Mt. Gox CEO won't appear in U.S. for questions about bankruptcy case
Mark Karpeles, the chief executive of Mt. Gox, said he would not come to the United States to answer questions about the Japanese bitcoin exchange's U.S. bankruptcy case, Mt. Gox lawyers told a federal judge on Monday.
In the court filing, Mt. Gox lawyers cited a subpoena from the U.S. Department of Treasury's Financial Crimes Enforcement Network, which has closely monitored virtual currencies like bitcoin.
"Mr. Karpeles is now in the process of obtaining counsel to represent him with respect to the FinCEN Subpoena. Until such time as counsel is retained and has an opportunity to 'get up to speed' and advise Mr. Karpeles, he is not willing to travel to the U.S.", the filing said.
The subpoena requires Karpeles to appear and provide estimony in Washington, D.C., on Friday.
The court papers also said a Japanese court had been informed of the issue and that a hearing was scheduled on Tuesday in Japan.
Bitcoin is a digital currency that, unlike conventional money, is bought and sold on a peer-to-peer network independent of central control. Its value has soared in the last year, and the total worth of bit coins minted is now about $7 billion.
Mt. Gox, once the world's biggest bitcoin exchange, filed for bankruptcy protection in Japan last month, saying it may have lost nearly half a billion dollars worth of the virtual coins due to hacking into its computer system..
According to Monday's court filings, the subpoena did not specify topics for discussion.
In the court filings, Karpelès' lawyers asked the court to delay the bankruptcy deposition to May 5, 2014 but said that Mt. Gox could not guarantee that Karpeles would attend that either.
The case was in Re: Mt Gox Co Ltd in the U.S. bankruptcy court for the northern district of Texas, Dallas division, No. 14-31229-sgj15.
At Mt. Gox bitcoin hub, 'geek' CEO sought both control and escape
In June 2011, when customers of now-bankrupt bitcoin exchange Mt. Gox agitated for proof that the Tokyo-based firm was still solvent after a hacking attack, CEO Mark Karpeles turned to the comedy science fiction novel "The Hitchhikers Guide to the Galaxy".
During an online chat, Karpeles moved the equivalent of $170 million in bitcoin at today's market rates - the virtual equivalent of a bank manager flashing a wad of cash in a wallet to establish credit. The gesture - with a sly wink to the "geek" culture Karpeles believed he shared with many of his 50,000 customers at the time, including an interest in coding, Japanese manga comics and science fiction - succeeded.
By moving 424,242 bitcoins, Karpeles, then 26, evoked the random number, 42, described as the "meaning of life" in Douglas Adams' sci-fi novel. "Don't come after me claiming we have no coins," Karpeles said, according to a transcript of that online discussion. "42 is the answer."
As the price of bitcoin soared from a few dollars to above $1,000, Mt. Gox grew to become the world's largest exchange for the digital currency, handling flows worth $3 billion in 2013, by the company's own reckoning.
But even as Mt. Gox boomed, French-born Karpeles seemed both keen to maintain total control of key operations and indifferent to commercial success, according to former staff and associates who spoke to Reuters, but asked not to be named because of ongoing investigations into the exchange's collapse.
Creditors who want to know how Mt. Gox at one point lost some $500 million worth of bitcoin and another $27 million in cash from its bank accounts, are seeking answers from Karpeles, who has spent recent days huddled in meetings with lawyers in Tokyo.
Mt. Gox and its lawyers declined repeated requests for comment for this article.
Lawyers for Karpeles told a U.S. judge last week that he was "not willing" to travel to the United States - as ordered by the judge to answer questions in a bankruptcy court - until his attorneys can "get up to speed" on a new subpoena from the U.S. Treasury Department. Karpeles doesn't want to go to the U.S. as he fears he could be arrested by authorities there, a person familiar with his thinking said.
"Regardless of whether it was a massive fraud or whether he was just grossly negligent, at the end of the day he's at fault," said Steven Woodrow, a lawyer representing a U.S. class action against Karpeles brought by Mt. Gox creditors.
Mt. Gox's bid to resuscitate its business was dismissed by a Tokyo court on Wednesday, and the court-appointed administrator said that meant the firm was likely to be liquidated. He added that Karpeles was likely to be investigated for liability in the exchange's collapse.
THE MAGICAL TUX
In its bankruptcy filing, Mt. Gox said 750,000 customer bitcoins and another 100,000 belonging to the exchange were stolen due to a software security flaw. Karpeles has told others he has been hurt by accusations he masterminded the theft, and wants to return the bitcoins and cash to some 127,000 creditors.
Karpeles, who has said he is reluctant to appear in public because of safety concerns, relieves stress by driving around Tokyo at night in a Honda Civic he bought as a company car at Mt. Gox, people close to him said. He lives alone with his cat, Tibane, whose exploits he used to chronicle on now-deleted Flickr and YouTube accounts.
The cat's name, chosen by Karpeles' late grandmother, inspired the name of his first company, Tibanne, which he set up in October 2009 in Japan. His employer at the time, software platform distributor Nexway, had transferred him to the country earlier that year.
Born in Chenove, in the Burgundy region of France, Karpeles wrote his first computer program aged 10. He wrote on his blog that he "never really felt at home in France," and has not been back since moving to Japan five years ago.
Shy and fearful of confrontation, the self-proclaimed "geek" felt comfortable in Japan, where he could also indulge his love of manga, video games and cosplay - a combination of "costume" and "play", where people dress as characters from Japanese anime, graphic manga novels and video games. Karpeles found solace in online communities, where he was known as "The Magical Tux", a reference to the penguin mascot of open-source operating system Linux.
His escapism into virtual worlds was accompanied by what some former associates describe as a lack of interest in how running afoul of law and regulation could threaten his business and reputation.
According to blog posts Karpeles wrote in 2006, he was arrested twice in France before he was 21 for computer fraud-related charges. One resulted in a 3-month suspended sentence. French authorities in Tokyo said they had seen confirmation of one prior conviction, but did not have details.
In Japan, Karpeles was sued by a customer in 2012 who claimed he had paid 15,000 euros ($20,700) for a website to be developed that was never built. Tokyo District Court ruled last May that Karpeles had to return the money.
The U.S. Department of Homeland Security seized $5.5 million in Mt. Gox bank accounts in 2013, saying the exchange had been late to register as a money transmitter.
How The Creator Of Bitcoin May Have Stumbled Onto Something Much, Much Bigger
We gave our Person of the Year award for 2013 to Satoshi Nakamoto, the pseudonymous creator of Bitcoin. We know some of you laughed.
If you did, you may want to read on. It's becoming increasingly clear that Satoshi's creation has the potential to change how much of commerce itself works, and for reasons not even many Bitcoin fans realize.
By many accounts, Satoshi came up with a real-world solution to a longstanding computer science paradox known as the double-spend problem, or the Byzantine General's problem (the professor who named it explains why he did so here). The challenge is how to send and receive money online without the need for a trusted third party, such as PayPal, ensuring that the same digital credit standing in for the amount being exchanged isn't being spent twice.
In the real world, this problem gets avoided with cash, which is quite difficult to counterfeit. In practice, digital counterfeiting is much easier.
Satoshi's solution was what has become known as the blockchain: a ledger of all transactions owned and monitored by everyone but ultimately controlled by none. It's like a giant interactive spreadsheet everyone has access to and updates to confirm each digital credit is unique.
It is this technology that programmers are now working to deploy for uses that go far beyond Bitcoin. Satoshi does not appear to have been looking to solve this problem when he created Bitcoin. But his design for the blockchain, which he spelled out in his 2008 Bitcoin spec paper (PDF), has profound implications.
"For the first time, two people can exchange a piece of digital property, without any prior relationship, and in a secure way, over the Internet," Jeff Garzik, one of Bitcoin's core developers (now employed by payment processor BitPay) told Business Insider. "As a computer scientist, and in computer science in general, when you talked about building distributed systems, there tended to be a purely theoretical view about how computers would talk to each other, how to keep them coordinated. Satoshi and the blockchain really solved that problem in an elegant and unexpected way.
"I don't think the computer science community has really caught up yet," Garzik said.
The breakthrough means that, theoretically, any act of commerce on the Web can be decentralized and stripped of a controlling authority.
Perhaps the most straightforward example of a post-Bitcoin service using Satoshi's blockchain is Proof of Existence. Created by Manuel Araoz, a 23-year-old developer in Argentina, the site allows you to upload a file to certify that you had custody of it at a given time. Neither its contents nor your own personal information are ever revealed — rather, all the data in the document gets digested into an encrypted number. Proof of Existence is built on top of the Bitcoin blockchain (there's a 0.005 BTC fee), so the thousands of computers on that network have now collectively verified your file.
Tokyo Court orders bankruptcy trustee to begin Mt. Gox liquidation
Tokyo District Court ordered liquidation to begin at failed bitcoin exchange Mt. Gox, the company said on Thursday, after the bankruptcy administrator said on April 16 that it would be difficult to rehabilitate the firm.
Mt. Gox, once the largest bitcoin exchange in the world, filed for bankruptcy protection on February 28, saying that 750,000 of its customers' bitcoins had been taken from the exchange due to a security flaw in its code, as well as 100,000 belonging to the exchange. It also said that $27 million was missing from its bank accounts.
A document uploaded onto its website and signed by bankruptcy administrator, attorney Nobuaki Kobayashi, said that he would conduct an investigation regarding the liability of the representative director of the company, Mark Karpeles, regarding the missing assets.
The document also said that a creditors' meeting would take place on July 23, 2014.
A group of investors under the umbrella of a company called Sunlot made a last-ditch attempt in mid-April to prevent the liquidation of the exchange, bidding to take over Mt. Gox in order to retrieve the cryptocurrency and cash belonging to its 127,000 creditors.
There goes my money
Sorry man, but that was classical ponzi
I know it now
But it looked so normal then
From my experience these kind of liquidations always end up bad for the smalls
Feel for your loss, but you should take the money and run while you sould
I know, I know
But it felt so good to see the value growing and growing. When it starting falling I was always waiting to see it back. But I guess that the is a common story of all that go through a bubble experience. I simply could not believe that something that all told is good can be a fraud
That is the nature of all bubbles : to make you fell good and special. And then you are simply trashed
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