Verdict due in MtGox bitcoin embezzlement case

The disappearance left a trail of angry investors, rocked the virtual currency community, and dented confidence in the security of bitcoin. At one point …

TOKYO – The former high-flying head of collapsed bitcoin exchange MtGox will learn his fate Friday as a Tokyo court hands down its verdict on charges of faking digital data and embezzling millions of dollars.

Mark Karpeles, former head of the collapsed bitcoin exchange MtGox, is accused of faking digital data and embezzling millions of dollars

Prosecutors have called for a 10-year jail sentence for French-born Mark Karpeles, 33, who denies the charges.

Karpeles is alleged to have repeatedly manipulated computer data over several years while embezzling a total of 341 million yen ($3 million) of clients’ money deposited at the company.

Prosecutors claim he splashed the embezzled money on a 3D-printing software business unnecessary for MtGox, as well as on personal expenses, including some six million yen ($54,000) for a canopy bed.

He also spent millions of yen on arranging overseas trips for his estranged wife, as well as utility bills and cleaning services at his luxury apartment that he reportedly rented for $11,000 per month, prosecutors allege.

MtGox was shut down in 2014 after 850,000 bitcoins (worth half a billion dollars at that time) disappeared from its virtual vaults, a mystery that remains unsolved.

The disappearance left a trail of angry investors, rocked the virtual currency community, and dented confidence in the security of bitcoin.

At one point, MtGox claimed to be handling around 80 percent of all global bitcoin transactions.

The spectacular failure of the exchange caused a dramatic slump in the value of bitcoin but the cryptocurrency rallied to an all-time high of near $20,000 in December 2017 before dropping off sharply.

It is currently trading at around $3,900.

Japan issued new regulations after the MtGox case, but the exchange Coincheck was forced last year to refund customers more than $440 million in virtual currency that disappeared from its holdings.

During the trial, Karpeles apologised to customers for the company’s bankruptcy but denied both data falsification and embezzlement.

“I swear to God that I am innocent,” Karpeles, speaking in Japanese, told the three-judge panel hearing when his trial opened.

Karpeles has said the bitcoins were lost due to an external “hacking attack” and later claimed he had found some 200,000 coins in a “cold wallet” — a storage device not connected to other computers.

“Most people will not believe what I say. The only solution I have is to actually find the real culprits,” he told reporters after the hearing.

The charges against the former CEO are not directly related to how the MtGox losses came about.

– ‘Significant money losses’ –

Satoshi Mihira, chief attorney at Mizuho Chuo law firm, said: “If it was an outside hacker who stole the currency, it’s a problem. But if he stole even part of the money, it would be embezzlement.”

“His defence counsel needs a high level of evidence to win an innocent verdict,” he told AFP.

“If he’s found guilty, it is possible he will get a jail term considering the significant money losses (suffered by customers),” said the lawyer, an expert on cryptocurrency issues.

The odds are stacked against Karpeles as the vast majority of cases that come to trial in Japan end in a conviction.

The Frenchman was first arrested in August 2015 and, in an echo of another high-profile case against former Nissan chief and compatriot Carlos Ghosn, was re-arrested several times on different charges.

Karpeles eventually won bail in July 2016 — nearly a year after his arrest — reportedly paying 10 million yen to secure his freedom pending a trial, which began in July 2017.

During his time on bail, Karpeles has been active on social media — notably voicing doubts about bitcoin and replying to some media questions about conditions in Japanese detention centres.

However, he has largely avoided commenting on his case in detail.

The court is expected to issue a verdict Friday and, if it finds Karpeles guilty, will likely hand down a sentence at the same time.

However, even if he were to lose the case, he has the right to appeal, which would keep him on bail.

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Sentinel Protocol – Blockchain Technology for Cyber Security Intelligence

The daylong initial coin offering (ICO) token sale on 27 May 2018 enabled Sentinel Protocol to achieve its sales target. In just 3 minutes 26 seconds …

Finally, the Launch of a Fraud Prevention Blockchain: Sentinel Protocol for the Cryptocurrency Industry that is Plagued with Frauds and Hacks

The daylong initial coin offering (ICO) token sale on 27 May 2018 enabled Sentinel Protocol to achieve its sales target. In just 3 minutes 26 seconds they were able to raise US$8 million. The prominent interest in this platform could very much be due to the urgent need for increased security in the cryptocurrency industry. The platform aims to deliver intelligence on real-time frauds and hacks to cryptocurrency exchanges, payment services, and wallets for increased security. This is done as a free API through their decentralized Threat Reputation Database (TRDB).

Missing Ethers Triggers Awareness

With headquarters in Singapore, Uppsala Foundation is a startup founded by security specialist, Patrick Kim to develop Sentinel Protocol. In 2016, Patrick lost 7,218 ethers that he mined due to security weaknesses in the Ethereum Mist wallet. He investigated the matter and found the loopholes that made this possible. He shared his findings with online communities and on YouTube leading to increased awareness of vulnerabilities in the system.

Building an Ecosystem for Cryptocurrency Security

Ultimately, the aim for Uppsala Foundation is to establish an ecosystem that disincentives fraudulent activities with cryptocurrencies. This is done by rewarding the contributions of security professionals, allowing the reporting of fraud and hacking incidents by individuals and organizations, as well as by curbing the usage of cryptocurrencies that are stolen.

Notable Frauds and Hacks in 2018

It has not been an easy year in 2018 with a staggering more than US$670 million being stolen through cryptocurrencies frauds and hacks. Notably there is the US$530 million Coincheck hack that is a Japanese cryptocurrency exchange. It is due to flaws found in new regulations governing the way exchanges run in the country. There is also the US$170 million BitGrail hack that is an Italian cryptocurrrency exchange. It is a very contentious case as rumors have it that the founder, Francesco Firano alleged misappropriated the funds. And there was also a US$660 million exit scam in ICOs from Ho Chi Minh City, Vietnam. The company, Modern Tech went missing after convincing 32,000 individuals to invest in two bogus cryptocurrency projects that resulted in mass protests on streets.

Frauds and Hacks Prevention Absolutely Needed

Considering the numbers of frauds and hacks that have been taking place in 2018 itself and the many more that has happened in previous years, a platform to strengthened security definitely sounds like a necessity. The success of the Sentinel Protocol would be greatly dependent on whether or not they can garner the participation and collaboration of security professionals and other relevant stakeholders.

Pic – The functions of Sentinel Protocol (from

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Cryptocurrency Exchanges in 2019: Prospects and Pitfalls

The EXMO cryptocurrency exchange decided to launch a kind of reverse IPO. Canadian public company GoverMedia Plus Canada Corp. received …

HodlX Guest BlogSubmit Your Post

2018 was not an easy year for all the participants of the cryptocurrency market, but it was the worst, perhaps, for the cryptocurrency exchanges. The main profits of the exchanges are commissions from trading operations and fees for listing. With a stagnating market full of low-quality projects and total sad mood, only the strongest participants will survive.

Today we will talk about the trends of the exchange market and the important factors that should be considered to stay afloat.

Tougher competition in the market

The first and, perhaps, the key trend can be considered more cruel competition between crypto exchanges. All the exchanges, without any exception, are trying to maintain trading volumes and to cover most of the market.

Because of reports about closures and bankruptcies of small exchanges (English Cubits, Ukrainian Liqui), Japanese giants began to buy cracked trading cryptocurrency platforms to enter the crypto market. For example, Coincheck was acquired by the ex-director of Goldman Sachs and Monex CEO Oki Matsumoto for just $34 million. Japanese exchange Zaif, with no ability to cover $60 million in losses from a hack, made a deal with research company Fisco from Tokyo, which bought a controlling stake in the exchange for 44 million.

Active localization

The active localization of exchanges is perhaps due to the bigger competition.

  • Huobi launches the Huobi Russia, however, the exchange does not plan to add the Russian ruble.
  • EXMO has entered the Turkish market, and has added the Turkish lira, language and technical support, and plans to open a physical office there.
  • Binance is going to conquer Malta, South Korea, Liechtenstein, and Singapore.
  • KuCoinplans an expansion to all Spanish-speaking countries in Latin America.
  • Geminiis going to Asia.
  • Coinbase has already started working in Europe.


Although absolutely everyone is fed up hearing forecasts about the access to futures, this will probably become the most important event in the industry.

The market is waiting for the launch of Bakkt, as never before, because Bakkt will open access to physically-backed futures. It is expected to attract institutional players to the market and to have a significant impact on the entire market. The site will not support margin trading, and all transactions will be fully secured with assets.

Bakkt will be processed by the operator of the New York Stock Exchange (NYSE), Intercontinental Exchange (ICE), in partnership with Microsoft, Starbucks, and BCG.

There are also other enthusiasts in this area. A number of large firms from Wall Street are going to launch an exchange: ErisX, it will provide access to futures with a physical supply of not only Bitcoin, like Bakkt, but also other cryptocurrencies such as Ethereum, Bitcoin Cash, and Litecoin.

Stricter rules for government control and inspections

Despite the fact that de-anonymization, personification, and regulation completely contradict the main ideas of cryptocurrency, the fourth trend will be the toughening of state controls and verification terms on exchanges.

Let’s take the Russian market. Perhaps the main exciting event was the criminal case against Dmitry Vasilyev, the general director of the WEX cryptocurrency exchange.

In Korea, only seven out of 38 cryptocurrency exchanges were reviewed by the government, and the leaders of the Komid exchange received prison sentences for falsifying $45 million in trading volumes.

Vlad Nistor, director general of the Romanian crypto exchange CoinFlux, was detained at the request of the US Department of Justice on charges of fraud, cybercrime, money laundering, and extortion.

All exchanges relate to regulation in different ways:

Kraken said that control by the authorities restrains the development of cryptocurrency business.

CEX and OKEx have introduced mandatory verification to comply with the “Fifth Anti-Money Laundering Directive” of the European Union (EU), the laws “Know Your Customer” and “Anti-Money Laundering” (KYC / AML).

The most active traders are now required to pass verification on Localbitcoins, and the owner of legacy accounts must undergo a KYC procedure on Poloniex.

Some exchanges are tryingto “change the conditions dramatically.”

For example, the decentralized IDEX exchange suddenly admitted that it is not decentralized, and introduced compulsory verification for users, complying with regulations that block users from Syria, Crimea, Washington, and Cuba. The exchange references a statement by a member of the Commodity Futures Trading Commission (CFTC), Brian Quintens, that states that developers can be held accountable for illegal operations performed by third parties using their written smart contracts.

Asset insurance and security enhancement

Security holes in exchanges and wallets gave hackers the opportunity to steal $854 million during 2018 (if we only take into account 10 major hacks reliably identified.

That is why the next trend is offering insurance for users’ assets and attracting the best market specialists in order to maximize security for the assets.

Gibraltar Blockchain Exchange (GBX) and Gemini have insured assets on their online and offline wallets.

Coinbase has confirmed recent movement of crypto assets worth $5 billion to an updated repository.

South Korean exchanges Bithumb and Upbit have received certifications from the Information Security Management System (ISMS) from the Korean Internet and Security Agency (KISA).

Binance made a partnership with CertiK, the company offering security services for various blockchains.

An interesting metric is the amount of interest stock exchanges have in initial public offerings (IPOs). A few years earlier, market participants criticized IPOs as an outdated and overly complicated way of attracting investments.

The EXMO cryptocurrency exchange decided to launch a kind of reverse IPO. Canadian public company GoverMedia Plus Canada Corp. received exclusive rights to negotiate the purchase of the exchange for 180 days. If the deal takes place, the new entity will continue to conduct business under the EXMO brand name and will be quoted on the Canadian Stock Exchange (CSE).

Blockchain Exchange Alliance (BXA), which controls BTHMB Holdings and Bithumb, a cryptographic exchange operator, as well as the American public company Blockchain Industries (BCII), operating on the over-the-counter market, signed an agreement of intent for a reverse merger.

And lastly, Kraken exchange is reportedly considering the possibility of a $4 billion private placement of securities.

Maria Stankevich, Head of Business Development at EXMO

Before she got passionate about blockchain and crypto, she was Head of Communications for international utilities companies. She has more than seven years of experience in PR and digital marketing, speaks five languages and is completing her PhD in new media.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Unexpected Bitcoin Whale: North Korea May Own Millions In Crypto

This stockpile purportedly includes cryptocurrencies, presumably like Bitcoin and Ethereum. According to the Nikkei Asian Review, which broke this …

Bitcoin Can Help Kim Avoid Sanctions

In a recent U.N. Security Council meeting, a panel of industry experts claimed that North Korea could have upwards of $670 million worth of currencies that isn’t the nation owns. This stockpile purportedly includes cryptocurrencies, presumably like Bitcoin and Ethereum. According to the Nikkei Asian Review, which broke this news, the Security Council’s North Korean sanctions team were informed that digital assets “provide the Democratic People’s Republic of Korea with more ways to evade sanctions, given that they are harder to trace,” and are relatively easy to launder across borders and through individuals deemed suspicious.

On the matter of how North Korea managed to garner the funds, the unnamed researchers claim that hackers associated with the nation broke into a number of crypto exchanges over yesteryear, securing millions in the process.

North Korean Hackers Implicated In Crypto Hacks

The Review’s report comes after a number of cybersecurity experts implicated North Korean groups of participating or even leading exchange hacks or crypto scams, corroborating the U.N. report. Per previous reports from Ethereum World News, a Group-IB report claims that the North Korea-based Lazarus hacker group is responsible for some of the crypto industry’s most-damaging hacks in the past 12 months.

Although the exact extent of Lazarus’ quickly growing sphere of influence is still unknown, citing the Group-IB report, The Next Web’s Hard Fork revealed that the group is directly tied to the attacks on the following five cryptocurrency platforms — CoinCheck, YouBit, Coinis, Bithumb, and Yapizon. Interestingly enough, it was noted that Lazarus was likely not responsible for the recent hacks on the Zaif, Bancor, and Coinrail platforms.

Recorded Future claims that the entities in the hermit nation have also played a role in a number of crypto swindles. Per the exclusive article, titled “Shifting Patterns in Internet Use Reveal Adaptable and Innovative North Korean Ruling Elite,” a blockchain startup dubbed “Marine Chain Platform” reportedly touted itself as a way to tokenize maritime vessels, but was far from that. The project, which also issued an initial coin offering (ICO), first hit the market in August 2018.

After an in-depth investigation into the startup’s history, domain registry information, LinkedIn page, and its webpage, which was found to have been plagiarized from, the cyber-threat firm behind the report revealed that Capt. Foong, the man behind Marine Chain, has ties to North Korea.

Title Image Courtesy of Random Institute on Unsplash

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UN Panel: North Korea Hacked $571M From Asian Crypto Exchanges

North Korea also stands accused of using the anonymity of virtual currencies to get around economic sanctions, the Nikkei Asian Review reported.

The U.N. Security Council has heard that North Korea uses cyberattacks and blockchain technology to evade economic sanctions and obtain foreign currency. Through hacking, the reclusive Republic has raked in around $670 million in foreign exchange and cryptocurrency, a panel of experts told the Security Council’s North Korea sanctions committee, ahead of the council’s annual report.

Also read: Social investment Platform Etoro Launches in 30 US States

Crypto Exchanges and Financial Institutions Hacked

Pyongyang is reeling from a slew of economic sanctions imposed by the U.N. at the request of the United States over its nuclear and missile programs. The embargo has crippled North Korea’s coal exports, a major foreign exchange earner.

According to the Nikkei Asian Review, which claims to have obtained the panel’s report, the North cyberattacked overseas financial companies from 2015 to 2018, and used blockchain technology to cover its tracks.

Between January 2017 and September 2018, the Democratic People’s Republic of Korea successfully hacked cryptocurrency exchanges in Asia at least five times, with losses totaling $571 million, the panel estimated. The attacks are understood to have been carried out by a specialized military unit and are now a crucial part of North Korean government policy, the article detailed.

UN Panel: North Korea Hacked $571M From Asian Crypto Exchanges

The panel did not name the affected trading platforms but Japanese exchange Coincheck reported in January 2018 the theft of $530 million worth of the NEM cryptocurrency during an attack. Another cyberattack in September last year on Zaif, a crypto exchange operating out of Japan, left a financial hole of $60 million.

In South Korea, more than 10 million users of e-commerce platform Interpark had their personal information stolen in cyberattacks. Hackers demanded a ransom of $2.7 million in exchange for returning the stolen data. The South Korean government believes the attacks were carried out by the North and the U.N. expert panel is convinced they were meant to obtain foreign currency.

Evading Economic Sanctions

In its report, which is due to be submitted formally within days, the U.N. panel explained:

[Cryptocurrencies] provide the Democratic People’s Republic of Korea with more ways to evade sanctions, given that they are harder to trace, can be laundered many times and are independent from government regulation.

The experts pointed out that the North Korean government created a pool of illicit funds from hacking since 2016. It recommended that state parties “enhance their ability to facilitate robust information exchange on the cyberattacks by North Korea with other governments and with their own financial institutions,” to detect and prevent the North from circumventing the sanctions.

UN Panel: North Korea Hacked $571M From Asian Crypto Exchanges

North Korea also stands accused of using the anonymity of virtual currencies to get around economic sanctions, the Nikkei Asian Review reported. For example, Marine Chain, a Hong Kong-based company, which buys and sells ships using blockchain, is believed to have supplied North Korea with cryptocurrency until it was eventually shut down in September 2018.

What are your thoughts on North Korean cyberattacks on cryptocurrency exchanges? Let us know in the comments section below.

Images courtesy of Shutterstock and Nikkei Asian Review.

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Jeffrey Gogo

Jeffrey Gogo is an award winning financial journalist based in Harare, Zimbabwe. A former deputy business editor with the Zimbabwe Herald, the country’s biggest daily, Gogo has more than 15 years of wide-ranging experience covering Zimbabwe’s financial markets, economy and company news. He first encountered bitcoin in 2014, and began covering cryptocurrency markets in 2017

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