Most Bitcoin users experienced the MtGox disaster first hand or heard accounts of it from other users. Mark Karpeles -the chief executive of MtGox- is standing trial on charges of embezzlement and data manipulation in the Tokyo District Court. He has plead not guilty to these charges.
What happened with MtGox: A Brief History
MtGox was one of the first time that Bitcoin users and traders got burned badly. There was a time when MtGox was responsible for over 80% of Bitcoin trades worldwide, but the company shuttered its doors in 2014 and filed for bankruptcy. Millions and millions of dollars worth of coins and assets were lost, while MtGox blamed a hack for the loss of assets.
What does Karpeles have to Do with This?
Karpeles was the chief executive of MtGox when this all took place, but there are even more damning actions he allegedly took during this time with MtGox. He allegedly moved about $3 million from an account holding customer funds to an account in his name. Though this strikes me as blatant embezzlement, his defense claims it is not. However, his defense team has made no apparent effort to deny that these money transfers took place.
While his defense is trying to downplay his involvement -he recently said he was only an engineer-, the prosecution is not pulling any punches. They argue that much of the stolen money was used for personal items -which would suggest embezzelment-. 3D printers and expensive canopy beds are among the items that the prosecution cited as luxuries purchased with stolen funds.
In all of this, Karpeles seems to be completely blase about the fact that his actions and the inadequacies of MtGox not only robbed people of hard won fortunes, but also damaged Bitcoin and other cryptocurrencies’ image enough that it struggles to be anything but “internet drug money” in the minds of many. The chances of wider adoption were definitely hurt by this event and Karpeles’ actions.
WillyBot, MtGox, and Karpeles
WillyBot is almost as notorious for Bitcoin users and MtGox itself. This bot operated as a trading bot, much to the concern of most traders on MtGox. It later came out that the WillyBot was manipulating the market significantly by pumping up trading volumes with many fraudulent trades. Apparently Karpeles has openly admitted to running WillyBot -also known as an obligation exchange-.
Admitting this is huge. This bot is largely held responsible for the enormous crash in Bitcoin’s price in 2014. This makes sense, because if Bitcoin’s price was -at the time- only being held up by a massive amount of fraudulent trades on an exchange responsible for the vast majority of Bitcoin trading then it was only a matter of time before something went wrong.
Karpeles maintains that this was not illegal because it was for the good of the company. The trial will resume in October.