Until recently cryptocurrencies lived in the realm of the obscure. The community was small and the interest was niche. It’s no wonder that in 2013 a single exchange was handling 70% of all Bitcoin transactions worldwide.
Most people have heard of Mt. Gox - its name is synonymous with mismanagement and corruption. Through negligence they lost over 850k bitcoins in 2014.. How did this happen? Let’s go back to the beginning.
In 2006 a programmer, Jed McCaleb created an online exchange to buy and sell Magic: The Gathering cards. With limited success he scrapped the project. Years later when introduced to Bitcoin he used the same domain name to register his Bitcoin exchange: Mt. Gox, which stood for Magic The Gathering Online eXchange.
As the site grew, Jed decided he wasn’t able to keep up with demand and issued a sale to a Frenchman living in Japan, Mark Karpeles. Less than a year after it’s sale a string of breaches plagued the site.
Despite a reputation of terrible service and poor engineering, Mt. Gox still dominated the Bitcoin space. It was only a matter of time before their luck ran out. In February 2014 they halted all withdrawals. From there things went downhill fast. A couple weeks later they suspended all trading and their website went offline - returning only a blank page. Leaked documents indicated the company had lost 744,408 bitcoins years ago in a breach that was never publicized. They folded soon afterwards.
In August 2015, Karpeles was arrested in Japan and charged for fraud and embezzlement.
This might seem like the end of the story.. It’s not.
During the Mt. Gox bankruptcy proceedings creditors had to convert any amount of BTC they were claiming into Japanese Yen. The bankruptcy proved to be an especially slow process dragging all the way through the end of 2017.. Directly into the year of massive Bitcoin appreciation. As the price of Bitcoin spiked, Karpeles found himself in a very fortunate situation. His liability was capped by the courts as the total amount he owed was now a fixed price in Yen. However the value of Bitcoin (which he still held) was skyrocketing. It’s estimated he will make around $859 million from BTC appreciation during the trial.
Karpeles remains one of the biggest villains in the crypto-sphere. Will his luck ever run out?