Nobuaki Kobayashi repeats extends the deadline for the same reasons as before — the number of “fully or partially disapproved” claims.
The trustee in charge of refunding users who lost money in the implosion of Bitcoin (BTC) exchange Mt. Gox has again extended the submission deadline for claims.
New claims deadline March 31, 2020
In a statement released on Oct. 28, Nobuaki Kobayashi said that the high volume of problematic requests for money meant that a five-month extension was inevitable.
Kobayashi confirmed the plan just one day before the current deadline arrived. That, too, was the result of an extension which the trustee agreed in April.
“A large amount of rehabilitation claims that the Rehabilitation Trustee fully or partially disapproved remains undetermined for being subject to claim assessment procedures and appeals against a decision on a petition for claim assessment,” he explained.
Kobayashi’s statement concluded:
“In light of the foregoing, the Rehabilitation Trustee filed a motion to seek an extension of the submission deadline of a rehabilitation plan at the Tokyo District Court, and, on October 25, 2019, the Tokyo District Court issued an order to extend the deadline for a rehabilitation plan to March 31, 2020.”
Almost six years since collapse
As Cointelegraph reported, a total of around 24,000 people were implicated in the Mt. Gox debacle. The exchange collapsed in early 2014, with a lengthy legal process still to award any refunds. Around 850,000 BTC (at the time worth $460 million) disappeared from its books.
The cryptocurrency industry is also keenly eyeing another exchange’s demise this year. Canada’s QuadrigaCX, the founder of which suddenly died in late 2018, still owes around $145 million to its 115,000 creditors.
Crypto worth billions upon billions of dollars has been lost to fraud. But what are the most common scams, and can they be stopped?
How can payment fraud be avoided?
Introducing better verification measures can go a long way to protecting consumers.
Amazon and eBay are often held up as good examples of how transactions should be handled in the wider economy. These sites often deliver impartial reviews based on the past activities of buyers and sellers, meaning it is easier for consumers to find someone reputable. Measures are also in place to protect both parties if a transaction doesn’t go to plan.
A multitrader marketplace called Kuverit is aiming to bring this to the crypto and fiat world alike. The company claims it is building the world’s first peer-to-peer platform that is designed to protect consumers from financial loss in fraudulent transactions, meaning they are guaranteed to get their money back. Through its infrastructure, users will be able to check the reputation of the person they are about to deal with, and view a baseline score that is partially calculated as a result of Know Your Customer checks.
Transactions of up to $5,000 in value can be guaranteed through the use of a guarantor, who is paid a fee to ensure that both sides receive their funds. Transactions that are larger than this are protected through so-called “co-op pools” where the risk is spread across multiple guarantors, a feature that is better suited for businesses and those who are making large deals. When something goes wrong, supporting evidence is provided to voters and auditors who look at the case and resolve the dispute. Niche protection pools also offer a financial shield for events that otherwise would have been uninsurable.
With trillions lost to fraud every year, Kuverit says its goal is to reduce customer anxiety, help establish trust within the community, and reduce the stress, uncertainty and apprehension that the crypto industry has been struggling to shake off in its quest for mainstream adoption.
Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.
I’m worried — can I track my crypto transactions?
Once a payment is sent, transactions can be tracked and verified through the blockchain.
For example, through a network such as Bitcoin, you can search for a transaction ID to check on the progress of a payment. The details provided include the total amount of fees that are being paid to miners, and how many confirmations the transaction has currently received. In Bitcoin’s case, six confirmations are required before the crypto has safely made its way to its destination.
Many other major cryptocurrencies, such as Ethereum and Litecoin, have their own blockchains where transactions can be verified. Payments involving ERC-20 tokens, a common type of crypto, are also verified through the Ethereum blockchain.
Global governments are also beginning to take an interest in tracking cryptocurrency, too. As Cointelegraph reported back in August, 15 jurisdictions around the world — G-7 countries among them — want to collect and distribute personal data on individuals who complete such transactions. The objective is to stop crypto from being used for illegal activities, namely money laundering and terrorism financing. More detailed measures are expected to be unveiled in 2020.
Tell me more — what are the most common ways to be tricked?
Exchanges, businesses, wallets and people that aren’t what they say they are.
For example, there might be a crypto exchange that looks like it offers fantastic rates and low fees on the trading fees you use the most. But, once you have made a deposit, it could be almost impossible to withdraw your funds. Another risk is entrusting your assets with a platform that has inadequate security measures in place. Just look at Mt. Gox — an astounding 850,000 BTC was lost all the way back in 2014, and those who were left out of pocket are still fighting to be reunited with their funds. Due diligence is essential — and even positive reviews found on crypto forums and social networks should be taken with a grain of salt.
Ponzi schemes are particularly disastrous because the number of victims can grow exponentially. Investors in these scams are normally under pressure to recruit as many others as possible to ensure that their profits rise. Indeed, they may even get a few payments to begin with — meaning those being duped often fully believe that they have stumbled across a real business opportunity. Ponzi schemes usually collapse when the pool of new recruits runs dry.
Phony crypto wallets are another issue. Apps posing as official wallets for NEO, Tether and MetaMask have been uncovered on the Google Play Store before now — and alarmingly, it seems they had hundreds of installs. The apps often requested a user’s private key and wallet password, sensitive personal data that would subsequently be used by cybercriminals to steal even more money. Other malicious pieces of software have piggybacked on reputable crypto wallet brands like Trezor.
Then, there are fake mainstream news articles and “official” social media pages that aim to capture crypto consumers who may have very little experience of the market. We’ve seen fraudulent investment opportunities that have claimed to have the endorsement of A-listers such as Elon Musk, Kate Winslet and Richard Branson — with Dutch billionaire John De Mol going as far to sue Facebook after the public lost an estimated $1.9 million falling for crypto ads that featured his image.
Facebook has even been a target itself, with fake pages on its social networks claiming to be official entities for the upcoming Libra cryptocurrency. They offered the chance for consumers to supposedly buy the stablecoin at heavily discounted prices, even though they hadn’t been launched.
How does payment fraud happen?
Fraudsters are getting increasingly creative — meaning constant vigilance is essential to protect crypto.
Ghost platforms that mimic legitimate exchanges. Fake platforms that invent users in order to make their business seem real. Clones of addresses that at first glance seem identical to the places you usually send funds. Yes, there are lots of great opportunities to be found in the crypto world, but fraud is big business.
Although sham initial coin offerings are not as commonplace as they once were (this fundraising method fell out of fashion a couple of years ago), exit scams remain. Crypto is raised for a business that looks exceedingly promising — complete with boasts of high returns — but then, the company disappears without a trace. In hindsight, the warning signs are there: the white paper was plagiarized, half of the team were not identified, and tough questions from concerned investors went ignored.
Higher levels of scrutiny are necessary because it can be nearly impossible to verify someone’s identity — not to mention their reputation — in the crypto world. All of this is affecting consumer confidence, and the adoption of digital currencies in general. Just look at 2019’s Blockchain Usability Report from the Foundation for Interwallet Operability. It revealed that just 25% of crypto consumers were “very comfortable and confident” that their transactions would be completed as planned. The rest described being very nervous and worried, somewhat stressed, or merely cautiously optimistic about the payment.
A district judge refused the request of the former CEO of now-defunct cryptocurrency exchange Mt. Gox to dismiss the U.S. class-action lawsuit.
District Judge Robert Kelly refused the request of the former CEO of now-defunct cryptocurrency exchange Mt. Gox, Mark Karpeles, to dismiss the U.S. class-action lawsuit against him, industry news outlet Coindesk reports on July 30.
Dismissal request rejected
Per the report, Karpeles previously filed for the dismissal of the lawsuit alleging that he has hidden issues at the exchange from its users by claiming that the Philadelphia court did not have jurisdiction in the case. An alleged court document of the ruling also indicates that the lawsuit has been initiated by former Mt. Gox user Gregory Pearce on behalf of the people affected by the collapse of the company.
Allegations of negligence and fraud
Pearce claims that Karpeles was aware of the presence of “security bugs in the system but did not make these defects known to the public.” Originally the suit was also brought against the exchange’s banking partner, Mizuho Bank, but the court found not to have jurisdiction over the bank. Pearce accuses Karpeles of negligence and fraud.
As Cointelegraph reported in April, the trustee of now-defunct Japanese cryptocurrency exchange Mt. Gox has extended the deadline for submission of rehabilitation plans.
Also in April, rumors started circulating that users who held Bitcoin (BTC) on Mt. Gox exchange and had certain self-admission rehabilitation claims filed for them could reportedly receive some of their funds back.
Fortress Investment Group has reportedly sent out an email offering to buy Mt. Gox creditors’ bitcoin claims for $900 per bitcoin.
Fortress Investment Group is buying bitcoin (BTC) claims from Mt. Gox creditors, according to a report by CoinDesk on July 8.
The Japan-based cryptocurrency exchange Mt. Gox filed for bankruptcy in 2014 after losing $473 million worth of bitcoin at the time due to an apparent hack. Bitcoin reportedly experienced a subsequent decline in value, dropping by 36% over the month when this took place.
As per the report, Fortress executive Michael Hourigan has sent out a letter to creditors detailing the buyback offer. According an apparent copy of such a letter, Fortress has offered to buy the bitcoin claims back at approximately double the bankruptcy value.
The value of the claims at the time Mt. Gox was declared insolvent was reportedly $451, while Hourigan says Fortress can offer $900 per coin.
The letter also notes that the purchase could be made in bitcoin or fiat money, and that the offer stands until July 31.
As Cointelegraph reported in April, Mt. Gox creditors may have claims for their lost bitcoins being automatically filed on their behalf. A Reddit user named DerEwige circulated an unverified screenshot of an email, which says:
“The creditors who objected to your self-approved rehabilitation claim withdrew their objections. As a result, the approval of your self-approved rehabilitation claim has become effective, and you no longer need to file an application for claim assessment.”
DerEwige interpreted this to mean that Mt. Gox users that did not file a rehabilitation claim after losing their crypto have had a claim automatically filed on their behalf, which has now been approved.
Mt. Gox founder Jed McCaleb allegedly misrepresented fund losses to keep traders on the platform, according to a lawsuit.
The latest in the long trail of events since the 2014 shutdown of the then-largest — but now defunct — cryptocurrency exchangeMt. Gox is a lawsuit that two former traders on the exchange brought against founder Jed McCaleb. The traders, Joseph Jones and Peter Steinmetz, allege McCaleb of fraudulently and negligently misrepresenting Mt. Gox to “induce” traders to use the exchange. The duo, who filed the lawsuit on May 19 in a court in California, allege that McCaleb was aware of “serious security risks” in the architecture of Mt. Gox back in late 2010 to early 2011, but neither followed-up to fix the issues nor disclosed the vulnerabilities to the public.
Was McCaleb aware of Mt. Gox’s security flaws?
The lawsuit from Jones and Steinmetz builds on the previous findings published in a Daily Beast report, that suggests that Mt. Gox had security flaws from its early days. The lawsuit claims that in or before January 2011 — when the Mt. Gox account was compromised, leading to the unauthorized sale of thousands of users’ Bitcoins (BTC) — McCaleb was informed about the security flaws and was aware that more than 80,000 Bitcoin had already gone missing.
Not long after, another breach, termed the “dictionary attack” — i.e., an attempt to gain unauthorized access to an account or computer system by trying several different passwords until one is correct — occurred, which involved at least two Mt. Gox accounts. McCaleb failed to take any action to fix the security issues, but instead sold the majority of his interest in Mt. Gox to the eventual CEO of the exchange Mark Karpeles, the lawsuit claims. Karpeles signed the sales and purchase agreement around February 2011. In a recent interview with Cointelegraph, Karpeles confirmed his belief that the security flaw in Mt Gox through which the attackers gained access was part of the original architecture of the platform:
“Mt. Gox was hacked prior to being transferred on from what ordinarily was made by the Mt. Gox creator McCaleb. I have not been able to review everything myself because right now the lawyer holds the files but based on what they could find on the blockchain, as for the stolen bitcoins, are basically analyzed from the different court documents that will be made available. I’m 99 percent sure that the hacking came from what originally was made by McCaleb, the original creator of Mt. Gox.”
The following email on April 28, 2011, obtained by The Daily Beast, suggests that McCaleb, who co-founded both Ripple and Stellar and currently serves as Stellar’s chief technology officer, knew about the missing 80,000 Bitcoin but did not disclose the information to the public:
Data obtained from Bitcoin.com shows that the price of bitcoin was, on average, $1.90, as of April 28, 2011.
Bitcoin Price on April 28, 2011
Indeed, as McCaleb wrote, Mt. Gox appeared to have made enough money to cover the loss of 80,000 Bitcoins, given that McCaleb came back around December 2011 to request an earnout worth $263,431 from Karpeles, in accordance with the sale agreement between the two. The supporting documents filed with the lawsuit include a purported email conversation between McCaleb and Karpeles:
Misrepresentations made by McCaleb?
After McCaleb handed over the reins of the exchange to Karpeles, Mt. Gox would go on to lose about 700,000 more Bitcoin to hacks and theft, all of which led to the eventual collapse of the exchange.
As of the time Mt. Gox halted withdrawals on Feb. 7, 2014, Steinmetz owned 43,000 BTC and Jones had 1,900 BTC, as the lawsuit shows. Based on the lowest Bitcoin price of $654.35 on the day, Steinmetz holding was worth roughly $28,137,050, and Jones’ 1,900 BTC was worth about $1,243,265
Bitcoin price from Feb. 7, 2014 to Feb. 8, 2014
Jones and Steinmetz claim that McCaleb reassured them about the security of the exchange, following the dictionary attack in 2011 An unknown amount of Bitcoin was missing due to this attack. In addition, the plaintiffs described themselves as experienced cryptocurrency traders and, as of the time of filing, they were still in pursuit of their lost Bitcoin.
Alleged misrepresentations that the plaintiffs mentioned include McCaleb saying:
These statements suggest that every issue of which McCaleb was aware was fixed and that no Bitcoin was stolen, a contradiction to findings that 80,000 Bitcoin was already missing. However, the purported misrepresentations above led users, especially the plaintiffs, to continue trading on Mt. Gox until the exchange ultimately sought bankruptcy protection in 2014, going by the following paragraphs in the lawsuit:
“Had plaintiffs known that the representations and omissions made by defendants were inaccurate, false and misleading, and designed to induce plaintiffs into utilizing the services provided by defendants, plaintiffs would not have selected Mt. Gox to do their bitcoin trading. As a direct, proximate and foreseeable result of defendants’ fraudulent misrepresentations and omissions, plaintiffs have suffered and will continue to suffer substantial damages in an amount to be proven at trial.”
A similar lawsuit filed against McCaleb by two different ex-users of Mt Gox last year showed email conversations with McCaleb that suggests that he was aware of the security flaws that had lead to Bitcoins going missing from the platform. The 2018 lawsuit, filed by Donald Raggio and his son Chris Raggio, claimed that McCaleb did not do enough to recover a total of 9,500 Bitcoins that were stolen from the pair’s accounts on Jan. 9, 2011.
Meanwhile, the struggles of Mt. Gox creditors to get their funds back is lingering. There had been hopes that creditors, of which there are approximately 24,000 people in total, might get paid before the end of 2019. However, the exit of the founder and coordinator of Mt. Gox Legal (MGL), Andy Pag, from the group has sprung new uncertainties. Pag, who decided to sell his stake in the group when he stepped down, said that the civil rehabilitation process of the failed exchange could take two additional years to reach a conclusion. Pag pointed at online legal issues including the recent petition from United States-based startup incubator CoinLab, which has issued a claim for $16 billion from Mt. Gox. It seems that the more the situation around Mt. Gox and its creditors develops, the more questions and accusations emerge.
On Wednesday, June 26, the price of BTC came close to reaching $14K. One hour later, it had dropped by close to 18%. Such events are known as a flash crash, a moment in time where a rapid-sell off happens and often times a few exchanges become inoperable. Over the last few years, especially when the market is extremely bullish, flash crashes have been prevalent.
The price of bitcoin core (BTC) took a dive on Wednesday after touching $13,850, dipping to $11,900 at an extremely rapid rate. In the midst of the drop, Coinbase suffered an outage and customers could not access the website. Not too long afterward, the San Francisco exchange detailed that the platform was operational again. The outage and the $1,700 flash crash was yet another reminder of the risks assumed when people use centralized trading platforms. Cryptocurrency traders have dealt with flash crashes a lot over the years and it’s safe to assume there will be more in the future. In order to understand these events, news.Bitcoin.com has collected data on some of the biggest crypto flash crashes of our time.
Flash Crashes Have Plagued Crypto Traders Since 2011
Mt. Gox June 19, 2011 and April 10, 2013
One of the first big flash crashes was in 2011 when BTC was trading for $2 per unit on Mt. Gox before suddenly creeping up to $32 per coin. At the time, bitcoiners celebrated the fact that BTC met parity with 1 ounce of 0.999 fine silver. However, on June 19, 2011, there was a large flash crash on Mt. Gox which saw the price plummet from $17 to $0.01 in a matter of no time. The sell-off was initiated by the announcement that Mt. Gox had been hacked. The Mt. Gox website was also inoperable at the time and customers could not access their funds. The exchange reopened that Sunday at 10 p.m. EST and not long after, most bitcoiners forgot about the incident.
Another crash that took place in the spring of 2013 saw BTC prices tumble from $266 to $100 in a few hours. At the time, BTC prices were extremely bullish, rising from just $13 in January to over $200 during the start of the spring. The crash took place on Wednesday, April 10, 2013, and during the downswing, Mt. Gox customers complained of login issues and extreme lag using the trading engine. Some trades allegedly took more than 70 minutes to process according to Vitalik Buterin’s recount of the day. The community assumed Mt. Gox was suffering from a distributed denial-of-service (DDoS attack) but Mt. Gox told clients it wasn’t a DDoS and said the lag was due to “high volume trades.” Another Mt. Gox tweet that followed said: “Network maintenance, don’t freak out!”
Btc.e Exchange, February 10, 2014
The now-defunct Btc.e exchange was a popular and long-running trading platform during the earlier years of crypto. On Monday, February 10, 2014, traders on the exchange watched the price of BTC drop from $620 to $102 in a matter of seconds. According to reports, the price of BTC bounced right back on the exchange two minutes later. “The crash is the result of what appears to be a single person selling at least 6,000 bitcoins significantly below the market price,” explains the Bitcoin Wiki page en.bitcoin.it/wiki. The crash record notes that the motivation behind the sale was a “subject of debate” and “the sale was made with apparently extreme loss.”
Bitfinex August 19, 2015 and November 29, 2017
In the summer of 2015, the price of BTC dropped 29% on Bitfinex in roughly a 30-minute period. The entire global average took a 14% hit that day, but on Wednesday, August 19, 2015, BTC prices dipped from $255 to $179.35 on the exchange. At that time, Bitfinex was one of the most liquid bitcoin trading platforms by volume and told the media the crash was “triggered by several leveraged positions.” Bitfinex executive Phil Potter explained in an interview that the exchange dealt with “technical difficulties” and “lag in its live engine.”
On November 29, 2017, Bitfinex had multiple flash crashes as the prices of NEO, OMG, and ETP reportedly lost more than 90% of value in minutes. At the time, Bitcoin futures had just been announced and the price of BTC was rallying toward $10k. The same day, BTC’s price corrected by 20% and Sam Aiken wrote a blog post on Medium describing how he lost a great deal of money. Aiken said the price of ETP instantly fell from $3.50 to $0.05, triggering stop-losses and liquidations. “A bit later ETP will fall down again from $2.7 to $1.00 and jump right back — After that NEO fell down from $33 to $4,” Aiken declared.
GDAX/Coinbase, June 21, 2017
Ethereum traders were shocked to see the price of ETH fall from $319 per coin to as low as $0.10 on the GDAX exchange, which is now called Coinbase Pro. The flash crash was blamed on a “multimillion-dollar market sell order.” Reports state that when the price of ETH dropped more than 800%, stop loss orders and margin trade liquidations took place. Coinbase vice president Adam White explained that “some customers did not receive the quality of service we strive to provide and we want to do better.” White revealed that the San Francisco-based company would reimburse traders after the flash crash. “For customers who had buy orders filled — we are honoring all executed orders and no trades will be reversed. For affected customers who had margin calls or stop-loss orders executed – we are crediting you using company funds.”
Kraken May 7, 2017 and May 29, 2019
The price of BTC to Canadian dollars (CAD) dropped on Kraken exchange from $11,200 to $101 on May 29, 2019. The drop was over 99% but it lasted only a minute or so before the price stabilized. Years prior on May 7, 2017, ethereum traders saw the price of ETH/USD plummet from a high of $98 per ETH to $26 a coin which triggered a cascade of margin liquidations. Kraken revealed that despite the fact there was a DDoS attack “the liquidations had been triggered and they could not be stopped – DDoS or not.” “The DDoS did neither cause nor exacerbate liquidations,” Kraken added. “[If Kraken should have halted trading while under attack] the consequences for traders would have been even worse.”
Poloniex, May 26, 2019
Poloniex, a subsidiary of Circle Financial, had a flash crash on May 26, 2019, when the price of clams (CLAM) plummeted. Reports state that margin traders saw the price of clams lose 77% in value in less than an hour. Poloniex revealed that the platform’s margin lending pool took a loss of $13.5 million thanks to a burst of liquidations. “The velocity of the crash and the lack of liquidity in the CLAM market made it impossible for all of the automatic liquidations of CLAM margin positions to process as they normally would in a liquid market,” Poloniex told customers. “Lenders impacted will see the reduction in their accounts when they next log in,” the exchange added.
Trade Safely: Flash Crashes Can Happen at Any Time
The flash crash last Wednesday is a good reminder that cryptocurrency markets are still very much prone to these incidents. It also should give large trading platforms a kick in the ass to prepare for large waves of users if 2019 is anything like 2017. Exchanges had more than a year to prepare for the next bull run and heavier usage. Traders who keep funds on exchanges should be aware that flash crashes could happen at any time and there may be a chance they cannot access funds when they need to trade. People should never put down more than they are willing to lose on a centralized trading platform.
What do you think of all the flash crashes over the years in crypto-land? Let us know what you think of think about this subject in the comments section below.
Image credits: Shutterstock, Vitalik Buterin, Pixabay, Patrick Lorio, Coinmarketcap.com, Mt. Gox, and Wiki Commons.
Joseph Jones and Peter Steinmetz have accused the ex-CEO of fraudulently and negligently misrepresenting the exchange.
The pair also allege that McCaleb was aware of “serious security risks” back in late 2010 or early 2011 — more than three years before 850,000 bitcoin (BTC) was stolen in an audacious hack. Their complaint adds:
“Rather than secure the exchange, McCaleb sold a large portion of his interest in the then sole proprietorship, and provided avenues to the purchases to cover-up security concerns at the time without ever informing or disclosing these issues to the public.”
Both of the plaintiffs describe themselves as experienced cryptocurrency traders. They said they were reassured by McCaleb following a “dictionary attack” in 2011, where a fraudster stole coins after targeting accounts with weak passwords.
The court document alleges that 80,000 BTC was already missing at that time, and claims that McCaleb sold a majority of his interest in Mt. Gox to Mark Karpeles instead of staying to repair the security issues.
While Jones said he owned 1,900 BTC at the time of Mt. Gox’s bankruptcy in February 2014 (worth $24 million at press time,) Steinmetz said he owned 43,000 BTC — crypto that would be worth more than $542 million at today’s rates. Both men are still in pursuit of their lost funds, and say they would not have used Mt. Gox had they known about the “significant security concerns” that existed in 2011.
In April, Mt. Gox rehabilitation trustee Nobuaki Kobayashi successfully petitioned a Japanese court to extend the deadline for the submission of rehabilitation plans to October 2019.
Meanwhile, back in March, former CEO Mark Karpeles was given a suspended jail sentence after being found guilty of tampering with financial records.
Mt. Gox was once the world’s biggest crypto exchange, and McCaleb later went on to become the founder of Ripple and the co-founder of Stellar.
Cointelegraph spoke with Mark Karpeles, former CEO of defunct crypto exchange Mt. Gox.
Disclaimer: The interview was edited and condensed for publication
Mt. Gox crypto exchange is well remembered — but mostly for a bad reason. The year of 2011 marked the biggest heist in terms of the amount of crypto stolen, an eye-watering figure of 850,000 bitcoins (BTC), worth around $473 million at that time. Four years on and only 200,000 BTC of that were recovered.
Most creditors still don’t know if or when they will ultimately get their funds back. Apparently, we may not see a conclusion any time soon, as Mt. Gox.’s trustee continues its standoff against the United States-based company CoinLab in court.
Meanwhile, recent reports that Mark Karpeles is working for Japanese company Tristan Technologies as its chief technology officer have unsettled the community, with many believing that Karpeles is now back in the crypto game. To clarify these rumors and to find out the details regarding Mt. Gox settlements, Cointelegraph spoke with the man himself, Mark Karpeles.
Media reports and rumors
Alex Cohen: First of all, let’s talk about recent reports that claimed you recently joined a brand new blockchain firm, Tristan Tech, as a CTO. You then took to the press to clarify that those reports were not accurate. Can you clarify all of this, please?
Mark Karpeles: This is not particularly a new role; I have been doing this since 2016. Tristan Technologies is a very small company. We have probably, I think, four employees, with two engineers, including myself.
So, it’s a very small entity and we’re working toward creating IT services — but nothing blockchain-related at this point, at least.
There are different reasons for why I work here. One of the reasons was that, at the time, I didn’t really have a choice anyway, considering I was just out on bail. And as such, it was not easy to find a job.
Also, I think Tristan Technology is a company that is very interesting on one specific point, which is that the director of the company is also my lawyer, who dealt with the criminal case in Japan..
I have an opportunity to work on things that most IT companies cannot do, because either it’s too complex or it’s about things people don’t even know is possible.
AC: So, just to clarify, do you have any plans to work in or with crypto, or do something blockchain-related right now?
MK: Well, of course, there are probably things I can still do in crypto. But I don’t think it’s the right timing, right now. It will depend on how things evolve in the future.
In the meantime, it is important to express and share what I have seen during my years at Mt. Gox and after that, and there is a book I’ve published in Japan that contains a lot of explanation – like what happened at Mt. Gox, what the status of cryptocurrency is, what has been done so far, and what needs to be done as soon as possible to make sure that crypto evolves and become something for the future.
Overall, Karpeles has not ruled out returning to the crypto and blockchain industry at some point in the future, after overcoming the most pressing obstacles:
MK: I don’t know when, it will not depend on me alone. It will also depend on the industry itself. Right now, I still have one trial ongoing in Japan.
The original charges include embezzlement and breach of trust, for which I have been judged innocent. But there’s only one thing remaining, to which I’m appealing.
So, it’s going to take some time, I believe. But I’m going to fight until the end to prove my innocence on this.
Legal battles continue on all fronts
The original charges against Karpeles were filed in 2015 on the grounds of breach of trust and embezzlement. He was eventually found guilty of record tampering and handed a 2 ½-year suspended jail sentence, which he is now appealing.
AC: How long do you think it will take until we see a conclusion to all the court cases?
MK: There are different legal processes going on at the same time in different places in the world.
I believe it’s going to be years until everything Mt. Gox clears out of the courts — maybe more, so it could be even 10 years, I don’t know. But I believe the thing most people are waiting for right now, really, is a bankruptcy itself. If we can just find a solution for creditors, I believe it would be much better for people than just waiting forever.
Actual progress right now depends on one specific creditor, which is a company called CoinLab. They are a firm that Mt. Gox at one point tried to work with to handle customers in the U.S. because of regulations. It was not really possible to do from Japan.
As it turned out, CoinLab didn’t get the right licencing, and they didn’t do things that were expected of them, so the agreement couldn’t move forward and CoinLab tried to sue Mt. Gox. We countersued CoinLab in the U.S.
In the meantime, Mt. Gox went into bankruptcy, so the lawsuit became a claim. So earlier, CoinLab filed a claim with Mt. Gox. But, with the recent petitions, they had a new $16 billion claim, which is completely preventing everything moving forward.
AC: During and after your trial, several media outlets reported that you have vast wealth stored in crypto. Is that true?
MK: Well, I wish that was true because I wouldn’t have to work. So, no, I don’t have any kind of crypto.
During the Mt. Gox bankruptcy, I was pushed to bankruptcy myself. I was detained for almost a year, during which time all my belongings were seized by the trustee fund. When I came out on bail in 2016, I came out with absolutely nothing.
The only thing remaining was a genuine distrust and simply the impossibility to get any kind of job — which, compared to this, actually I would say that I accomplished quite a bit, getting back on my feet. But I’m still far from done, I believe.
But still, if I had billions in crypto, it would have been so much easier for me. I did manage to finally create a bank account, but most banks would just say no, seeing my name. So, it’s been a while to find the bank that would let me even just create an account. I’m definitely not going to get any credit cards anytime soon.
When could Mt. Gox creditors get their money back?
AC: What of the amount that the creditors would be paid back? There were conflicting reports in the media, so is there a specific number?
MK: Well, I would say it’s confirmed because the only reason for it to get changed would be in case CoinLab gets a different amount approved, which is very unlikely, as far as I know.
I do not think the amount is going to be any lower than what it was going to be during the bankruptcy. It should also include cryptocurrencies such as bitcoin and bitcoin cash. But the case is that, I guess, it could take years.
For this, there are two parts: The trustee fund has actually secured more than $500 million worth of cash by selling bitcoins during the bankruptcy, and it has more than 100,000 bitcoin cash, which can be distributed too.
So, the only thing that remains would be to clear the CoinLab charges and then submit an original plan to the court. which would then outline a concrete road to implement the plan. So really, CoinLab is a big stopping block to moving forward.
Basically CoinLab has made a claim that is clearly outrageous. I mean, $16 billion is, by any kind of total, too much. And very clearly, it’s only there to delay the process in order to be in a better position when negotiating some kind of a settlement.
But quite clearly, the only way CoinLab would get any kind of money is if the trustee of the court approves a settlement — because the claim, as I know, has no merit.
In February 2019, U.S.-based bitcoin business incubator CoinLab upped its initial court claim against Mt. Gox from $75 million dollars to $16 billion. The original filing against the bitcoin exchange, which took place in 2013, implicated Mt. Gox of breaching a contract regarding the servicing of customers in the U.S.
Mark also shared his expectations regarding the outcome of the case against CoinLab:
MK: For the case, if it goes to the end, CoinLab will definitely lose and will not be awarded anything. I believe the trustee has a very good chance against CoinLab, as long as the case gets properly fought.
But the thing is, CoinLab is not fighting to win but to cause delays, because they know there is a big pressure on the trustee to clear everything as soon as possible, which is not an option as long as CoinLab is there.
Questions from readers
Ahead of the interview, Cointelegraph has asked the community to send in questions through social platforms. Here are several of them:
Does Brock Pierce have any right to the Mt. Gox URL?
MK: I do not believe Brock has the rights, as of today, for the URL or Mt. Gox itself. Of course, if he wants to take Mt. Gox, surely he can make an approach to the trustee, and the trustee would review it, discuss and decide whether it’s a good thing or not. But I do not believe — at this point, anyway — that this kind of thing will happen. Brock Pierce actually made two attempts at reviving Mt. Gox.
He came to Japan, so I met him in this office right here, actually, and we talked a little bit about different things. Basically, it didn’t seem like he had a solid plan to bring recoveries to creditors or to make things move faster. He seemed set on the idea of issuing a new coin. So, based on what I’ve seen, I’m not sure it would have benefited everyone equally.
Does Mark have any regrets about getting involved in the crypto world? And if he could go back in time and change anything what would that be?
MK: Well, I would say my main regret was to accept Mt. Gox instead of just creating a new exchange.
At the time, I didn’t have the overall experience I have today. When Jed [i.e., Jed McCaleb, the founder of Mt. Gox] came to me and offered me Mt. Gox — asking for money — I didn’t, at the time, find it suspicious. So no, with the experience I have today, I would never do those kinds of things.
Mt. Gox creditors are still waiting
AC: Do you still have any altercations with Mt. Gox creditors?
MK: I do have a lot of contact with many creators. I’m helping many people to try to go through all the process, which is in Japanese. Of course, I’m trying to do anything I can to help people, because today, I cannot do much more than that — although I’m making sure the bankruptcy process has anything it needs from me and trying to make it possible for creditors to contact me.
AC: In terms public perception, people were and still are quite suspicious of you. Do you think this notion toward you has softened over time.
MK: Being judged innocent of charges is actually a big stamp of approval from a Japanese court, based on the police investigation. So, I believe it’s actually helped restore a lot of trust and a lot of belief in people for me.
But, there’s still one case remaining, which I’m still fighting. Even if I am proven truly innocent, some people would just say that the court is not being fair or something. But actually, that would be an uphill battle, because Japan tends to have a very high conviction rate.
Justifying that I am innocent of the charges, the prosecution didn’t decide to appeal this. Something that I didn’t expect to happen. I believe this really means something.
Tron CEO Justin Sun gets to lunch with Warren Buffett for $4.5 million, while Facebook’s coin may come out this month.
Coming every Sunday, the Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions, and much more — a week on Cointelegraph in one link.
Mark Karpeles, the former CEO of long-defunct Japanese cryptocurrency exchange Mt. Gox, denied press claims this week that he is returning to blockchain. Karpeles said that his activities with Tristan Technologies will not involve the cryptocurrency sector, as previously reported, and that the firm is not a startup and not related to blockchain. In comments to Cointelegraph, Karpeles said that he wasn’t “sure how this got reported wrong” and that his main goal is to “try to bring back Japan near the top of the IT industry.” A judge acquitted Karpeles of embezzlement in March and is currently appealing a lesser conviction of data manipulation, all in relation to the hack of Mt. Gox.
Canadian startup Kik has been sued by the United States Securities and Exchange Commission (SEC) for an unregistered $100 million token offering. According to the SEC’s complaint, the commission alleged that Kik’s digital token sale was not compliant with U.S. securities laws, as it had not registered the offering with the proper authorities. The SEC’s complaint comes right after Kik’s recent announcement that the company is launching a $5 million crypto initiative to fund a lawsuit against the SEC, with a campaign called DefendCrypto. Steven Peikin, co-director of the SEC’s Division of Enforcement, said in a press release that, by conducting its kin token sale, Kik “deprived investors of information to which they were legally entitled and prevented investors from making informed investment decisions.”
Justin Sun, Tron founder and CEO, has won an eBay charity auction to have lunch with Warren Buffett, renowned investor and CEO of Berkshire Hathaway. In order to win the lunch, which Buffett has participated in for 20 years, Sun allegedly bid a record-breaking $4,567,888. The winner will be able to bring along seven friends to a New York steakhouse, and all proceeds from the auction go to San Francisco-based nonprofit Glide Foundation. Sun wrote in a statement that the bid was a key priority for the Tron and BitTorrent team. Buffett has long been known for his negative stance on cryptocurrencies, although he has made positive comments in regard to blockchain.
Global peer-to-peer (p2p) crypto exchange LocalBitcoins officially confirmed this week the removal of trading in local fiat currencies. The Finland-based exchange had previously removed the cash trading option on June 1 with no announcement, which caused some outrage in the crypto community. In an official statement this week, the exchange noted that its liabilities are determined by the Act on Detecting and Preventing Money Laundering and Terrorist Financing, which requires them to follow certain regulations. The move comes on the heels of the news that LocalBitcoins will soon become monitored by the Financial Supervisory Authority of Finland, as the Finnish government passed new legislation for crypto assets earlier this year.
Social media giant Facebook will reportedly announce its cryptocurrency project this month, and employees will be allowed to take part of their salary in the coin. According to unnamed sources, the white paper for the coin will be released on June 18. As well, Laura McCracken, Facebook’s head of financial services and payment partnerships for Northern Europe, said in an interview this week that the stablecoin would not only involve a U.S. dollar peg. Other media reports this week have noted that there are now 100 people known to be working on the crypto project via profiles on professional networking platform LinkedIn. Winners and Losers
This week in the markets, bitcoin is below $8,000, trading at around $7,933, ether is at $245 and XRP at $0.41. Total market cap is about $253 billion.
The top three altcoin gainers of the week are posscoin, bitcoin 2 and hempcoin. The top three altcoin losers of the week are bzedge, pandemia and quantis network.
For more info on crypto prices, make sure to read Cointelegraph’s market analysis.
Most Memorable Quotations
“The unwillingness to allow more competitors to offer geared ETFs seems to be another example of denying or curtailing access to a product that would be useful to some investors.”
“What a difference it would have made a decade ago if blockchain technology on a private distributed ledger accessible to regulators had been the informational foundation of Wall Street’s derivatives exposures.”
“I don’t recommend bitcoin in either direction because I don’t really care for it in terms of an asset, but I do care for it as a signalling mechanism that I think was a tip-off to this bounce in gold.”
Peter Boockvar, chief investment officer at financial planning and wealth advisory firm Bleakley Advisory Group
“My love for Japan has not changed. Japan used to be engineering superpower in terms of its PCs but right now, taking the cloud for example, it’s the U.S. that dominates. But I still believe in the potential Japan has and I would like to develop that.”
Coinroom, a Polish cryptocurrency exchange, has reportedly shut down its operations and disappeared with customer funds. While the total amount lost has not been disclosed, some users said that they had up to 60,000 zloty (around $15,790) in their accounts. Before ending its operations, Coinroom reportedly asked customers in an email to withdraw their money in one day, while in reality, customers have said that they were unable to get all of their money in this final withdrawal. A spokesperson for the district prosecutor’s office in Warsaw said that proceedings had been initiated against Coinroom for unregistered crypto payment services.
According to Twitter user and malware researcher Fumik0_, a new website is spreading cryptocurrency malware. The aforementioned site reportedly imitates the website for Cryptohopper, a site where users can program tools to perform automatic cryptocurrency trading. After a user goes on the site, which displays the logo of Cryptohopper in an attempt to trick the user, it automatically downloads a setup.exe installer that will infect the computer once it runs. The installer infects the computer with an information-stealing Trojan, which then also installs two other Qulab Trojans for mining and clipboard hijacking deployed once every minute to collect data.
Cryptocurrency wallet service GateHub said this week that hackers compromised almost 100 XRP Ledger wallets, resulting in the loss of around $10 million. In a statement, GateHub said that it was notified by community members of the loss of funds, following which it discovered increased application programming interface (API) calls coming from a small number of IP addresses. While one of those who warned GateHub about the breach reported that almost 13,100,000 XRP ($5.37 million) had already been laundered through exchanges and mixer services, GateHub has stated that the investigation is still ongoing.
After Tezos updated without forking and Iota introduced an ostensibly centralization-killing element, Cointelegraph examines the importance of decentralization by some of the large players in the crypto community.
With some anonymous Satoshi Nakomoto posers coming out of the woodwork, as well as one very not-so-anonymous Craig Wright, Cointelegraph looks at the potential motivations for claiming to be bitcoin’s father.
Former Mt. Gox CEO Mark Karpeles is dipping his feet back into the crypto industry as he wants to help Japan become a powerhouse within the blockchain economy. The former CEO of the now-defunct exchange told the media on June 5 about his new venture called Tristan Technologies.
Statistically speaking, Mark Karpeles was extremely fortunate to have been found not guilty of embezzlement in Japan, which has a 99% conviction rate throughout the land. In March, Karpeles was handed down a suspended sentence of roughly two and a half years and if he stays out of trouble he won’t have to serve time. Now the former Mt. Gox CEO has announced he’s stepping back into the crypto world and revealed his new blockchain startup to media outlets. Regional publication The Mainichi detailed that Karpeles’ new venture called Tristan Technologies aims to utilize his expertise with cryptographic technology.
According to Mainichi reporters, Karpeles told the press that he wants Japan to be the global leader when it comes to blockchain technology. So he’s established a startup in the country that aims to provide a new operating system (OS) that uses a distributed ledger technology framework and claims to be faster than OS competitors.
“Japan used to be engineering superpower in terms of its PCs but right now, taking the cloud for example, it’s the U.S. that dominates,” the former Mt. Gox CEO told the press. “But I still believe in the potential Japan has and I would like to develop that — My love for Japan has not changed.”
Mark Karpeles, former CEO of Mt. Gox, says “it’s been a very long road to today” when talking about his situation. He says “I had to start form zero” about his current financial status. He added “I want to make great things in the future again and I’m working toward this goal.” pic.twitter.com/u790drJS3q
Last year, in mid-April, it was reported that Karpeles landed a C-level position as the chief technology officer (CTO) for a firm called London Trust Media (LTM). It is uncertain how long Karpeles worked there, but the firm did not stray too far from the cryptocurrency industry either. LTM is a technology company that invests in virtual private network companies and digital currencies. The startup has created apps like Inbrowser for Mobile, and a cryptocurrency market cap monitor for Slack. When Karpeles disclosed this information last year, he was interviewed by the press in Tokyo’s Shinjuku district. At the time, Karpeles also revealed that there were times after his prison release when he feared for his safety and he was still facing embezzlement charges.
“After I came out, I felt like in a kind of dream, like I didn’t feel things were real — Even today I’m not sure yet,” Karpeles told the media.
Karpeles also still runs a blog called Magicaltux.net, which shares information about cryptocurrencies and blockchain technology. In the blog he also expresses opinions concerning what should happen with the current Mt. Gox civil rehabilitation plan. “As I see things Coinlab is still today the largest obstacle to getting this situation solved promptly,” Karpeles wrote. Karpeles emphasized to the press this week that he currently holds no digital assets. “I wouldn’t say I’m rich today,” Karpeles said, noting that he was starting his life from scratch. The former exchange operator has also published a book called “Cryptocurrency 3.0” and told regional reporters in Japan that he still finds great interest in the crypto space. It’s unclear what Tristan Technologies’ new blockchain operating system will offer in a time where distributed technology projects have taken a backseat, with most people now focused on cryptocurrencies that have real use cases. But it’s a sure bet with the latest announcement that the crypto community will be hearing a lot more from the former Mt. Gox CEO.
What do you think about Mark Karpeles’ new blockchain venture? Let us know what you think about this story in the comments section below.
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