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Mt Gox staff tried to warn CEO of Bitcoin loss risks – reports

Fears over 'customer funds covering operating costs' says Reuters

Internet Security Threat Report 2014

Staff at fallen Bitcoin exchange Mt Gox in Japan have claimed that they raised alarms about how the company was handling client funds as long ago as 2012, according to Reuters.

In this report, the unnamed “current and former employees” of Mt Gox were concerned that “customer funds were diverted to cover operating costs” of the popular website.

These expenses went far beyond the day-to-day running of Mt Gox's offices in a Tokyo tower: they included “high-tech gadgets such as a robot and a 3D printer and a souped-up, racing version of the Honda Civic imported from Britain for [CEO Mark] Karpeles,” the staffers alleged to Reuters.

However, the same sources also noted that Karpeles said customer money was not being used to fund the business, "but [he] declined to provide details on how the business had covered any loss," the newswire reports.

The exchange claimed in 2012 it was handling US$14 million in monthly Bitcoin transactions, which would have been around 90 per cent of Bitcoin trade at the time. In August 2012, to assure traders it was solvent, it claimed on its site that its transaction fees were netting it US$1,500 per day.

In April 2013, Karpeles claimed – again according to Reuters – that it processed US$20 million a day.

As is now well documented, Mt Gox's collapse early this year stung account holders for about US$450 million in losses at today's prices for the crypto-currency. The company has also been unable to account for US$27 million in cash holdings. ®

Internet Security Threat Report 2014

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