(CNN) – Japanese police have arrested the head of the Mt. Gox bitcoin exchange company over the loss of a “massive amount” of the virtual online currency.
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Before it collapsed, Mt. Gox was considered the Internet’s largest hub for trading bitcoin.
At the time of its closure, Mt. Gox said that it couldn’t find 850,000 bitcoins, leaving raging customers out of pocket. They were worth about $480 million at the time of the disappearance.
The Japanese government is charging Karpeles with cooking the books, using fake accounts to fill orders, fraudulently skimming funds in the process.
In a statement the Tokyo police said: “He [Karpeles] created false information that $1m had been transferred into the account, when in fact it had not been”. Investigators claim that Karpeles played the system for years, skimming bitcoins while the exchange was actually in debt.
It later said it found about 200,000 of the virtual currency.
Kyodo News service is quoting Karpeles’ lawyer as saying his client is denying any wrongdoing.
Bitcoin is produced through a series of complex chains of processes that safeguard the decentralized network of the virtual currency and process transactions, also known as “mining”.
But regulators argue the lack of legal framework governing the currency, the opaque way it is traded and its volatility make it unsafe. Some 650,000 bitcoin still remain unaccounted for since the exchange shut down in 2014, which Karpeles blamed on a computer flaw.
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This Bitcoin ecosystem held a 70% market share within the cryptocurrency market around the world before it collapsed in 2014. A local official familiar with the investigation told the Journal that some of the bitcoins that Karpeles said were stolen may not have existed.
