox suspended all trading and went offline.

By the end of February, Mt Gox had filed for bankruptcy protection in Tokyo and later in March for bankruptcy protection in the U.S. leaving a trail of angry investors demanding answers. With the company admitting that it had lost 750,000 of its customers’ bitcoins in addition to 100,000 of its own, Karpelès appeared on television to apologise and say that all the coins are ‘almost all gone.’ Subsequently, this news dented the reputation of the currency.

At the time, the loss of the 850,000 bitcoins was worth around $500 million, representing about seven percent of the estimated global total number of bitcoins.

Fast-forward a month later and the bitcoin exchange posted on its website that it had found 200,000 bitcoins worth around $116 million in an old wallet that had been used in 2011.

However, three years later and the mystery over the remaining missing bitcoins has continued to cause many to speculate where they could be.

According to the Japan Times, Karpelès led a rich life and is reported to have lived in an $11,000-a-month penthouse spending money lavishly, including on prostitutes.

What Now?

As things stand a court-appointed Toyko trustee in the Mt Gox investigation has completed a review of 24,750 individual claims by creditors as the reimbursement of lost funds to creditors takes shape.

Kolin Burges, a British investor who said he lost several hundred bitcoins in the exchange’s collapse, and is famous for protesting outside Mt Gox’s headquarters (main image), said:

“I’ve not had any back yet, but hopefully, eventually all the creditors will get a small percentage of their money back from the bankruptcy distribution.”

He added:

“The charges only cover a subset of the issues which were happening at Mt Gox, so I don’t expect that we will find out most of the information we want to know.”

If Karpelès is found guilty, he could face up to five years in prison and a fine of 500,000 yen or $4,000.

In light of the Mt Gox collapse, Japan passed a bill stating that all digital currency exchanges were required to be regulated by the Financial Services Agency.

Japan’s Interest in Bitcoin Grows

It may have been three years ago when the Mt Gox scandal broke, but in Japan wounds run deep.

So much so, that the country has shied away from digital currencies and what they stand for until recently. After Japanese regulations changed in April, which now sees bitcoin as a legal form of payment, thousands of merchants have stated that they will accept the digital currency by the end of 2017.

This reawakened interest in the digital currency has helped to push its value up as a new wave of investor interest turn their attention to bitcoin.

Of course, even though the most popular cryptocurrency has had a troubled past it still remains a viable alternative for many people around the world. As a result of this new influx of investors, the price of bitcoin soared to its highest yet in June where it was recorded at over $3,000. It has since settled back down to $2,450, according to CoinDesk’s Bitcoin Price Index (BPI), but considering it was struggling to break the $1,000 barrier at the end of 2016 it has come a long and significant way.

It remains to be seen how much further the currency can go and even though it will still be a currency that is used by criminals it’s hoped that bitcoin has reached a new level of maturity that its price won’t be too affected if such a negative situation involving bitcoin arises in the future.

Featured image from Flickr via Trân Trân.

Is the PBoC’s Regulation Crackdown Cooling Bitcoin Fever in China?

A surge of interest in bitcoin has seen its price reach new heights, yet the excitement of the digital currency market in China has been watered down due to the nations government who wants to control bitcoin.

According to a salesperson at Huobi, one of the ‘Big Three’ digital currency exchanges in China, the platform is receiving fewer phone calls for inquiries.

“This is because withdrawals are controlled by regulations.”

Sending money out of the country through bitcoin was easy for people to undertake. However, such a procedure for the People’s Bank of China (PBoC) was frustrating as its keen to keep the yuan from weakening.

As a result, in January 2017, the PBoC undertook on-sight inspections at China’s biggest digital currency exchanges known as the ‘Big Three’ in Shanghai and Beijing: OKCoin, BTCC and Huobi.

At the time, the Shanghai branch of the PBoC, said in a public statement that:

“The People’s Bank of China Shanghai HQ, the Shanghai Municipal Finance Office and other units formed a joint inspection team to carry out site inspections on Bitcoin China, focusing on checking whether it was operating beyond its business scope, whether it was engaging in unlicensed forex, payment, financing and other related businesses; whether it engaged in market manipulation; implementing anti-money laundering, financial security risks and so on.”

A separate notice was issued by the Beijing branch of the PBoC, which issued a similar statement.

BTCC revealed on social platform Weibo that it had met up with the PBoC and that it was ‘cooperating with regulatory departments.’

Bitcoin

In order to comply with the anti-money laundering (AML) and other requirements, all three exchanges announced that they would be suspending their withdrawal services and would only resume once they had received regulatory approval.

It was initially believed that the withdrawal freeze would only last one month; however, it continued through to March and only ended at the beginning on June, signalling the end of China’s freeze. News of digital currency exchanges resuming their services helped to bump the price of bitcoin back up to around $2,400.

However, while bitcoin trading volumes are gradually improving in China since the withdrawal restrictions, the PBoC still has a keen interest in digital currencies. So much so, that it’s expected to release a new set of regulations regarding them in due course. As a result, the Chinese bitcoin market remains on edge with no idea as to how these new rules will impact the currency.

Trading Turns to Japan

Unlike China, though, Japan has changed its stance of digital currencies such as bitcoin and now regards it as a legal form of payment for goods and services.

On 1 April, the Japanese government passed a law that had been drafted in December 2016, bringing bitcoin exchanges under AML and know-your-customer (KYC) rules, while listing bitcoin as a payment method.

The debate circulating the regulation of digital currencies such as bitcoin come in the wake of the collapse of Mt. Gox, the now-defunct digital currency exchange. In 2014, the digital market was left shattered after it was alleged that the Tokyo-based platform had lost $350 million or 744,4000 bitcoins. Mark Karpeles, CEO of Mt. Gox, was later arrested on allegations that he had manipulated volume on the-then leading bitcoin exchange prior to its demise. He is currently under investigation as to his involvement in the platform’s collapse and the remaining missing money.

Now that the law has been put into effect, it means that capital requirements are in place for the digital currency exchanges to protect users from any further mishaps. Not only that, but the exchanges are also required to undertake employee training programs and to submit yearly audits.

Such a turnaround of events has seen trading volumes in Japan rise. In May, trading of bitcoin in Japanese yen rose by 31 percent.

Furthermore, this acceptance of bitcoin has meant that retailers are working toward accepting it as a form of payment for customers.

Appearing to lead the way is Japanese low-cost airline Peach Aviation Ltd., who have announced that they will be accepting bitcoin as a form of payment by the end of the year to customers who want to purchase flight tickets. Japan’s leading online travel agent Evolable Asia has also teamed up with BITPoint Japan, the company behind Peach Aviation Ltd., to get 1,400 hotels and inns around the country to start accepting bitcoin by the summer of 2017.

Such a move is likely to produce a chain reaction, which is already being reported. So much so, that by the end of the year, it’s believed that there will be around 300,000 Japanese retailers accepting bitcoin for goods and services.

For a country that hasn’t had the best experience with bitcoin in the past, this news highlights how far the currency has come and the belief that countless individuals appear to have in it.

Many, however, continue to question bitcoin’s usage to pay for things considering it remains such a volatile asset and the transaction fees involved to transfer bitcoins. Despite this, though, the digital currency market remains popular with bitcoin leading the way. As such people appear embracive of the currency, which can be seen in Japan.

China to Follow?

It remains to be seen whether China will change its position on digital currencies and provide favourable regulations that will boost bitcoins price and restart the surge of interest within the country.

At the moment, the market is on tenterhooks as it remains unclear as to what direction the PBoC will take.

Yet, if China’s position on bitcoin regulations proves favourable, could it help to push the market cap of all digital currencies to one trillion dollars?

Bruce Fenton, a blockchain economic advisor, recently made this announcement on social media. According to him, in three years the market cap value of the entire crypto market will be valued at one trillion dollars.

Bitcoin

According to Coin Market Cap, it’s currently worth over $112 billion and is likely to continue rising as more interest and investment gets pushed into the market. It remains to be seen whether the one trillion mark is reached within three years or sooner than that.

Featured image from Flickr via worldwide finance.