Mt Gox Went Broke 6 Months before Filing Bankruptcy

The Japanese investigators, who are looking into the role of Mark Karpeles’ role in the downfall of now defunct Mt Gox bitcoin exchange seems to have stumbled up on one more shocking piece of information. According to the recent reports, the investigating team has uncovered information which points at the possibility of Mt Gox running out of cash almost half a year before it filed for bankruptcy.

Mark Karpeles, the CEO of Mt Gox was arrested in Tokyo last Saturday over suspicion of him tampering the Mt Gox computer systems. He was suspected of altering the data in exchange’s computer system to artificially increase the bitcoin holdings by $1 million. Mark was later charged with embezzling funds during the course of questioning after suspicions were raised about illegal transfer of funds from the exchange to other firms whose owners were none other than Mark Karpeles himself.

Soon after his arrest on Saturday, he was produced before the Tokyo District Public Prosecutor on Sunday for questioning. Mark Karpeles is suspected of spending close to $9 billion in funds belonging to the users for personal use. While there were speculations among the Japanese media about the possibility of Mark being rearrested for suspected professional embezzlement.

According to the information obtained from investigative sources and company documents, Mt Gox had assets worth over $30.65 million in its accounts on March 2013. However, within 5 months, the exchange’s balance sheet was in red with more liabilities than capital and assets put together. Mt Gox took another 6 months to file for bankruptcy protection in February 2014.

During those 6 months, Mt Gox was unable to honor any cash reimbursement requests due to lack of funds. The users were informed that the exchange was targeted by hackers and there is a system vulnerability which may allow hackers to gain access to funds during the fund transfer process.

Investigation is still underway to determine the extent of his role in Mt Gox fiasco.

Image: SHIZUO KAMBAYASHI/AP

Gautham

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I see, I think and I do… passionate about digital currency, start-ups and social good. I believe that if you mix them right, you can change the world. Find me @gautham_n on twitter or /gautham,nm on facebook

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