The 32-year-old head of failed bitcoin exchange Mt Gox pleaded not guilty on Tuesday to charges relating to the loss of hundreds of millions of dollars worth of bitcoins and cash from what was once the world’s biggest exchange based in Japan.

Mt Gox, which handled around 80% of global bitcoin trades, shut down and went bankrupt in February 2014, saying that it had lost about 850,000 bitcoins – then worth around half a billion US dollars – and $28m (£22m) in cash from its Japanese bank accounts. The Tokyo-based Mt. Gox blamed hackers for its lost bitcoins, pointing to a software security flaw, but subsequently said it had found 200,000 of the missing bitcoins.

At a Tokyo District Court, French-born Mt Gox chief Mark Karpelès stands accused of embezzlement and data manipulation, including for accessing the exchange’s computer system to inflate his account by $1m and for transferring 341m yen ($3m) from a Mt Gox bank account holding customer funds to an account in his name during September to December 2013.

Karpelès was arrested in August 2015 and released on bail last year. He denied wrongdoing, telling the three-judge panel hearing his case that “I swear to God that I am innocent”. If found guilty of embezzlement, he could face up to five years in prison, or a fine of up to 500,000 yen ($4,000).

People affected by Mt Gox’s failure are still trying to obtain funds they lost and are hoping the trial will help explain what happened.

The collapse of Mt Gox was a major setback for bitcoin. Critics said the debacle highlighted the risks of bitcoin transactions, while bitcoin proponents contend Mt Gox is just an exception, but the failure badly damaged the image of cryptocurrencies, particularly among risk-averse Japanese investors and corporations.

The exchange’s bankruptcy also prompted Japan’s government to decide how to treat bitcoin, and preceded a push by local regulators to license cryptocurrency exchanges. Japan became the first country to regulate cryptocurrency exchanges at the national level this year, part of a government effort to exploit financial technology as a means of stimulating the economy.

The Japanese regulations help prevent misuse of bitcoins and other cryptocurrencies for terrorism or other illegal activities, including requiring banks and other businesses to verify identities, keep records and report suspicious transactions.

The regulations implemented in April require cryptocurrency traders to keep customers’ assets separate from their own.

The value of bitcoin is highly volatile and hit a record high of $2,980 last month. Like other cryptocurrencies, such as Ethereum and Ripple, bitcoin has no central authority and relies instead on thousands of computers across the world that validate transactions and add new units to the system – technology known as the blockchain.

Bitcoin can be traded on exchanges in the same manner as stocks and bonds. It has also become a mode of payment for some retailers including Japanese electronics retailer Bic Camera, and a way to transfer funds without the need for a third party.