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This is because embezzlement is rampant in the Bitcoin space, e.g.: Inputs.io, TradeFortress, MyBitcoin, Silk Road 2.0, GBL, I could go on. Embezzlement, as in

This is because embezzlement is rampant in the Bitcoin space, e.g.: Inputs.io, TradeFortress, MyBitcoin, Silk Road 2.0, GBL, I could go on. Embezzlement, as in you get "hacked", oops, we lost everyone's money, everyone move along, nothing to see here. 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.

michaelt 12y ago
While you're right that embezzlement is rampant, it's possible the embezzlement was by an employee rather than Karpelès himself. It doesn't sound like they had very strict change control policies.
- danielweber 12y ago
  A private key is 256 bits, right? A determined insider given the chance to visually see the key once per day could probably take the whole thing out in his brain in a few weeks.
aianus 12y ago
Why would he want to be a laughingstock digital billionaire under police scrutiny in bankruptcy court when he's already a successful business owner with tens of millions? It really doesn't make sense that he up and decided to steal them. If he did it he'll die having spent less of his stolen fortune than he would have spent of his legitimate fortune. Seems a lot more likely he's an idiot who got in over his head.
- Cyther606 12y ago
  Sorry, but your line of thinking takes for granted that criminality doesn't pay. On the contrary. Having a hidden fortune is more valuable than having a pubilc fortune, objectively in that you pay less taxes and forego frivilous lawsuits and subjectively in that you can walk around less paranoid of kidnappings. Second of all, there's no way to stop Karpeles from mixing his coins. People who don't have much experience using Bitcoin are often operating in the PayPal model, where it takes a trusted third party to spend your money and even if not, the other person is known. In the Bitcoin space, there is no trusted third party, and if your coins are mixed and you and the other person are behind Tor, there's effectively no identifiable information involved in the transaction. 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.
  - kbenson 12y ago
    If embezzling Bitcoins was the perfect crime, there wouldn't be an active police investigation.
    - Cyther606 12y ago
      There isn't an active police investigation, not in Japan at least. In Japan, there are bankruptcy proceedings scheduled, and absolutely no police investigation into embezzlement that anyone knows of. 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.
nikcub 12y ago
No logical person would give up $3-5M+ per month in growing legit income for $400M+ in dirty money with a risk of lifetime of jail. Not when they controlled 60%+ of all btc trades at the time and the VC/private equity rush at the time would have easily cashed him out legitimately for a value higher than the total value of deposits. 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.
- Cyther606 12y ago
  A generous estimate would put accumulating 850,000 BTC in profits through exchange fees at 85,000,000 BTC in volume. That assumes a 1% fee on all trades, which is already unsustainable in the current exchange market. It also assumes 0 operating expenses, but hey we're being generous in this calculation. 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.

michaelt 12y ago

While you're right that embezzlement is rampant, it's possible the embezzlement was by an employee rather than Karpelès himself. It doesn't sound like they had very strict change control policies.

danielweber 12y ago
A private key is 256 bits, right? A determined insider given the chance to visually see the key once per day could probably take the whole thing out in his brain in a few weeks.

aianus 12y ago

Why would he want to be a laughingstock digital billionaire under police scrutiny in bankruptcy court when he's already a successful business owner with tens of millions? It really doesn't make sense that he up and decided to steal them. If he did it he'll die having spent less of his stolen fortune than he would have spent of his legitimate fortune. Seems a lot more likely he's an idiot who got in over his head.

Cyther606 12y ago
Sorry, but your line of thinking takes for granted that criminality doesn't pay. On the contrary. Having a hidden fortune is more valuable than having a pubilc fortune, objectively in that you pay less taxes and forego frivilous lawsuits and subjectively in that you can walk around less paranoid of kidnappings. Second of all, there's no way to stop Karpeles from mixing his coins. People who don't have much experience using Bitcoin are often operating in the PayPal model, where it takes a trusted third party to spend your money and even if not, the other person is known. In the Bitcoin space, there is no trusted third party, and if your coins are mixed and you and the other person are behind Tor, there's effectively no identifiable information involved in the transaction. 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.
- kbenson 12y ago
  If embezzling Bitcoins was the perfect crime, there wouldn't be an active police investigation.
  - Cyther606 12y ago
    There isn't an active police investigation, not in Japan at least. In Japan, there are bankruptcy proceedings scheduled, and absolutely no police investigation into embezzlement that anyone knows of. 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.

nikcub 12y ago

No logical person would give up $3-5M+ per month in growing legit income for $400M+ in dirty money with a risk of lifetime of jail. Not when they controlled 60%+ of all btc trades at the time and the VC/private equity rush at the time would have easily cashed him out legitimately for a value higher than the total value of deposits. 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.

Cyther606 12y ago
A generous estimate would put accumulating 850,000 BTC in profits through exchange fees at 85,000,000 BTC in volume. That assumes a 1% fee on all trades, which is already unsustainable in the current exchange market. It also assumes 0 operating expenses, but hey we're being generous in this calculation. 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.