A Tokyo District Court on Friday convicted Mark Karpelès, the former CEO of the infamous bitcoin exchange Mt. Gox, of illegal production of electronic records, but found him not guilty of more serious charges of embezzlement and breach of trust. The court sentenced him to two-and-half years in prison. However, his sentence was suspended for four years, meaning that as long as he remains on good behavior he’ll serve no additional jail time.
The French-born Karpelès, 33, was first arrested in Japan in early August 2015. He spent 11 months in prison before being released on bail. Prosecutors said that Karpelès embezzled a total of $3 million worth of clients’ money and manipulated data on his company’s trading system to increase the balance in an account. Karpelès had long maintained his innocence.
Karpelès purchased the Tokyo-based Mt. Gox in 2011; two years later it was processing more than 70 percent of all bitcoin transactions worldwide. In late February 2014, the exchange suspended trading, closed its website, and filed for bankruptcy in Japan, reporting that 850,000 bitcoin had vanished as the result of a hack. Shortly thereafter, Mt. Gox filed for bankruptcy in the U.S.
When BREAKERMAG caught up with him last year, Karpelès said he anticipated being convicted. “The fact is, I’m fighting an uphill battle because in Japan there’s a lot of cases like this ending with conviction,” he said. “Something like 99 percent.”
Get the BREAKERMAG newsletter, a weekly roundup of blockchain business and culture.
Prosecutors, who had sought a 10-year sentence, accused Karpelès of using money he’d embezzled on, among other things, a 3D-printing software business, overseas travel expenses for his estranged wife, and a $54,000 canopy bed. The charges are not related to the purported hacking losses.
”What Mark’s actually charged with is small potatoes compared to what actually went down at Mt. Gox,” software engineer Kim Nilsson, who did a thorough analysis of what happened to the exchange’s missing bitcoin, told BREAKERMAG on the eve of the conviction. “The Japanese police have completely dropped the ball on actually investigating where all the bitcoin went. Instead, the case against Mark is based on one little piece of the puzzle that they can pin on him. That’s their goal basically—to say, ‘All right, Mark Karpelès did this. Case closed.’”
Meanwhile, Karpelès recently squabbled publicly with Bitcoin Foundation chairman Brock Pierce over the latter’s Gox Rising effort, which aims to maximize Mt. Gox creditors’ recoveries and relaunch the shuttered exchange.
In other related news, an Illinois federal court judge on Tuesday rejected Karpelès’s bid to end a putative class action brought by Mt. Gox customers claiming they’d been ripped off. Karpelès argued that he had never purposely directed business to Illinois and therefore had no connection to the state.