TOKYO—Japanese police on Saturday arrested Mark Karpelès, the head of collapsed bitcoin exchange Mt. Gox, alleging that he manipulated the company’s computer system to increase the balance in an account.

Tokyo-based Mt. Gox was once the world’s largest exchange platform for the virtual currency by trading volume. In February 2014, it filed for bankruptcy, saying it had lost 750,000 of its customers’ bitcoins as well as 100,000 of its own, worth some $500 million at the time. It later said it discovered 200,000 bitcoins.

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