Mt. Gox

Mt. Gox was one of the world's first bitcoin exchanges. The company ceased operations in February 2014.
== Background ==
Founded by software hacker Jed McCaleb, Mt. Gox was originally known as the "Magic: the Gathering Online Exchange." Its primary focus was selling cards from the trading card game series "Magic: The Gathering". In 2010, Mt. Gox began selling bitcoins. McCaleb sold the site in 2011 to programmer Mark Karpeles, who would become CEO. By April of 2013, Mt. Gox handled 70 percent of the world's bitcoin trades. 
As of July 2021 the Mt. Gox website contained notices about the still pending rehabilitation plan as well as links for creditors to access documents.
== Overview ==
During the summer of 2013, various technical issues led to Mt. Gox halting customer withdrawals in US dollars. Mt. Gox claimed that a "bug in the bitcoin software" could allow transaction details to be altered. Anonymous former employees have claimed that around this time, the development, maintenance, and cybersecurity measures of the company's trading platform and servers, not to mention the company itself, were in complete disarray. The insiders pointed to Karpeles, claiming "he liked to spend time fixing servers, setting up networks and installing gadgets" rather than fulfilling his duties as the company's CEO.
On February 23, 2014, Karpeles resigned as CEO of Mt. Gox. Incidentally, the official Mt. Gox Twitter feed erased all previous tweets from the account.
Reports on February 24, 2014 have said that Mt. Gox lost almost 750,000 bitcoin due to long-running theft. 
Mt. Gox filed for bankruptcy protection in Tokyo on February 28, 2014. It said 750,000 bitcoins belonging to its customers and 100,000 of its own bitcoins were stolen by hackers who exploited a security flaw in its software. It also said $28 million was missing from its Japanese bank accounts.
In the first confirmation of a criminal investigation at Mt. Gox, the exchange said on March 26, 2014 that it was working with the Tokyo police regarding the disappearance of bitcoins worth about $490 million. Much of that money was found late in a hardware wallet. Karpeles was charged and was on trial in Japan, a court case that began in June and continued through December 2018. He pled innocent to charges of embezzling about 340 million yen (more than $3 million) from Mt. Gox and manipulating Mt. Gox data. Prosecutors are seeking a 10-year sentence. The verdict is expected on March 15, 2019. 
=== Closing down ===
On February 25, 2014, Mt. Gox announced that the site would be shutting down to protect the site its users.
After its website briefly disappeared from the Internet, the site went back online. The Mt. Gox homepage displayed the following message:
"Dear MtGox Customers,
In light of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.
Best regards,
MtGox Team" 
In the first confirmation of a criminal investigation at Mt. Gox, the exchange said on March 26, 2014 that it was working with the Tokyo police regarding the disappearance of bitcoins worth about $490 million.
In August 2015, Mark Karpeles was arrested by Japanese police and charged with manipulating Mt. Gox's records in order to increase the balance of a certain account. After almost a year in prison, he went to trial in Tokyo for embezzlement and manipulating corporate records.
=== Finding the culprit ===
Swedish software engineer Kim Nilsson teamed up with other Mt. Gox customers to find the hacker or hackers that stole Mt. Gox's bitcoins. They formed a company called WizSec in 2014. By 2016, Nilsson had tracked a large number of the missing bitcoins to wallets owned by a single user. Nilsson tracked the user's posts on various online message boards, concluding they used the username WME. One day, Nilsson read an old post on a bitcoin forum in which WME posted a letter from his lawyer, with his real name plainly visible. Nilsson forwarded this to special agent Gary Alford of the United States Internal Revenue Service (IRS), who has a history of catching cybercriminals. 
In 2016, a Russian IT specialist named Alexander Vinnik was arrested by police while vacationing with his family in Greece. He was charged with helping run BTC-e, a digital currency exchange whose primary purpose was to launder money using bitcoin. Vinnik has denied the charges, but Nilsson and certain prosecutors believe that based on existing evidence, the connection between Vinnik and the Mt. Gox case is strong. The IRS investigation is currently ongoing.
=== The Mt. Gox Bitcoin Fortune ===
At the time of Mt. Gox's collapse, Mark Karpeles owned a majority share in the company. To date, approximately 200,000 BTC of the original 850,000 lost have been recovered. The bankruptcy trustee handling these funds has sold approximately $387 million worth of BTC, but an estimated $1.8 billion remains. Typically in such a legal case, the recovered assets are inherited by the company's shareholders. This means that Karpeles, who is currently on trial in Japan for embezzlement and manipulation of records, would get most of the bitcoins. This has caused a significant uproar in the bitcoin community - Karpeles has claimed to have received "very specific" death threats from enraged, anonymous people as a result. Karpeles has said that he doesn't want the bankruptcy to be resolved in this way. A number of Mt. Gox creditors petitioned the Japanese government to put the bankruptcy case on hold so that "civil rehabilitation" proceedings could begin. In Japanese law, "civil rehabilitation" is a process in which non-monetary claims, such as bitcoin, can be converted into fiat currency based on their value at the time of proceedings. On June 22, 2018, the Tokyo District Court issued an order of commencement for civil rehabilitation proceedings to begin.
On July 11, 2018, Karpeles issued a plea to the Tokyo District Court, saying, "I am innocent of all charges. I never once improperly used any funds during my work at Mt. Gox."
In December 2018, prosecutors at the Tokyo District Court sought a 10-year sentence for Karpelès. According to the report filed by the prosecutors, Karpelès "diverted company funds to such uses as investing in a software development business for personal interest" and "played a great role in totally destroying the confidence of bitcoin users."
In February 2019, Karpelès was refused a motion to stay a U.S. court case "in light of ongoing civil rehabilitation proceedings in Japan that are likely to provide full recovery" to plaintiffs Gregory Greene and Anthony Motto, two former customers of Mt. Gox who are holding Karpelès "personally liable" for losses incurred by investing in Mt. Gox. The Northern District of Illinois judge Gary Feinerman denied the motion. Following the denial, a status hearing was scheduled for May 1, 2019.
On March 15, 2019, Karpelès won a not-guilty verdict on the charges of embezzlement and aggravated breach of trust. His sentence was suspended for four years, although he was found guilty of falsifying electronic records by a Japanese court. He was sentenced to two and a half years in prison, but his sentence will not be carried out for four years, provided he maintains "good behavior."
In April 2019 Andy Pag, the founder and coordinator of Mt. Gox creditor organization Mt. Gox Legal, announced that he would be stepping down from his role with Mt. Gox Legal. He said that he had "put [his] career on hold for 18 months," and that he wanted to "move on with his life."
In October 2019 the office of Nobuaki Kobayashi, a trustee recovering funds on behalf of Mt. Gox's creditors, announced that it had contacted the U.S. Department of Justice seeking information about its investigation of Vinnik.
== References ==
 
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