Even in the case of just pure incompetence, there was a failure of ethics/law in how problems were handled, but if it was just incompetence fundamentally, bringing in a good partner early on might have saved it.
There was a story a while back about a law firm that discovered its escrow account was empty, even though it should have had millions in it. Turns out a legal secretary had gotten caught up in a Nigerian scam. She started out sending a small amount of her own money. They'd tell her they just needed a little more and then she'd get it all back plus a lot more. As she got deeper in trouble, at some point she started "borrowing" from her employer. Incompetence led to pressure that created ethical failure.
My guess (as uninformed as anybody's) is that Karpeles started out merely incompetent and with underdeveloped ethics. As he got in deeper, he just focused on trying to stay out of trouble in the short term. That led to massive snowballing of problems. His very modest helpings of competence and ethical backbone were quickly overrun, demoted in priority to the same level as getting enough niacin in his diet. The best liars I know aren't people who know that they're lying; they're people who focus on saying what you want to hear while ignoring entirely what the truth might be.
For those unfamiliar with the Dunning-Kruger effect, it also seems relevant here: http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect
When your business involves holding money on deposit for people, you have a very high moral and legal standard to follow. Unfortunately the very legal leverage and fractional reserve lending by financial institutions makes that line very blurry. A single technical misstep and you are now an insolvent ponzi scheme. Being lazy or "over your head" in this area is like laying down in front of a moving truck.
US laws relating to money laundering and finance are very strict, accidents and lapses still lead to convictions. I don't know anything about Japanese law. I'll take a page from the BNP Paribas case and say that because Mt Gox used US dollars it falls under US jurisdiction and must also follow US law, not just Japan's.
Anyone who thinks Mark Karpeles isn't guilty of embezzlement at a minimum - MINIMUM - just isn't viewing the situation in light of the massive amounts of operator fraud that have historically taken place, not to mention copious amounts of evidence suggesting Mark Karpeles' talking points have been entirely fabricated from the beginning. Remember, he stole over a _billion_ dollars: 850,000 * 1200. He only relinquished control of 200,000 of those 850,000 after being called out on it by the community. At this point the legal system is the least of Karpeles' worries.
Seems a lot more likely he's an idiot who got in over his head.
Embezzling Bitcoins is the perfect crime. As has been mentioned already, Karpeles has a history of computer fraud, so embezzling digital money would be right up his alley. He had the means, motive and opportunity to do so. When you consider the rampant embezzlement in a historical context ... it's pretty much case closed. Your argument boils down to "this time it's different". Also, laughing stock digital billionaire? Sorry but there's no such thing as a laughing stock billionaire. I'd take a billion knowing it would make me the "laughing stock" of the world, and so would anyone with a brain.
If the community hadn't called Karpeles out on using transaction malleability as a fictional excuse for losing 850,000 BTC, and we had all believed Karpeles, he would in all likelihood be looking at Japanese bankruptcy court followed by a lifetime of traveling the world with a hidden fortune rivaling Satoshi's.
> I'd take a billion knowing it would make me the "laughing stock" of the world, and so would anyone with a brain.
Not if I had $10m. Marginal utility of those last $990m is easily less than the hit to my reputation and the cost of constantly fearing for my freedom and physical safety. Especially when I can't buy anything large and obvious with them.
A court requested Karpeles appear in Texas to face possible charges for criminal wrongdoing, but again, this was only after he had been called out by the wider Bitcoin community for fabricating excuses. FYI: Karpeles turned down the offer.
Fact is embezzling Bitcoin has unquestionably _been_ the perfect crime for everyone who has attempted it. Karpeles made copious amounts of errors on his way to embezzling coins, and there's still people out there like yourself that would allow him to get away with it. Imagine if he had been anonymous. Imagine if he hadn't used the transaction malleability excuse. Imagine if the MtGox private database hadn't been leaked. Imagine if there were no investigative reporters in the wider Bitcoin community! Again, if that were the case, which thankfully it has not been the case, Karpeles would be looking at simple Japanese bankruptcy proceedings followed by a lifetime of world travel with a hidden fortune rivaling Satoshi's.
Is this part of the interview a lie then? I'm seriously asking, I don't know and you seem to have some information as to this aspect. It seems like a silly thing to lie about in an interview though.
there's still people out there like yourself that would allow him to get away with it
I'm not sure what you are talking about, but you seem to be projecting some argument on to me that I haven't made. I was simply calling out a bit of hyperbole.
Imagine if the MtGox private database hadn't been leaked. Imagine if there were no investigative reporters in the wider Bitcoin community! Again, if that were the case, which thankfully it has not been the case...
Exactly, there's quite a bit of scrutiny and investigation at this point. Hardly what I would call the perfect crime.
Also, aren't these bitcoins traceable to wherever they are eventually used? Is it really that good of a crime when a) you'll forever face public scrutiny (to varying degrees) by people with a vested interest in recovering the money, b) may have an investigation as to your conduct, and c) your stolen money is forever traceable?
I only meant to imply that many have read this WSJ interview without any historical context.
At this point, there may be scrutiny, but just a few months ago, people all over the place were claiming the US government must've seized MtGox's funds. If you look at @magicaltux's twitter feed, he even tried to fan flames on that government conspiracy theory in the same tweet where he began fabricating the excuse of being "physically attacked".
To anyone who hasn't been following the MtGox fiasco since mid-2013, which is when MtGox first started having "liquidity issues", it may very well seem like Karpeles has been charged with fraud. No, that isn't the case. Karpeles has been screaming "Transaction malleability" (BS), "US government stole it" (BS), and now "Physical attacker stole it". The Bitcoin community actually went along with each of Karpeles excuses, but public opinion has just recently began to spell out FRAUD, loudly and repeatedly. There is still no criminal investigation of Karpeles for fraud, just a lot of loud people screaming it on the Internet, because it is obvious and because it has happened so many times before in the Bitcoin space.
The truth is, Bitcoins aren't traceable if you know what you're doing over Tor. Anonymous spending is very much possible. Running a Bitcoin exchange with a proprietary database and large shared wallet with thousands upon thousands of BTC in it, is actually the perfect vehicle for coin mixing and I would be shocked if Karpeles didn't mix in personal BTC withdrawals over his years of running MtGox. It's really simple, transfer BTC into an exchange account with fake or no identifiable info attached to the account, wait a bit, and withdraw fresh coins. With judicious use of Tor, you have fresh new coins, and the original coins are tumbled around a gigantic shared wallet. There's just no practical way of linking BTC addresses to your identity if you know what you're doing.
I haven't been following the bitcoin community reaction, but from what I remember reading here, most people seemed VERY critical of his explanations of what happened.
The truth is, Bitcoins aren't traceable if you know what you're doing over Tor
Do you mind explaining this a bit? My understanding is that there's a trail of all transactions (transfers, I guess) of a bitcoin, so there's some tracking of the history of the funds. If it's a matter of mixing small amounts into larger shared wallets, it seems like what's needed (if it doesn't already exist) is a curated list of known bad bitcoins. If there was a public service to check whether the source bitcoin is blacklisted (or what percentage it's blacklisted, if mixed into a larger wallet), then sites accepting bitcoin trasnfers could make decisions on whether to accept it or not. This obviously would only work if a) people were willing to accept this list as bad, b) doing the legwork of tracking the history of a coin back isn't too computationally expensive, c) it was adopted soon, before the coins got too mixed in and how "bad" they are is diluted. It's then in your best interest to reject bad coins because it taints your wallet.
But maybe I've got a few assumptions in there that are completely bunk. I'm mostly an outsider to this.
In any case, the fact that bitcoin has a trail built in seems like it offers numerous ways to reduce the attractiveness of stealing them by making them harder to convert into goods and currency.
The whole entire point of money laundering is to get to the legit income, it would be unheard of to go the other way especially when you own 100% of the company, are high profile and your future spending will be extremely scrutinized.
Simplest explanation is best: Karpeles was incompetent and distracted, didn't trust others, wrote horrible code nowhere near suitable for a bitcoin exchange and when he noticed a year later that he had been robbed attempted to cover it up.
To do 85,000,000 in BTC on MtGox would mean averaging over 230,000 BTC of daily trading volume for 365 days. For context, most Bitcoin exchanges these days are doing 20% of that on a record day. So if we're super duper generous in our calculations, we'd assume it would take Karpeles 5 years to accumulate the amount he stole in a legal way. This further assumes two equally incredibly unlikely things:
1. MtGox stays ahead of the competition
2. MtGox maintains a 1% trading fee
Remember that in April of 2013, which is when MtGox had its second huge trading engine crash, there was already significant demand amongst traders to move away from MtGox, which is precisely how MtGox started rapidly losing marketshare.
The TLDR is, Karpeles wouldn't have made nearly as much money by engaging in legal business. He would've found it much more tempting to close MtGox before having to deal with burdensome regulations coming out of America, a trend which started in 2013. And even if he had tried to deal with regulators, MtGox most likely wouldn't have been able to maintain its number 1 position for much longer.
So the fact of the matter is he was looking at spending the next 10-20 years pursuing a business he wasn't prepared to run, or he could've just taken the money and walked away, declaring bankruptcy.
> Simplest explanation is best: Karpeles was incompetent and distracted, didn't trust others, wrote horrible code nowhere near suitable for a bitcoin exchange and when he noticed a year later that he had been robbed attempted to cover it up.
I find it absolutely, positively _unbelievable_ that 850,000 BTC were stolen out of a hot wallet. If it had been due to terrible coding practices, he would've gone to that as his first alibi rather than claiming 850,000 BTC were lost due to"transaction malleability". If the code was the likely culprit, he could and would have proved it.
It's mostly speculation. But nearly everything we know at this point is speculation, other than that Karpeles has a history of both technical and ethical shortcomings, which basically means that anything is possible.
If there were an oracle that could answer, I'd comfortably bet even odds that he started out with some rather small mistake, and then thought "well, I just need to keep things afloat a while to cover for it, and then we will all be good." Oh, I'll borrow a little money from my spouse. Oh, I'll just take some money from my neighbor without him knowing, but I'll get it back and return it to him later.
Lots of gambling addicts flame out this way, and my gut tells me that the Bitcoin community has more than its fair share of gambling-addictive personalities.
A violation of trust when dealing with people's money is a perfect way to describe what happened at Mt. Gox, but it doesn't necessarily mean it was scam. That is only possible because Bitcoin.
The "investigator" of the free willy report got it wrong.
the tech guy that Roger Ver bought in when Gox was at crisis point talked about how despite the state of emergency Karpeles would leave the office mid-work-day to go and pick some silly color scheme for the new bitcoin cafe.
This is days/hours before Gox was going under.
The other part was inability to delegate and lack of trust in the code that wasn't his own. Despite his lack of interest in Gox, he still was the central (and choke point) in all site updates (which he merged manually, no source control) which explained the lack of development.
In getting MtGox into trouble I don't think he was intentionally fraudulent, just a bad case of dev project ADD. In terms of the lying and cover up, he definitely was - but seems like the type of person who doesn't realize how serious that is.
In terms of culpability, the DOJ indictment with his name on it (which i'm 95% certain exists) won't distinguish between incompetence/ignorance and willful fraud.