Mark Karpeles, former CEO of Bitcoin exchange Mt. Gox, was arrested over the weekend by Japanese authorities in Tokyo. Karpeles has been charged with manipulating the exchange's system data in 2013 to generate several million dollars in Bitcoin.
While Karpeles admitted to tweaking the exchange's computer system as a trading 'test', he has continued to deny the suspected allegations that he embezzled millions of dollars in Bitcoin. Karpeles maintains the story that the unaccounted Bitcoin was lost from an external hack. Mt. Gox lost around 650,000 Bitcoins in customer funds.
The Tokyo-based Mt. Gox was the first and largest Bitcoin exchange that was handling around 70% of all Bitcoin transactions by 2013. In February 2014 the exchange shut down and filed for bankruptcy, citing a massive hack that caused the exchange to lose customer's funds. The real reason for the Bitcoin loss has remained a mystery, with internal fraud and mismanagement by Karpeles as the likely scenario.
The Mt. Gox collapse in 2014 followed the large price spike of $1200 per Bitcoin that brought a lot of attention to the young digital currency. Thousands of customers lost a significant amount of their funds in the exchange, casting doubts on the legitimacy and trustworthiness of Bitcoin. Some in the community believe that the fall of Mt. Gox set Bitcoin development back by at least a year.
Former Mt. Gox employee Ashley Barr explained on Reddit over the weekend the financial mismanagement and security horrors that internal employees faced when dealing with Karpeles. Barr ultimately believes that Karpeles was covering up gross incompetence in his actions rather than maliciously attempting to steal customer funds.
It is suspected that Karpeles will face more charges reflecting corporate embezzlement over the misuse of funds. Karpeles has denied all allegations and no statement has been issued from his attorney.