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Bitcoin CEO challenged in 2012 about irregular finances by employees

updated 10:47 am EDT, Mon March 31, 2014

CEO Mark Karpeles questioned by six employees about expenses, cash flow

The problems with shuttered and bankrupt Bitcoin exchange Mt. Gox may have been evident to employees as early as two years before its well-publicized meltdown. Six employees reportedly confronted CEO Mark Karpeles over money-handling in the organization, with the group alleging that customer funds were being diverted improperly to other expenses, such as a 3D printer, and a modified car imported from the UK for the CEO.

The employees challenged Karpeles in early 2012, according to Reuters, seeking more open disclosure of the company's finances. They demanded an answer to why it appeared to them that Mt. Gox was doling out far more money than it was taking in from transaction fees levied on users.

Karpeles denied the claims in the meeting, but didn't show any proof that things were running well. A person familiar with the matter said that Karpeles believed that his leadership was being challenged, and told the staff they had no right to examine the financial data from the company.

Technically, Mt. Gox had no obligation to share the data. Karpeles held an 88 percent share in the company, and had no announced debt. Furthermore, the company wasn't regulated as a financial agency in Japan, which further cut down the obligations it had for transparency.

In April 2013, Karpeles claimed that up to $20 million in Bitcoin were coming into the exchange daily, with $300,000 outgoing. A transaction fee of 0.6 percent of the trade value was assessed as the exchange's sole method of income.

Accusations of mismanagement and theft started before the closure, and continue. Hackers claimed to have stolen information pointing to a large amount of the crypto currency still in the exchange's hands. Mt. Gox also notes that it "found" 200,000 Bitcoints in an unused virtual wallet recently.



By Electronista Staff
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