Bitcoin CEO Arrested On £250m Fraud Charges

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Written By Hossein Soltani

The chief executive of a failed Bitcoin exchange stands accused of stealing almost £250 million of the virtual currency in a sophisticated fraud.

Police in Japan have arrested Mark Karpeles, 30,  who headed the MtGox Bitcoin Exchange until the business collapsed in February 2013.

At the time, MtGox was one of the leading international Bitcoin exchanges and held millions of pounds worth of the online currency in supposedly secure electronic vaults for customers.

Bitcoin is a virtual currency, which is created online by investors writing computer code.

The founders intended Bitcoin should fall outside of government and central bank regulation and instigated electronic security to safeguard holdings.

Security fears

Karpeles is alleged to have spoofed the company’s computer systems into transferring the lost cash into his personal accounts.

The company filed for bankruptcy claiming the £250 million of Bitcoin had been stolen by hackers.

A police investigation has uncovered tampering with the company’s computer systems and evidence that Karpeles manipulated the MtGox network to pay himself the missing Bitcoin.

Police in Tokyo, where MtGox was based, have yet to formally charge Karpeles but have up to 23 days to hold him before putting him before a court.

Karpeles has issued a statement through his lawyers claiming the allegations are false and that he will deny them if they go to court.

Apparently, several former MtGox employees have made statements about how Karpeles ran the company and have indicated he mingled his personal cash with Bitcoin held on deposit for thousands of customers.

Mainly due to security fears, the value of Bitcoin has plunged in recent months.

Plunging value

Around the end of 2013, a Bitcoin was valued at around £525. The price on July 31, 2015 was £180.

Other Bitcoin exchanges have also closed following frauds or attacks from hackers.

Now, regulators in the United States are looking at supervising Bitcoin markets and businesses involved in trading or dealing in the virtual currency.

Many supporters are arguing that Bitcoin should remain free of regulation and should be given currency status.

If Bitcoin was afforded currency status, profits from trading would be exempt from capital gains taxes in many countries, meanwhile, profits from trades are viewed as taxable income.

Around 12.5 million Bitcoin are circulating the internet, but the founders have capped the limit that can exist at any one time to 21 million units.