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August 20, 2015

Former Mt. Gox chief Karpeles faces potential re-arrest over bitcoin theft

Fallout from closure of Bitcoin exchange continues more than a year later.

By Jimmy Nicholls

The chief executive of Mt. Gox is reportedly facing re-arrest in Japan as last year’s collapse of the Bitcoin exchange continues to make waves in the cryptocurrency business.

Mark Karpeles was detained earlier this month and is likely to be held without charge for the legal limit of 20 days, under allegations that he artificially created $1m of bitcoins by manipulating data and moving money between different companies he owned.

Once the time period lapses, local media reports claim Japanese police will issue a fresh warrant accusing him of stealing $2.6m (£1.7m) in Bitcoin deposits, citing investigators in the case.

According to the Yomiuri paper’s sources the bulk of money was spent on acquiring software rights, with Karpeles also accused of buying a luxury bed for $48,000.

Alongside those accusations, the Japanese police are said to be looking to question the chief executive about the disappearance of 850,000 bitcoins during the MtGox collapse last year, worth some $480m at the time.

Before closure the exchange claimed to have handled 80% of Bitcoin payments, but the loss of the coins led the firm to file for bankruptcy, in turn deflating much of the hype around cryptocurrency.

Later on Karpeles said he had found 200,000 bitcoins in an isolated device used for cryptocurrency storage.

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After the collapse a number of bitcoin storage facilities said business was booming, with Tom Robinson, co-founder of Elliptic Vault, telling CBR: "It’s definitely becoming much more important to be able to trust a third-party with your bitcoins after Mt. Gox."

Cases like that of Karpeles, who denied any wrongdoing in the accusation he is currently being held for, are continuing to baffle regulators, police and lawyers, who are struggling to legislate around cryptocurrencies, which lack the backing of any government.

Bitcoin is configured so that powerful computers can "mine" for the currency by performing calculations that increase in difficultly as the supply increases, with a limit being set on the final amount that will circulate.

Karpeles has yet to comment on the potential re-arrest, details of which were originally reported by the AFP newswire.

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