Mt. Gox Questioned By Employees For At Least 2 Years Before Crisis 134
Rambo Tribble (1273454) writes "Reuters reports that Mt. Gox employees began to question the handling of funds at least two years ago. Although only CEO Mark Karpeles had full access to financial records, a group of a half-dozen employees began to suspect client funds were being diverted to cover operating costs, which included Karpeles' toys, such as a 'racing version of the Honda Civic imported from Britain.' Employees confronted Karpeles in early 2012, only to be given vague assurances with a 'pay no attention to the man behind the curtain' ring. Unfortunately, since Mt. Gox was not regulated as a financial institution under Japanese law, it is unclear what recourse might be gained in pursuing this question."
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I really don't think MK is a sociopath. A sociopath would not damage their own company to the point of having to declare bankruptcy. Not when their own income depended on that company, not when that company had such high potential. Sociopaths are still pragmatic.
I think he was just utterly inept and far out of his depth. He literally didn't have a clue what he was doing. His stupidity and carelessness is no defense, he should face jailtime.
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You are making an assumption that a sociopath while willing to steal from clients, would not choose to go so far as to damage the company as a whole. That assumption in turn depends on 2 other assumptions
If Assumption 1 wasn't true he might decide to cut his loses
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Depends on the quality of the hookers and blow.
Much less (Score:3)
If this was happening two years ago it's more likely he spent them when they were worth a fraction of their current value.
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Read the fucking summary: "a group of a half-dozen employees began to suspect client funds were being diverted to cover operating costs, which included Karpeles' toys"
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Hookers, blow, and honda civics. Who the hell buys a Honda civic when they could buy anything? Who the hell gets one imported from the other side of the world?
If he was just a little bit competent he could have run a business that would have covered all his expenses legally and still run at a strong profit. The guy was well out of his depth. He needs to get jail time as a warning to others.
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The European version of the Civic is actually a completely different car to the US version (you wouldn't recognise it as a Civic if you saw one and only know the US version). Even the low end current gen Civics in Europe have very sharp handling and are a lot of fun to drive. A European Civic with a big engine would be pretty awesome.
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The European Civic doesn't share a single body panel with the Japanese or US ones either (it wouldn't entirely surprise me if it shared not a single common part number). It's not just about the engine size, it's about what the car looks like and the design of the suspension. They aren't the same cars despite both being called "Civic".
I wouldn't want to be Mark Karpeles at all. (Score:5, Insightful)
Re:I wouldn't want to be Mark Karpeles at all. (Score:4, Insightful)
With all that money he can get a new identity. He can get plastic surgery to change his looks, and hire excellent security.
Assuming that he did not blow it all as he got it thinking the gravy train would never run out... And based on how things unfolded, I am guessing it went that way.
Re:I wouldn't want to be Mark Karpeles at all. (Score:4, Insightful)
If Karpeles was smart enough, he would have been careful to avoid the accounts of Russian Oligarchs etc, and instead simply have stolen money from unconnected, largely unmonied Libertarians who have little to no legal recourse. Since there is no society, these types would have little means of coming back at him.
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And how do you know where anonymous money has come from?
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and instead simply have stolen money from unconnected, largely unmonied Libertarians
Stealing money from the "unmonied"? I see a huge, gaping flaw in your plan. Might as well steal half a billion from your pet cat. I'm sure he's good for it.
As was already noted, the problem isn't stealing from monied or unmonied, it's stealing from people with access to illegal recourse. Those people have means for getting back which are worse than anything "monied" people can do legally.
Since there is no society, these types would have little means of coming back at him.
And of course, we have to finish with a two minute hate. Libertarianism is basically about minimal government necessar
your comment will make no sense (Score:1, Troll)
> Libertarianism is basically about minimal government necessary for society not minimal society. But I guess you don't care.
Or, not understand, and think your comment makes no sense. To these people, society IS government. When they say "we should help people who need it", that in no way suggests that they would EVER consider buying diapers and milk for the struggling young mother in line behind them. To them, "we" means "Washington", so "we should help" means "Washington power brokers should take y
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Or, not understand, and think your comment makes no sense.
I have to agree. You don't seem to understand. Maybe you should fix that before doing that straw man thing again.
I guess this is the same sort of thing that is said about any political label. Maybe I should be pleased that people are discussing libertarianism with the same lack of seriousness that they'd give to any other major ideology.
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Libertarianism is about believing "initiation of force" means everything I don't like and that if only the society was different, whatever replace courts would always rule in my favor. Is putting a dam on your land to divert all the water of the river, thus depriving of water other lands "initiation of force"? The libertarian that built the dam will say "no, I do whatever I want on the land I own". The libertarian owning the land that does't receive water will say "the water belongs to me, therefore it is
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Re: I wouldn't want to be Mark Karpeles at all. (Score:1)
And if you were smart enough, you would have used the subjunctive mood when phrasing a state of unreality.
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What the hell is a "racing version" of a Honda Civic. Isn't a Civic supposed to be an economy car? Why wouldn't he just purchase a car that is built for racing?
Re: I wouldn't want to be Mark Karpeles at all. (Score:1)
Not acquainted with the term "rice burner?" Souped up civics have been an institution amongst young Asian men for decades. The aftermarket high performance parts selection for Civics is massive.
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Term is "rice rocket"
Underbody LEDs ... (Score:5, Funny)
What the hell is a "racing version" of a Honda Civic.
For many, one with underbody LEDs. :-)
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funny how they talk about this as if it's something special and luxurious.
seems like your average student or blue collar worker has something like this in their driveway.
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dunno... a racing version is something they use to race in some gti class or something like that.
but you know, put in a monkey cage, take out most of the interior, put in a tuned engine and all that stuff.
(I think you can buy a type-r street gti version in japan anyways)
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At least he can rest easy knowing that they no longer have bitcoins to hire hitmen with. ;)
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i wonder if us customers can sue and use these laws.
Remember, though, the IRS considers Bitcoin "property" not "money".
Re:bitcoin (Score:4, Insightful)
i wonder if us customers can sue and use these laws.
Remember, though, the IRS considers Bitcoin "property" not "money".
So sue/press charges on Mt. Gox for loss/theft of property? If bitcoins are property, then an exchange would be like a storage place, or maybe a consignment shop. If you put your physical items in any of those places and then one day the owner says "oops, your stuff is gone, sorry"(especially due to the actions/fault of the owner), you would be able to go after them for the loss of your assets. It should be the same case with bitcoins.
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IRS notice not applicable ... (Score:2)
i wonder if us customers can sue and use these laws.
Remember, though, the IRS considers Bitcoin "property" not "money".
So sue/press charges on Mt. Gox for loss/theft of property?
US IRS notices don't have much weight in Japan. :-)
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US IRS notices don't have much weight in Japan. :-)
That Japanese government may very well have the same issues with Bitcoin that the US government does. In fact, mast governments will, because they are looking for ways to control and tax it.
So, thanks for the "simile face", but just because Japan is not the US does not mean everything is hunky dory with Bitcoin in Japan.
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That wasn't a simile face. It was like a simile face though.
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The Japanese government, in typical Japanese government fashion, never updated any laws or regulations in response to the rise of Bitcoin. It is not clear if Karpeles broke any Japanese laws.
Same thing (Score:2)
Japan also considers bitcoin a commodity.
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Technically speaking, bitcoins are not financial instruments. Producing a bitcoin is effectively a gamble. So entirely bitcoin system is a gambling institution. And exchanges act as token brokers. In gambling terms, they are the house. I don't think casinos are treated as financial institutions though. And for anyone actually looking to regulate bitcoins, casinos are probably a better model. People can exchange chips among themselves anonymously. But if they want to exchange them at an "established" location, then they have to do it through a cashier acting as a broker. This is what exchanges are.
Except that they have "accounts" where they hold your money and do whatever they want with it in the meantime. It makes them much more like banks. Of course they go to great lengths to dispel that, since it would mean regulation and oversight.
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OK, now tell us how they differ :-)
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I was making a commentary about all the toxic paper passed off as financial instruments in the banking crisis and in what way it differs from betting on musical chairs.
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Actually since much of it was fraudulent in the first place, and based on the behavior of some who were involved they knew it, it was really more like fiat poker chips. It was perfectly obvious to anyone not willfully blind that it was all going to go bust at some point. They were playing so fast and loose that, in fact, in many cases the contracts were missing in action and nobody cared (at least until a judge came up with what was the apparently astonishing notion that you need to show you actually own a
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None of those loans were government mandated. They knew damned well the papers weren't AAA and could never be AAA. You drank the cool aid.
Not to mention the robo-signing.
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Not to mention the robo-signing.
Like I mentioned, this happened after the crises in a rush to resolve a huge foreclosure backlog. Yes, computer programs written in a hurry have bugs. Edge-cases get missed and not accounted for in checking for validity of ownership. This has nothing to do with what happened in the run-up to the crises.
None of those loans were government mandated. They knew damned well the papers weren't AAA and could never be AAA. You drank the cool aid.
Yes, I am also a witch. Because you know, if I agree with you, I am right, if I know of facts which make you wrong, I am a witch. Must be really easy to live such a world. HInt: you are hyped up on adren
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it's an outright lie.
I hereby challenge you find any statute or regulation that required talking a naive buyer into buying a McMansion they could never in a million years afford rather than an affordable starter home.
And in case you forgot, I was implying that the funny paper was indistinguishable from gambling on musical chairs.
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I hereby challenge you find any statute or regulation that required talking a naive buyer into buying a McMansion they could never in a million years afford rather than an affordable starter home.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Legislative_changes_1989
Here's an excerpt:
"...According to Ben Bernanke, this law greatly increased the ability of advocacy groups, researchers, and other analysts to "perform more-sophisticated, quantitative analyses of banks' records", thereby influencing the lending policies of banks. Over time, community groups and nonprofit organizations established "more-formalized and more-productive partnerships with banks..."
Arbitrarily enforced regulations d
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And in case you forgot, I was implying that the funny paper was indistinguishable from gambling on musical chairs.
There are point of fact, and there are points of law. Consider a situation A: a car runs over a pedestrian because the pedestrian ran in front of it and the driver couldn't possibly stop. Now consider a situation B: a drunk driver runs over a pedestrian crossing on a green light. In fact, from the perspective of the pedestrian, they suffered the same fate. But from the point of view of the law, they didn't. Your argument amounts to saying that because two situations are similar in fact, they are identi
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I see nothing there about requiring huge loans that can never be paid off. Not one single thing. Just a bit of "quit being racists" and "people may be watching" Certainly there was nothing mandating that they set the loans up to fail with built in time bombs (the balloon) and definitely nothing about claiming they were a AAA investment and getting rid of them like a hot potato.
Meanwhile, there were credible warnings that it was all going to blow up a couple years in advance. They were thoroughly ignored bec
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No, I am arguing that getting hammered and then playing slalom with pedestrians is close enough to homicide that there is little point in drawing a distinction. The law agrees.
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I see nothing there about requiring huge loans that can never be paid off.
Don't need to require it. It's enough to create a market place in which banks that don't do that can't stay competitive. Not everything government-created situation is do-or-die. It's not an order every time. If the government makes all banks in Column A play by one set of rules and all the banks in Column B play by a much more beneficial set of rules, it's not forcing the banks in column A into anything harsh. But bank in column B simply push banks in A out of the market place. And in that situation
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No, I am arguing that getting hammered and then playing slalom with pedestrians is close enough to homicide that there is little point in drawing a distinction. The law agrees.
Right and that has nothing to do with it. The driving was not an analogy. It was an example that demonstrated clearly the distinction between points of fact and points of law. Financial instruments, even if one buys your drool about them, maybe similar to bitcoin in fact, but they are still different in law. You want to ignore the legal distinction, but you can't. It's just there. You can't ignore their being contracts which the courts can enforce as opposed to bitcoins which are not contracts which t
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Since my argument was one of practicality, what's your point? The courts enforced nothing so any legal distinction is moot.
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Don't need to require it. It's enough to create a market place in which banks that don't do that can't stay competitive.
Since the market was there government or no, you don't get to blame the government. It was just banks foolishly grabbing for cash using the thinnest of excuses. A very few banks (like RBC) chose to behave like responsible adults, so they were never in trouble. The other banks could have done the same but they freely chose not to.
You failed completely to address the fact that the loans were structured such that foreclosure was nearly inevitable.
The phrase "I see nothing there" is a polite way to say "you are
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Unfortunately, since Mt. Gox was not regulated as a financial institution under Japanese law
And to point out that bitcoin was entirely based on chance and provided no contractual obligation. Financial instruments do derive their value, at least in part (non-zero part unlike bitcoin), from legal contractual obligations. Thefore, treating of trading of bitcoins the same way that the financial instrument exchanges are treated would be less straight-forward than the summary implied.
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Since the market was there government or no, you don't get to blame the government.
Yes, you do when the government policy directly changes the market. The fact that the government used one form of influence over another form of influence speaks of their methods. But it doesn't absolve them of responsibility for their accomoplished results. Their followed a policy which created encouraged self-destructive behavior among banks. How do you let them have pass on that just because the banks were already there to begin with?
The phrase "I see nothing there" is a polite way to say "you are hallucinating or delusional, I'm not sure which".
No, it's not. It's a subtle way to pretend that you understand mo
Now we'll find out something (Score:5, Insightful)
Now that ex-employees are talking to the press and the cops, we'll find out what was going on.
The Reuters article makes it clear that Karpeles had exclusive personal control over Mt. Gox's cash. That probably means he'll be the one going to jail. I've been writing for months (ever since Mt. Gox suspended US dollar withdrawals last summer) that Mt. Gox was either incompetent, broke, or crooked. Now it looks like all of the above.
Why would Karpeles import a Honda Accord R from the UK to Japan? They're made in Japan.
Re:Now we'll find out something (Score:5, Informative)
He imported a Civic, not an Accord. There are two cars called the "Civic Type R", one of which is made in Japan (and also sold in the US) and the other is made in England (and sold in Europe). The former looks like this:
http://www.allvehicles.co.uk/c... [allvehicles.co.uk]
The latter looks like this:
http://upload.wikimedia.org/wi... [wikimedia.org]
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You think a guy steeling that kind of cash would have gotten something other than a Honda Civic from England. He either has bad taste in cars or he wasn't squandering money quite as lavishly as this article leads you to believe.
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This is in Japan. You can't really get supercars there so you have to settle for more modest bling.
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As someone who was almost hit by a bright yellow Ferrari while walking to work in Ginza, I'll take this opportunity to laugh at your ludicrous claim.
P.S. http://www.tokyo-rossoscuderia... [ferraridealers.com]
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You think a guy steeling that kind of cash would have gotten something other than a Honda Civic from England. He either has bad taste in cars or he wasn't squandering money quite as lavishly as this article leads you to believe.
I couldn't agree more. Unless he was really trying to impress a single mother of two in Japan.
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The European version of the Civic (made in the UK) is actually a very fun car to drive, even the low end models have excellent handling and are fun to thrash on a curvy road. I have to imagine the Type R is pretty good fun to drive, and while they might not have the bling factor of a Ferrarri, they have Honda reliability not the cantankerous and impractical nature of an Italian supercar. There are many worse choices he could have made.
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Ah, you're right. I got it mixed up with the "Civic Si" which is a similar but slightly different car.
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Yes, that's what similar means.
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Well, the article said it was a Civic. The Honda Civic is made in Swindon (southern UK) and presumably he wanted the version of the Civic that's not manufactured in Japan (the European Civic is vastly different to the US one for instance - might be the same case with the Japanese version).
Re: Easy (Score:5, Informative)
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Taking most of the revenue for yourself while using the money of later investors to keep earlier investors sweet = Ponzi, bro.
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that would imply that he was inflating market value of bitcoins just to get more people to buy bitcoins... which doesn't really sound plausible with the money he had.
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That's exactly what a Ponzi scheme is. Fraud, claiming that you are making money when you aren't, and paying out people from the money contributed by new investors.
As I have mentioned elsewhere.
You should also probably look up Ponzi's as well, it is not some generic term you can trough at any sort of fraud. It is a specific type of fraud that does not apply here (MtGOX never returned a percentage per day/week/month/year as interest).
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that's fraud and practically a Ponzi scheme.
Yep, it is total fraud, but it is not "practically a Ponzi scheme", it is just plain old fraud.
Exchanges with interest (Score:2)
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there are a number of exchanges that pay interest on your holdings on the exchange.
That just screams "Ponzi scheme". Where's the money coming from?
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Securities fraud to be exact. When they opened a US branch they opened themselves to US law. The IRS just ruled that bitcoins are property not currency. As a result they fall under US securities laws. And amazingly the US fed's have been investigating them for a while.
The SEC is going to eat the CEO for lunch, just wait. It's going to take a little while to build the case depending on when they started the investigation but I'd wager within 2-3 years he's going to be charged with violations of US securities
Screw Mt.Gox (Score:2)
Anyone knows what really happened with CoinEx.pw?
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Who said I had any money there? Unless you think 1000 Doge is a huge fortune.
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Update: CoinEx.pw is online again and all my coins are still there.
Pro tip (Score:5, Insightful)
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Videos from the Mt Gox office (Score:2)
https://www.youtube.com/watch?... [youtube.com]
Wrong on many levels (Score:4, Informative)
You know things are really screwy when Japanese cars are being imported from Britain to Japan.
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It's a car built in Britain that is exported to Japan.
http://en.wikipedia.org/wiki/Honda_Civic_Type_R#FN2_chassis_.28European_version.29 [wikipedia.org]
Production of the current generation of the Civic Type R hot hatch for the European market finished in October 2010.
Honda’s Swindon plant will continue to build the car for the Australian markets. It is also exported to Japan and marketed as Civic Type-R EURO in limited edition in fall 2010, following a successful run in November 2009.
The Honda Civic Type R Euro has been a solid hit in Japan. The UK-built hatchback packs 201 horsepower, love-it-or-leave-it styling and a suspension that has been honed on the lunging tarmac of Europe. No, it may not be as fast as its predecessors, but that hasn't stopped Japanese buyers from snapping them up in troves. Honda says that since the car went on sale in November, the company has sold 1,850 units on its home turf.
This is not unheard of even for GM: Pontiac GTO, Pontiac G8 GXP, Chevy SS were all built in Australia.
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Many Japanese manufacturers have different models for Europe, Japan and the US. It's a combination of tailoring the product to the local tastes and regulations, building the cars in those markets from parts that are more widely available there, and wanting to prevent too much import/export as currencies fluctuate.
That last one is a big deal - in the course of about six years the Pound went from being worth 225 yen to 120 yen and now back up to about 170 yen. If you imported a car to the UK back in 2007 for
Wow. Still not sure how they spent it all. (Score:2)
MTGOX charged 1% fees (.5% from both sides of a trade) and had volumes in the 50 million range for many months. They often had earned a profit in the range of 500,000 every month. That should be close to the amount they were spending on all of this junk plus employees. I still do not see where all of the dough went even with the extravagances shown.
It has also been shown that they did not have large amounts of transaction malleability theft as well. Something else happened. Like the owner keeping the c
Weasely sentence in the article (Score:4, Insightful)
"It is unclear how Japanese law would treat any such diversion of customer funds as Mt. Gox was not regulated as a financial institution. As a private firm in which Karpeles held an 88 percent stake with no declared debt, Mt. Gox was under no obligation to share any details on its finances."
The lack of regulation means that they cannot prosecute the *lack of disclosure* but the article makes it sound like it implies they cannot prosecute the fund diversion itself. Of course you can, it's embezzlement, there are laws on the book against it, and no you don't need to be "regulated" for these laws to apply.
Financial regulation is something that can make such frauds harder to perpetrate, it's not what makes is illegal. Sheesh.