KYODO NEWS - Jul 11, 2017 - 21:11 | All

The head of MtGox Co., once the world's largest bitcoin digital currency exchange, denied embezzling hundreds of millions of yen from its customers as his trial began Tuesday in Tokyo.

Appearing at the Tokyo District Court, Mark Karpeles, 32, who was born in France, said huge losses of the digital currency at the now-bankrupt exchange were the result of hacking.

He pleaded not guilty to data manipulation and embezzling a total of 341 million yen ($3 million) of customers' money between September and December of 2013.

Q&A: MtGox head Mark Karpeles answers questions after first trial

"I swear to God I am not guilty," Karpeles said in reading out a prepared statement in Japanese after listening to the charges against him through interpreters.

"I offer my sincere apology for causing inconvenience to many clients with the bankruptcy of MtGox," he said, while claiming that the alleged data manipulation was in fact part of his company's regular business operations and the money he spent was not his clients'.

(Nobutoshi Katsuyama)

Prosecutors argued in their opening statement that Karpeles managed the company's assets and money entrusted by the company's clients in the same bank account and failed to respond to requests by company associates to separate them.

Of the 341 million yen allegedly embezzled by the defendant, around 315 million yen was intended for the purchase of a 3-D printer business and 6 million yen for purchasing a canopy bed for his personal use, according to the prosecutors.

In February 2014, MtGox suddenly shut down all transactions, causing a panic among its customers, including many foreigners. It then announced that it had gone bankrupt after having lost about 850,000 bitcoins, worth about 48 billion yen at the time. It said the bitcoins were likely stolen through hacking.

In August 2015, Karpeles was arrested for allegedly manipulating data on his company's trading system. He was eventually indicted on charges of pocketing about 341 million yen of customers' money by transferring it from his company's bank account to his own.

He was released on bail last July.

Asked by Presiding Judge Takeshi Irie to state his occupation at the beginning of the trial, the defendant said he is just an "IT engineer" and no longer a CEO as his company has already gone under.

"As the person responsible for MtGox, I have to recover the stolen bitcoins and determine where they have gone, but this trial is not aimed at finding the cause of (the company's) bankruptcy," he said.

After the daylong court proceedings, Karpeles told reporters he has been cooperating with investigative authorities to find out what had happened to the missing virtual currency.

"Perhaps more details will come to light as the investigation proceeds to the next stage," he said, without going into details.

Karpeles obtained MtGox in 2011 after coming to Japan in 2009 and built it into the world's biggest bitcoin exchange at one point.

He said he was "researching" new virtual currencies and running the business was appealing from the standpoint of pursuing his research.

But the company incurred major losses and its debts exceeded assets in August 2013 after the U.S. Department of Homeland Security seized its assets in U.S. bank accounts around May 2013, prompting its American clients to withdraw their money from MtGox.

After filing for bankruptcy protection with the Tokyo court, MtGox has been undergoing bankruptcy proceedings since April 2014.

Since the sudden shutdown in 2014 of the exchange raised concern about the credibility of virtual currencies, Japan has revised its law to regulate them to protect users and prevent their use in terrorism and moneylaundering. The revised law took effect in April.