Mt. Gox CEO Mark Karpeles States Innocence in Latest Trial

Mark Karpeles, the former CEO of defunct cryptocurrency exchange Mt. Gox reasserts his innocence during the closing arguments of his trial.
Mark Karpeles. Source: CCN

Mt. Gox was the world’s largest trading exchange until its 2014 collapse after revealing that it had lost 850,000 Bitcoin due to hackers compromising the exchange – worth $450 million at the time. While Karpeles claims this was theft, authorities believe there is more to the story.

With the trial beginning in June of this year, he was charged for embezzling approximately 340 million yen, or ~$3 million. He allegedly transferred “340 million yen belonging to customers from Mt. Gox account to his personal account between September and December 2013.” In response to this, NHK reported that his defense team said this transfer was for business reasons – not personal. Karpeles claims it was for a temporary loan.

He is also charged for manipulating data on the exchange’s interface to inflate balance numbers. Prosecutors are now seeking a 10-year sentence if found guilty, up from the original 5-year sentence he was originally facing. Located in Japan, he has been set free from bail on the premise that he does not leave Japan. According to CCN, a final verdict for the case is set to be made on March 15, 2019.

Regulators have been working to compensate users for lost funds. Meanwhile, Karpeles later found 200,000 Bitcoin in cold storage, which would have been more than enough to repay users considering the price increase of Bitcoin. We hope that all Mt. Gox users receive compensation for their lost funds, but we will have to see.

What Can We Learn from This?

After the fall of Mt. Gox, cryptocurrency investors have become increasingly cautious about where to invest their funds. Since Mt. Gox, other exchanges such as MintPal and Cryptsy have shut down for shady reasons. In fact, Cryptsy founder, Paul Vernon, fled to China to hide from authorities.

When choosing a trusted counterparty to hold your cryptocurrencies, it is important to research the team, the legal jurisdictions they are permitted to operate in, if they are insured, and if there is any history of hackings. For example, Coinbase mentions they are FDIC insured for up to $250,000, much like a regular bank. This makes US investors more comfortable using Coinbase and Coinbase Pro, over an unknown exchange, even if the unknown exchange has more options of altcoins. Additionally, many decentralized exchanges are being introduced to the market, but for now, we recommend avoiding these until they prove themselves to be technically and legally reliable.

Best practice is to never leave your crypto funds on an exchange. Unless you are an active trader who leaves positions open overnight, we recommend sending your cryptocurrencies back to your wallet at all times. This way you stay in control of your funds and get rid of all counterparty risk. After all – personal control of one’s own finances is a major driver behind the cryptocurrency revolution.

To dig one step deeper, we recommend using hardware wallets, such as the Ledger Nano S, even over desktop wallets. Hardware wallets are disconnected from the internet, so there is no way you can get compromised by hackers.

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