Former Mount Gox CEO Mark Karpeles receives suspended prison sentence for falsifying financial data but acquitted for embezzlement of bitcoins

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Mark Karpeles, the former head of Mt. Gox – a bitcoin broker that went bankrupt in 2014 – was convicted of data manipulation by the Tokyo District Court on Friday and imposed a two-and-a-half-year prison sentence, suspended for four years.

He was found not guilty on another charge of embezzling millions of dollars through customer accounts.

Karpeles, a 33-year-old Frenchman, was at the head of Mt. Gox filed for bankruptcy protection in 2014, after the disappearance of 850,000 bitcoins – an estimated value of 48 billion yen at the time – from its digital vaults.

Karpeles was arrested in 2015 and accused of embezzling a total of 341 million yen belonging to customers and kept in a mount. Gox account. He would have been transferred to his own account and used that money to lead a lavish lifestyle.

However, the court estimated that Karpeles had transferred approximately $ 33.5 million into a bank account managed by a Dallas-based bitcoin center in 21 transactions between February and September 2013. He used his personal computer and is hidden by falsifying the company's archives.

In Friday's ruling, the court said the problem was not that Karpeles had transferred money, but that he had acted against the interests of the company and beyond his authority when he had manipulated the company's records to conceal the transactions.

Prosecutors had called for a 10-year prison sentence, but the court had dismissed some aspects of their case by alleging the lighter sentence.

Among the problems involved was Karpeles' decision to use about 315 million yen of money purportedly misappropriated to buy a 3D printing company, which, according to prosecutors, was not necessary. Gox. The court concludes, however, that Mt. Gox used this money to acquire the business as a valuable and potentially profitable asset, calling the decision reasonable.

The court also ruled that it was not possible to determine that Karpeles had embezzled funds from Mount. Gox's clients, because the company did not have a proper accounting system for borrowing money from its executives, a common arrangement in small and medium-sized enterprises or private businesses without units accountants.

Presiding Judge Tomoyuki Nakayama said that the manipulation of the data has led to a loss of credibility of the cryptocurrency exchange services, given the size of the amounts invested.

The court stated that, given Karpeles' expertise in computer engineering and its position as a manager, the misuse of the information in its possession was not justifiable.

"The criminal responsibility of the accused can not be taken lightly," said Nakayama.

But the court decided to suspend the sentence since Karpeles had no criminal record.

Throughout the trial, Karpeles maintained his innocence, blaming the financial loss on an external hacking attack.

"I swear to God that I am innocent," he said in Japanese at a panel of judges at a hearing at the opening of his trial in 2017.

He apologizes to customers for the bankruptcy of the company but denies the allegations of manipulation or misuse of data.

Karpeles then recovered about 200,000 lost bitcoins from a storage device.

At one point, Mt. Gox said it handles 80% of bitcoin transactions worldwide. Following the closure of the company in 2014, angry investors began to question the security of crypto-currencies in general.