Reuters reported that the Mark Karpeles has to come to the US to discuss the Mt.Gox Chapter 15 bankruptcy. The company filed bankruptcy in Japan but are also dealing with a class action filed in Chicago.
Last month, Karpeles asked a Dallas court to grant Mt. Gox Chapter 15 bankruptcy protection, in part to put a stop to a class action that had been filed by U.S. customers in Chicago federal court.
The chief executive of Japan’s Mt. Gox, once the world’s leading bitcoin exchange, was ordered to the United States to answer questions related to its US bankruptcy case, filed after the company lost $400 million of customers’ digital currency.
US Bankruptcy Judge Stacey Jernigan has ordered Mark Karpeles to appear on April 17 in Dallas at the offices of Baker & McKenzie, the law firm that represents Mt. Gox. Karpeles’ testimony could help solve the mystery of what happened to money and bitcoins that were entrusted to Mt. Gox by its clients, most of them from the United States.
Karpeles controlled the company’s financial records and may be the only person who knows where the company’s assets and money might be, Steven Woodrow, an attorney for US customers, told the Dallas hearing.
Jernigan limited the deposition questioning of Karpeles to issues pertaining to whether the court should grant permanent bankruptcy protection to Mt. Gox.
The case is In Re: Mt. Gox Co Ltd, US Bankruptcy Court, Northern District of Dallas, No. 14-31229.
It smells like Enron to me. They should be in front of a grand jury, not a bankruptcy judge. The Bitcoin ledger works perfectly, keeping track of all of the transfers of BTC within the network while making sure that no single bitcoin is transferred from one computer to more than one computer, all while the mining continues. Yet, $400 million in the wallets disappears at the exchange. I bet that Mt. Gox’s CEO believes that in time they can put that money back in their pocket without anyone knowing. They couldn’t back up the system to keep that data from disappearing? I don’t buy it.
Like many Bitcoin businesses, the guy was incompetent. They ran en exchange so the transactions were not on the blockchain, they were internal to Mt. Gox. Then there is the issue of managing bitcoin balances in the accounts and doing withdrawals in real bitcoins.
The claim by Karpeles is that he was fooled by “transaction malleability.” When there is a transaction a cryptographic hash is created and stored on the blockchain. There was way to create an identical with a different hash so if you just search on the hash you will miss the transactions. Mt. gox is claiming people kept claiming the transactions did not go through so they were sent more bitcoin in error. However, this issue was identified on the Bitcoin Wiki in 2011 and Karpeles was in charge of managing the Wiki back in 2011 when the issue was published. Apparently the latest story is that the issues were a combination of this “transaction malleability” and mismanagement of internal wallets. Karpeles would spend his time tinkering with servers and installing tech gadgets rather than managing the business so he never did much to fix problems.
These guys are mostly gamers, not business people. You should see some of the stupid things they do. If you get Bitcoin the first thing you need to learn is cold storage that you manage yourself.