Mark Karpeles, the head of the collapsed MtGox Bitcoin exchange who was arrested in Tokyo, is facing fresh allegations that he misused $8.9 million in customers' deposits, Japanese media reported Sunday. French-born Karpeles, 30, was arrested on Saturday after a series of fraud allegations led to the Tokyo-based exchange's spectacular collapse last year and hammered the digital currency's reputation. Karpeles is suspected of manipulating data on the exchange's computer system in 2013 to artificially create about $1.0 million in Bitcoins, while police were also investigating his possible involvement in a massive loss of the virtual currency in 2014.
He was sent to the Tokyo District Public Prosecutors' Office Sunday morning for further questioning, public broadcaster NHK said. Police now suspect that he illegally spent customer deposits worth about 1.1 billion yen ($8.9 million), according to NHK and the best-selling Yomiuri newspaper. He is suspected of misusing the funds privately and sending them to his other firms, the news reports said. Police are expected to re-arrest him on suspicion of professional embezzlement over the suspected misuse of funds, the Yomiuri said, quoting police sources. Under the Japanese criminal justice system, police can hold a suspect without charge for up to three weeks, during which time they may carry out vigorous interrogations in an attempt to extract a confession. Karpeles reportedly denied all allegations.
The global virtual currency community was shaken by the shuttering of MtGox, which froze withdrawals in early 2014 because of what the firm said was a bug in the software underpinning Bitcoins that allowed hackers to pilfer them.
The MtGox exchange - which once boasted of handling around 80 percent of global Bitcoin transactions - filed for bankruptcy protection soon after the cyber-money went missing, admitting it had lost 850,000 coins worth 48 billion yen. They were worth about $480 million at the time of the disappearance.