Since the collapse last year of Mt. Gox, the exchange that served as the largest hub for storing and trading the virtual currency Bitcoin, law enforcement officials and angry clients have been asking what happened to nearly half a billion dollars in Bitcoins that the company said had vanished from its computer systems.
On Saturday, Japanese police arrested Mark Karpeles, the head of the exchange, which was based in Tokyo, on suspicion that he had used the popular online financial platform, which he developed, to illicitly add $1 million to an account under his control.
But the arrest, and the small amount of information divulged by Japanese law enforcement officials, shed little light on the larger mystery of the missing Bitcoins.
Television news video showed officers from the Tokyo Metropolitan Police Department leading Karpeles, a 30-year-old French national, from his apartment early Saturday morning. In a statement, the police said they believed that Karpeles had “unjustly inflated the balance” of an account held under his name by manipulating transaction records on a system that Mt. Gox used to swap Bitcoins for dollars.
“He created false information that $1 million had been transferred into the account, when in fact it had not been,” the police said in a brief statement.
The implosion of Mt. Gox, which Karpeles nurtured from humble beginnings as a platform for trading collectible cards from the game Magic: The Gathering, shook the still-developing world of virtual currencies. The sophisticated encryption that makes it possible to use Bitcoin conveniently and anonymously did not, the episode seemed to show, necessarily protect it against theft or security lapses at one’s virtual bank.
Before it filed for bankruptcy in February of last year, Mt. Gox said 850,000 Bitcoins, mostly belonging to its clients, had been either lost or stolen by hackers, an amount worth more than
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