In February 2014, Mt. Gox was the largest Bitcoin exchange in the world when it was shut down and $500 million worth of Bitcoin and client funds went missing. Investigators revealed Tuesday that Mt. Gox had apparently ran out of money six months before it announced that it was filing for bankruptcy in both Japan and the United States.
Mt. Gox’s CEO Mark Karpeles originally said that the loss of consumer funds was caused by a bug which allowed a hacker to spirit away the cryptocurrency.
Over the weekend, former Mt. Gox employee Ashley Barr hosted an ‘Ask Me Anything’ on Reddit to answer questions from former Mt. Gox investors. Barr was hired by Karpeles in 2011 and asked to become CEO in 2012 before he was dismissed for failing to find outside investors for the company.
Information released by Barr indicated that the company was spending far more than it was earning. During times when half the employees made less than $2,000 a month, Karpeles was spending lavish amounts on an expensive lifestyle complete with an exclusive high-rise apartment populated with a robot and 3D printer.
In his remarks, Barr recalls his experiences working with Karpeles, saying,
I remember just how unorganized he was, and how little he cared about dollars and cents. I had to talk him down from buying a Lamborghini as his first car.”
News of the exchange running out of money six months before bankruptcy emerges following Saturday’s arrest of 30-year-old founder and CEO. Karpeles was arrested and detained on suspicion for falsifying financial records in the Mt. Gox computer system in order to inflate his own bank account by $1 million. If found guilty for accusations of tampering with the exchange’s system, Karpeles could face up to 5 years in prison or a fine of up to $4,000. A lawyer acting on Karpeles’ behalf denies any wrongdoing.
Some members of the cyptocurrency community believe that Karpele’s arrest marks the end of bitcoin’s first era and remain hopeful for a future with less corruption.
Read more here- “Mt. Gox bitcoin chief Mark Karpeles Arrested in Japan,” (Charlie Osborne, CNET)