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Mt. Gox bitcoin exchange founder given suspended jail term

Mark Karpeles found guilty of manipulating data but acquitted of embezzlement

Mark Karpeles Mt. Gox
Mark Karpeles, the former CEO of Tokyo-based bitcoin exchange Mt. Gox, bows to reporters in a press room at a Tokyo court in 2014. (Photo by Ken Kobayashi)

TOKYO -- The Tokyo District Court on Friday sentenced Mark Karpeles, the French-born CEO of Mt. Gox, to two and a half years in prison, suspended for four years.

The company was previously one of the world's biggest virtual currency exchange operators.

Karpeles, 33, was given the suspended jail sentence for manipulating Mt. Gox's bitcoin trade data, but acquitted of embezzlement and violating corporate law by committing aggravated breach of trust. Prosecutors had demanded a 10-year jail sentence.

The case involved significant amounts of bitcoin that allegedly disappeared from the exchange, which is now undergoing civil rehabilitation procedures following bankruptcy in 2014.

Karpeles pleaded not guilty to all charges and denied any involvement in the disappearance of the cryptocurrency, claiming it had been stolen by hackers.

The Tokyo Metropolitan Police Department's investigation has so far failed to establish the cause of the disappearance.

At issue in the trail was an offense over fund manipulation not directly related to the missing currency. Karpeles' defense lawyers also stressed that "the content of the indictment is totally unrelated to Mt. Gox's failure."

The indictment alleged that Karpeles embezzled about 340 million yen($3 million) by transferring funds that customers held with Mt. Gox to his and other accounts between September and December 2013. He allegedly used it for business acquisitions, living expenses and payment for furniture, the indictment said.

The indictment also alleged Karpeles had committed the crime of unauthorized creation of private electromagnetic records by manipulating transaction systems to disguise cash balances.

Prosecutors added violation of the companies act, through aggravated breach of trust, as a preliminary count.

Karpeles insisted that he had not used customers' money illicitly. He pleaded not guilty, claiming the money had been booked as loans to him by his company that he intended to settle at a later date.

The court ruled that Karpeles had accessed his company's trading system between February and September 2013 and falsified data to show that $33.5 million had supposedly been credited to his account.

Mt. Gox, which was set up in 2011, grew to become the world's largest bitcoin exchange, at one point handling about 70% of global transactions of the currency. In February 2014, the company abruptly stopped cashing and withdrawal of bitcoin, announcing that some 48 billion yen ($429 million) worth of bitcoin, at the rate then, had been lost, along with about 2.8 billion yen cash.

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