Mt. Gox CEO Charged With Stealing $2.7 Million 99
An anonymous reader writes: After being arrested six weeks ago in Japan, Mt. Gox CEO Mark Karpeles has now been formally charged with the theft of $2.66 million worth of clients' money. "Tokyo-based MtGox shuttered last year after admitting 850,000 coins — worth around $480 million at the time, or $387 million at current exchange rates — had disappeared from its digital vaults. The exchange, which once said it handled around 80 percent of global Bitcoin transactions, filed for bankruptcy protection soon after the cyber-money went missing, leaving a trail of angry investors calling for answers." Karpeles still denies doing anything illegal. The case is proving difficult for Japanese authorities to unravel, and they're taking it as slowly as they legally can.
just copy the bitcoins (Score:5, Funny)
Re:just copy the bitcoins (Score:4, Informative)
He's going to jail. In Japan, the prosecutor decides if you are guilty, and then the court just rubber-stamps the decision. The conviction rate is over 99%.
Re:just copy the bitcoins (Score:5, Funny)
Sounds like he didn't have the Wright defense attorney.
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The Wright brothers flew planes you insensitive clod!
Maybe, but did those planes ever rise from the ashes, like an Ace Phoenix!
Re:just copy the bitcoins (Score:5, Insightful)
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If the courts will rubber stamp, the threshold for "cases they are nearly certain to win" is much lower than it might otherwise be.
Re:just copy the bitcoins (Score:5, Interesting)
Also, there has been something of a tradition that many judges are inclined to trust the prosecutors/police, that's only more recently been whittled away at with some of the evidence that's come to light in old cases with DNA evidence brought in. Consider Hakamada Iwao, who was found guilty of murder, only to be exonerated 45 years later when DNA testing proved his innocence. One of the original judges reportedly considered committing suicide out of shame over it:
http://www.theguardian.com/wor... [theguardian.com]
http://www.nytimes.com/2014/03... [nytimes.com]
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Consider Hakamada Iwao, who was found guilty of murder, only to be exonerated 45 years later when DNA testing proved his innocence. One of the original judges reportedly considered committing suicide out of shame over it:
Yeah, he should have committed suicide. If you are prepared to take away 45 years (more, actually) of someones life you had better be pretty certain that they are guilty.
Terminology problems (Score:3)
The term vault shouldn't be used anyway, unless the "vault" computer is literally air-gapped. We have a vault for storing data for legal purposes, it's a literal interal concrete structure within the building with a reinforced steel door, and only a few people have keys that open it. The only wiring going in there is for lights and fire alarm/smoke detectors. No outlets, no data, no phone. It's not a bank vault, but it would require a degree of commitment to get in there.
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There is splashes of little ironies through out the comedy that this incident has caused. Most of the bitcoin wallets were indeed held off line, so had the attack been an outside intruder only so much currency would have been there to steal. Following the physical layout of a 'real' bank is wise, as long as nobody lets the bank manager run off with the contents of the vault in an armored truck.
Re:Terminology problems (Score:4, Informative)
Most vendors who really take BTC (as opposed to just using an instant-exchange payment processor to convert it to USD) do exactly that (though they use the term "cold storage").
They have a live (hot) wallet and an offline (cold storage) wallet (and usually a "watch" wallet, which allows verifying transactions to the hot wallet without any risk of compromise); the hot wallet regularly sends its balance (over a certain amount you want on hand) into cold storage, leaving only what you can bear to lose in the hot wallet.
The cold storage never even needs to power up unless you want to withdraw from it (which takes a few extra steps to do securely - Basically you need to make a new cold storage wallet and spend the entire old one between your hot wallet and your new cold storage wallet); but when talking about having a few million dollars on hand, only a moron would try to save themselves the extra five minutes it takes to do it right, once a month or so.
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I have seen the term "vault" used quite loosely. To me, a true "vault" is something as described above -- has secure HVAC, fire, and electric routing, and has a door that is at least 15-30 minutes resistant to heavy duty power tools (TL-15/TL30.)
However, this word is used in computing. In Netbackup the term "vaulting" is used for copying data from one set of media to another, so if a restore comes in, and a disk doesn't have it, it will know to go fetch a tape out of a silo.
I've also seen the term "digita
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That the individual in question has not been disappeared, based upon the nature of the criminal activities associated with the currency, is a pretty solid indication that, local to Mount Gox, organised crime was involved in the major theft and paid the commission and provide the protection.
But what about the MTG cards? (Score:5, Funny)
What happened with all the MTG cards?! They've got to be worth something!
If he stole 1 billion worth (Score:4, Interesting)
he could have applied for a gov bailout and used that to pay himself a bonus.
Here's a question (Score:3)
A rhetorical one, but one you should find out the answer to none the less: What was the repayment rate of the bailout loans?
See it turns out the money wasn't a gift. The government didn't say "here's free money," rather they made loans, acting as the lender of last resort (which is something governments do to stabilize financial systems) but as with any loan, repayment was expected when possible. So go have a look and see what the repayment rate was, I'm not going to ask you to take my word for it, and let
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they broke the laws of morality and ethics -- but pretty much everything they did (that I know of anyway) is technically legal according to US law.
I think what GP was referring to with the "pay themselves bonuses" is that the bailout enabled banks to pay high performance bonuses to managers that had contributed to the disaster. That is pretty directly rewarding the unethical scum via government intervention.
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The problem wasn't really the loan itself. The problem was that the interest rates on the loans did not reflect the fact that the borrowers were typically insolvent before the loan. The low interest rates constituted a gift.
They should just ignore it (Score:1, Interesting)
The freedom loving butt coin investors loathe government involvement; until of course somebody steal from them at which time they go crying for help.
The Japanese government should just wash its hands of the matter and ignore it as being of no concern.
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And I hope* you have a serious stroke and a long (otherwise) healthy life - having locked-in syndrome for 50 years may help you realize that judging another person without proof may not be so smart...
(* not really even if your death wish almost get me there)
Caveot Emptor (Score:5, Insightful)
Hard to have any sympathy for the situation. If you sign up for an currency that is designed to be outside of the world governments, don't come crying to the government that dumb ass idea blew up in your face.
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But in this case the government did do something about it -- and I think it's quite possible that jail time like this will be a far more effective deterrent than the giant bailouts the banks got in the US.
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Re:Caveot Emptor (Score:5, Informative)
Although your conclusion
there's no guarantee that those people will get their money back - unlike with a government-issued, government-insured currency.
is sound, it's actually a little more subtle than that. The reason that people who lost money in Mt Gox can't get their money back isn't because it was in Bitcoin. In theory, the US government could decide to insure Bitcoin deposits in FDIC-regulated banks (of course they don't currently), even though the US government can't print Bitcoin (of course, the value of that guarantee is only as good as the US government's ability to get its hands on Bitcoin if a bank goes under). The reason people won't get their money back from Mt Gox is because Mt Gox isn't an FDIC insured bank. Even if people just deposited US Dollars in Mt Gox, they would have lost everything when it was stolen because there is no "deposit insurance" for a company that isn't FDIC-insured.
While it may seem like I am being pedantic for the sake of a silly "gotcha," that is not my intent. Instead, the very important point that this illustrates is that there is a big difference between Bitcoin as a currency, versus "Bitcoin" as a financial system. As strong as Bitcoin as a currency may be, the Bitcoin financial system is barely embryonic and needs to do a lot to develop the kind of institutional heft that the current financial system has. Note that this does not have to be centralized (and certainly doesn't have to be done through a government), but it's much more likely that large numbers of ordinary Joes will use Bitcoin only if the larger system is more robust.
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The reason that people who lost money in Mt Gox can't get their money back isn't because it was in Bitcoin. ... The reason people won't get their money back from Mt Gox is because Mt Gox isn't an FDIC insured bank.
Your point is sound (deposit insurance is different from who or what issues a currency), but in practice that distinction doesn't help anyone looking to replace their wealth storage in dollars with something else. The reason Mt Gox isn't an FDIC insured bank is because their deposits are in bitcoin, and FDIC doesn't insure anything that isn't in dollars.
I seriously doubt the US government will start insuring bitcoin deposits because 1) it doesn't control the currency, and 2) because it wants to encourage p
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I seriously doubt the US government will start insuring bitcoin deposits
It's actually not as strange as it seems. The government insures any and all kinds of securities under SIPC [wikipedia.org] as long as the institution that is holding those assets is insured. I just used FDIC because that is what people are more familiar with. But FDIC is to insure a deposit in a bank, which as we all know isn't actually held in the vault, it gets lent out to some guy buying a house or a car so if the bank has trouble, your money isn't there. But Bitcoin at Mt Gox wasn't a "deposit" where they could then l
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Hard to have any sympathy for the situation. If you sign up for an currency that is designed to be outside of the world governments, don't come crying to the government that dumb ass idea blew up in your face.
If it were just that the bitcoins crashed and became worth nothing, that's one thing. Theft is another.
If you steal baseball cards that the market says are worth 100,000 - that's the amount that you're going to be tagged for.
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If you sign up for an currency that is designed to be outside of the world governments, don't come crying to the government that dumb ass idea blew up in your face.
It's not really a currency, it's far more like an easily trade-able commodity. Also, governments already regulate bitcoin as a trade-able commodity. The IRS treats bitcoin profits as capital gains, and you're required to report them as income when they're converted into something tangible. It's really not all that different from Gold,
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If I paid a company to host my photos and they lost most of them and sold the others without my permission and pocketed the money, they would be liable to criminal charges.
Ah so bit coins are intellectual property? And you have copyright on them? So we can charge him with copyright infringement with respect to your bitcoins for selling them without your permission?
And for losing some? Do you have a contract with them that shows they have to compensate you in any way if they 'lose' any of your 'bitcoins'? That would certainly be unusual in any hosting agreement I've ever seen - I know dropbox and facebook and spideroak and crashplan make no such promises, but maybe you have s
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Hard to have any sympathy for the situation. If you sign up for an currency that is designed to be outside of the world governments, don't come crying to the government that dumb ass idea blew up in your face.
No, it's even worse than that.... The folks that lost their money here put their BitCoin in another person's hands for safe keeping instead of keeping their OWN wallets locally. They took a basically untraceable currency, put it in an unregulated bank overseas (for most of them) and then where surprised when their accounts got raided because somebody figured out how to steal the currency electronically..
It's like they had the local pan handler on the street corner hold their stack of Jefferson's because i
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Stealing is still illegal, even if the thing being stolen is not currency backed by a world government. Hell, someone can steal US$ from you, and if it wasn't in an FDIC insured account, the US government won't reimburse you either.
There are plenty of dumb things done by the people who had their bitcoins stolen. Investing in a currency that is not controlled by a world government isn't one of them. Look at all the people who had held Yugoslavian dinars or Zimbabwe dollars.
A different approach (Score:2)
Bitcoin conflates two unrelated ideas: a new, non-governmental currency and confidential transfer of digital cash. Why can't we have one without the other - use blockchain technology to anonymously transfer real currencies?
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But anonymizing transfers of real currencies could bring large, trusted players into the field, such as Swiss banks. American money laundering laws would preevnt any US-based companies from getting into this field, but who's to know the identity of the patrons?
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US money laundering laws also apply to bitcoin. If you operate a bitcoin exchange in the US, you need to keep records on large cash transactions, and turn them over to the government. ("Large" here means $10K or more, or any batch of transactions that looks like it's intended to transfer $10K or more without triggering the reporting requirements.)
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That's exactly what Bitcoin does: it's a way to transfer real money around. It doesn't attempt to be a proper currency itself.
Although that doesn't stop people from thinking that it is, and then going around telling everybody that it sucks for not working well as one...
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Why can't we have one without the other - use blockchain technology to anonymously transfer real currencies?
IBM is working on it, and some big US banks say they're interested.
http://www.reuters.com/article/2015/03/12/us-bitcoin-ibm-idUSKBN0M82KB20150312
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I see a couple of practical problems with taking the bitcoin blockchain concept and attempting to apply it to balances denominated in government currency (or any other extenal asset)
1: the bitcoin blockchain gains it's security against modification of history from having lots of computing power behind it. That computing power is currently "paid for" by issuing new bitcoins*. The beauty of this system is that as the userbase grows and the value of a bitcoin grows the effective reward and hence the ammount of
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The problem is that existing governmental currencies are printed by those governments. Bitcoin is "mined" (meaning it can't simple be printed through very little effort). A government could decide to adopt and sanction a crypto-currency like bitcoin if it wanted, but it would have no direct control over the creation of that currency.
Bitcoin is basically like gold that is easier to store and transfer. No government gets to decide to make more gold simply by typing a sequence of keys on a keyboard. Mining
I'm sure there's a reasonable explanation (Score:3)
it's called a bonus.
Difficult investigation, or difficult charges? (Score:2)
What I'm wondering is whether this is actually a difficult investigation, or whether it's actually that the Japanese courts are having trouble deciding what to charge Karpeles with. I don't think there's a single government that has decided what Bitcoin actually is - a currency or personal property. If it's a currency, and it turns out that Karpeles was taking money from his business, that's embezzlement. If it's not, it's theft. There could also be fraud charges thrown in if, as some people suggest, the st
embezzlement: taking for your own use ANYTHING en (Score:5, Informative)
embezzlement:
The fraudulent appropriation to his own use or benefit of property or money in trusted to him by another
-Black's Law Dictionary
One can embezzle any type of property, including horses, currency, and chocolate. The distinguishing feature of embezzlement is that the culprit as been entrusted with the property. Theft would be if he took the thing from you without your permission. Embezzlement is when you hand him the thing, expecting him to hold it for you, but he uses it for himself.
Embezzlement applies to Mt Gox because people sent their stuff to Mt Gox willingly.
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> I don't think there's a single government that has decided what Bitcoin actually is - a currency or personal property.
It's a scarce digital commodity. Word documents or mp3 files are easily copied. Control of a bitcoin address, and whatever balance it holds, cannot. The control comes from a private 256 bit key, which is required to transfer control of the balance to another address. The balance can't be copied because you can trace it back through previous transactions to the point where the coins
We'll never know - Japan's investigators are bad (Score:4, Insightful)
Japan's criminal justice system is terrible, just terrible.
Crime is very low to start with so police are mostly helpful cop on the corner type or worst case dealing with drunks, gropers, or teen prostitution (but they usually don't bother with that one). There are a very few 'elites' who handle the nasty stuff, and they have an extremely high conviction rate because once they finger you you're going to jail whether you did it or not. Prosecution, defense, and judge all go with that (the detective said so!), so the only thing up for debate, really, is the sentence. There's a grand jury for a few things but they're mostly go along go along too.
And they know nothing at all about technology. There was a thing two (?) years ago where some mother's apartment dwelling otaku freak was cancelling Kurko's Basketball (a popular manga/anime) events left and right for over a year and they couldn't do a damn thing about it. Eventually the freak got so cocky he got careless and did things like using messenger cats. My memory's a little hazy, but it went on seemingly forever and the cops were completely helpless. And they're terrible with corporate crime like this (the handling of the Olympus affair was a disgrace) since usually it's all a matter of what Japanese politicians you have in your pocket - but apparently Mt. Gox didn't have any. Whoops.
I think Karpeles did it, or at least someone close to him at Mt. Gox did it, because it's just entirely too fishy, but I don't think this will prove it.
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I recall that Japan has a >99% conviction rate, which is pretty unhealthy for a democracy and is comparable to many totalitarian regimes. This probably means that for Karpeles his conviction will be a formality and it's just a question of how many years he's going to get.
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I recall that Japan has a >99% conviction rate, which is pretty unhealthy for a democracy and is comparable to many totalitarian regimes. This probably means that for Karpeles his conviction will be a formality and it's just a question of how many years he's going to get.
Well, you have to ask *why* the conviction rate is so high before rushing to any judgement. I'm not an expert, but Plea bargaining [wikipedia.org] is not allowed under Japanese law. So they can't use lower level criminals to help obtain evidence for higher level ones. There's no incentive for the low level criminal to cooperate, his sentence is the same no matter what. So they don't cooperate. Weak cases that rely on this sort of criminal cooperation just don't go forward due to lack of evidence.
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This is exactly the sort of thing
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Japan's criminal justice system is terrible, just terrible.
Crime is very low to start with
Okay, one of us doesn't understand the point of the justice system. If crime is so low the cops rarely deal with serious crime I'd say that it's working EXACTLY as intended and that you have a silly idea of the purpose of any given criminal justice system.
I realize as an American you think the goal is for the cops to put everyone in jail, but that in fact is not the case. The justice system is intended to make crime unappealing so that it is rare. Meaning that they are probably better cops than you're us
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I realize as an American you think the goal is for the cops to put everyone *else* in jail, but that in fact is not the case.
FTFY
Re:We'll never know - Japan's investigators are ba (Score:4, Interesting)
And they know nothing at all about technology. There was a thing two (?) years ago where some mother's apartment dwelling otaku freak was cancelling Kurko's Basketball (a popular manga/anime) events left and right for over a year and they couldn't do a damn thing about it. Eventually the freak got so cocky he got careless and did things like using messenger cats. My memory's a little hazy, but it went on seemingly forever and the cops were completely helpless. And they're terrible with corporate crime like this (the handling of the Olympus affair was a disgrace) since usually it's all a matter of what Japanese politicians you have in your pocket - but apparently Mt. Gox didn't have any. Whoops.
I was intrigued by this, so I did a little research. It's a shame you really did not do a very good job here with explaining what happened as your post was interesting and on topic, but yeah, this paragraph could have been a lot better. The "otaku freak" as you call him did not personally cancel anything as your writing seems to claim. What he did was send threatening letters, sometimes with suspicious liquids or powders, to various places that were associated with the anime or its writer in some way and those places canceled many events related to Kuroko's Basketball. As to why he apparently had it in for this particular anime, it gets into sub-genres of anime that I'm not really qualified to talk about it and it seems that maybe he had a problem with the people who were interested in it and focused his rage at the creators and supporters. Apparently popular anime series have "events" of some kind in various places, but I have no idea what goes on there.
Anyway, Japan sounds better to me than some countries I could name where not only is it impossible to lock up anybody for the rest of their life no matter how many people they kill, they actually start to feel sorry for the criminal because he's been locked up.
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He mixed up 2 different cases. One is the one you described, and the other is the 'cat' person using a "remote control virus" to taunt the police and got them to arrest the wrong person (whose PC is infected and used to send email remotely). He got caught and confessed eventually I think.
http://www.wired.co.uk/news/ar... [wired.co.uk]
http://www.japancrush.com/2012... [japancrush.com]
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Japan's criminal justice system is terrible, just terrible.
Crime is very low
Funny - I'd call very low crime rates a roaring success of the criminal justice system.
And how the hell did you get modded up so high by asserting both "CJS is terrible" and "crime is very low"?
The free market sorting it out? (Score:1)
Security Model Sounds Wrong (Score:2)
I'm not a cryptocurrency expert, so pardon my ignorance, but...
Am I seriously expected to transfer bitcoins from some "hot" wallet to a "cold" wallet and store that in a fucking safe???
I don't have a safe. I don't want to print/tattoo/OCR a wallet. I don't trust them to exist 50 years from now.
I do want to be able to keep as many copies as possible.
You know, like my bank has backups (they do, they're not going to forget anyone's debt, e-v-e-r).
I want a copy on my phone, all laptops, on an RFID card, wearabl
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The "wallet" in the article is really just your private key to be able to decrypt a set of bitcoin addresses which have had coins associated with it. It's not really a great analogy. The actual "wallet" is the blockchain, which is spread everywhere in the world. You just can't make a withdrawal (you _can_ make a deposit) from it without your private key to prove it's really you requesting the transfer.
Like any other sort of encryption, if you have the private key and passphrase, you can read it (and spend t
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One difference is that I can get my money out of a bank with pretty much any means to prove it's me, while I can get value out of a bitcoin wallet only by maintaining access to a 256-bit key that has to be kept secret. The bank system is much easier to deal with and understand.
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Exactly. You can lose your real life wallet and thus lose access to your bank and credit accounts, but those methods have a backup authentication system in place which people end up using all the time.
Someone with any serious amounts of bitcoins would be well advised to rent a bank safety deposit box (or two) and store an off-line backup of the key data required to reclaim their bitcoin addresses if they lost them.
Neither one helps you if someone robs your account by stealing your CC info or your encryption
Ofcource they are taking it slowly... (Score:2)