Bitcoin exchange MtGox appears to have run out of money six months before it announced in February last year that it was filing for bankruptcy, with tens of millions of dollars worth of the virtual currency and client funds having disappeared, investigative sources said today.
The Tokyo-based company seems to have been running a deficit on its balance sheet and started paying some clients with money drawn from other customers’ accounts as early as August 2013, the sources said.
The fresh allegations emerged after the arrest of Mark Karpeles, its 30-year-old founder and CEO, on Saturday for allegedly manipulating virtual currency data to pad his personal cash account. Karpeles, a French national, denies the charge, according to Tokyo police.
On Sunday, he was sent to prosecutors for possible indictment.
Karpeles set up the business in 2011 and built it into the world’s biggest bitcoin exchange.
According to company documents and the investigative sources, MtGox had roughly 3.8 billion yen (US$30.65 million) worth of balance sheet assets as of March 2013. They included bitcoins and cash gained as fees for brokering bitcoin transactions between clients.
By August that year, however, the company appears to have been saddled with liabilities surpassing its assets and capital on its balance sheet, preventing it from making prompt payments to clients seeking cash reimbursements, the sources said.
In February the following year, MtGox abruptly shut down all transactions of the virtual currency and filed for court protection, saying it had lost about 850,000 bitcoins, worth around 48 billion yen at the time, and around 2.8 billion yen in funds entrusted by clients.
The police are also investigating whether Karpeles may have consolidated customer and corporate funds in a bank account held by the company and embezzled around 1.1 billion yen, funneling funds to an account of an affiliate company and for personal use.