Mark Karpeles Gets Suspended Jail Term

(bloomberg.com)

98 points | by T-A 103 days ago

9 comments

  • MotiveMe 103 days ago

    As someone that still has Bitcoin tied up in the Gox civil rehabilitation suit, I feel justice is adequately served here.

    Karpeles was clearly in over his head, and made terrible decisions after the hacking, but I don’t believe imprisonment would serve any meaningful purpose, and I do believe he feels genuine remorse for his actions.

    • ckastner 103 days ago

      > but I don’t believe imprisonment would serve any meaningful purpose

      Sure it would! It would serve as a deterrent. Some people shouldn't be handling hundreds of millions of USD.

      Karpeles' operation wasn't just unprofessional finance, it was a complete shit-show. The court should have sent the message to others to not attempt something as complicated and risk-laden as operating a financial exchange without even the slightest bit of know-how necessary to do that.

      Startup culture can be great, but it's amazingly dangerous when operating certain trades or industries.

      • joecool1029 103 days ago

        > Sure it would! It would serve as a deterrent. Some people shouldn't be handling hundreds of millions of USD.

        I don't think Mark ever expected to handle that kind of money. It just sort of happened. One of the things usually needed to prove a crime was committed was that there was the intent to commit it.

        > Startup culture can be great, but it's amazingly dangerous when operating certain trades or industries.

        Mark's about the furthest thing from a startup bro. Honestly, I got the vibe he started MtGox as a hobby that happened to make money. A lot of it doesn't make sense from a business planning standpoint. Bet you didn't know the parent company of MtGox was named after his cat and served as a hosting company and domain registrar. He's a gentoo nerd that had a pet project win the lottery. There's far more to question about what the exchange had happen before he took it over, but I suppose jed won't talk about that.

        To be fair though the year he spent in jail probably added some years to his life. While I doubt it was great for his mental health, it did wonders for getting his weight under control.

        • ckastner 102 days ago

          > I don't think Mark ever expected to handle that kind of money. It just sort of happened.

          That is probably true, and I wouldn't expect anyone to stand in the way of something that they had created and that developed such a momentum. How could one!

          What I would expect, however, is (1) that person to recognize this momentum, (2) to recognize that this momentum is way above the person's head, and (3) to rent or hire the know-how necessary to deal with this.

          IT Security consultants, legal experts, people with experience in running exchange systems, etc.

          > One of the things usually needed to prove a crime was committed was that there was the intent to commit it.

          There's no question of that, as the court found that he had tampered with accounts and manipulated records to hide losses.

          • lovemenot 102 days ago

            I actually met Mark once, on the very day that it was reported here on HN that Mt. Gox had been breached. This was a couple of years before the melt-down.

            I had read the story here and, having just a little experience of Financial systems (nowhere near enough) I offered to help.

            Mark took my meeting on that day because, in retrospect, he was likely looking for a Hail Mary. Perhaps hoping for a ransom demand.

            He was at least smart enough to know I wasn't it. Nevertheless, if there had been good options, as you seem to suppose, I very much doubt he'd have taken my meeting.

            Mark was in over his head, even then. And that tsunami just kept on rolling in. I wish him well.

          • wcoenen 102 days ago

            > Honestly, I got the vibe he started MtGox as a hobby that happened to make money.

            Mtgox was started by Jed McCaleb. He essentially gave it away for free to Karpeles when he realized that he was in over his head. It seems he was already losing money running mtgox and just wanted to get rid of it.

            https://hackernoon.com/mt-gox-interviews-jed-mccaleb-on-the-...

            • mikeash 102 days ago

              You seem to be describing premeditation. Criminal intent just means that you didn’t do it by accident. Did Karpeles ever knowingly misstate Mt. Gox’s bitcoin holdings? That’s intent, even if he never meant to be responsible for so much money.

              • s3xham 102 days ago

                Tux has really slimmed up for sure. Let's be honest and say Jed's the real Teflon Don MVP unloading the MtGox shitshow on Mark, doing the ripple thing, selling that chainless shitcoin to banks and rinsing and repeating again with Stellar.

                -otc bro high-five

              • renholder 102 days ago

                >It would serve as a deterrent.

                This argument has never worked in the history of ever. The examples from history are far too numerous to list but if you really must need an example, the War on Drugs would serve that purpose.

                • lukifer 102 days ago

                  With apologies for source amnesia, I've read that successful deterrence scales not with severity of punishment, but with perceived probability of getting caught.

                • solveit 103 days ago

                  > Some people shouldn't be handling hundreds of millions of USD.

                  Yes, but deterrents don't work if you don't expect to handle hundreds of millions. And I don't believe he did expect to handle hundreds of millions. Nobody did. Bitcoin just... did that.

                  • icebraining 103 days ago

                    They did send a message, they convicted him.

                    Plus, the guy already spent a year in jail prior to the trial .

                    • londons_explore 102 days ago

                      The fact he is not capable of handling millions of dollars isn't his fault, nor should he be punished for it.

                      It is the fault of the law and the regulators, or of the users for not being aware that the law and the regulators were not on top of it.

                      • michaelcampbell 102 days ago

                        > Sure it would! It would serve as a deterrent.

                        I'd like to see any studies to back up this theory.

                        • trhway 103 days ago

                          > a financial exchange

                          as far as i understand Mt Gox wasn't a financial exchange, it was a marketplace for non-financial stuff like for example Magic cards and cryptocurrencies. People putting hundreds of millions of real money into a virtual goods traded at a place not registered with SEC have only themselves to blame.

                          • s3xham 102 days ago

                            MTGOX-USD codes were about as liquid as you could get 7-8 years ago.

                        • xorcist 102 days ago

                          That clearly depends on the magnitude of whatever Mark has stashed away for the day when the personal heat is off him.

                          More than 100k BTC was "found" post bankruptcy IIRC, and only when the community started talking about where they were visible on the blockchain.

                          It is way too tempting to hide cryptocurrency, especially when accounting is a mess at best. We know for a fact that Mark traded on his own exchange and he must have known early on that it was not sustainable.

                          Remorse may not be the only thing that's important here. It must also be clear that white collar crime is not a business opportunity.

                          • xiphias2 102 days ago

                            Of course he feels genuine remorse for his actions, just like a thief after getting caught. It still doesn't mean that the thief shouldn't go to jail.

                          • zubairq 103 days ago

                            Having lost over 350 Bitcoins myself, I would say this is a fair verdict. Mark Karpeles was in over his head, that is true, but so are most people in startups or companies that end up hurting people or losing their money. If we were to start jailing people who lost other people's money then 95% of all people who take investment would be in jail.

                            • pakitan 102 days ago

                              So, if you buy bank shares today and it turns out the bank has been insolvent for 2 years already and management was hiding this from investors, this is totally fine, as long it's not an established bank but a "startup" bank, am I understanding you correctly?

                              Mark was in way over his head but nobody says he should be jailed for being in way over his head. He should be jailed for defrauding people. He cooked the books and he hid the fact that MtGox was insolvent practically from the moment he bought it.

                              • smokeyj 102 days ago

                                Comparing Magic The Gathering Online Exchange to an FDIC regulated bank.. He was running the equivalent of a fraudulent trading card ring that happened to become very valuable.

                                Mark has some of my coins and I think he's done enough time. Prison in general is cruel and unusual for anything besides violent offenders.

                                • bdcravens 102 days ago

                                  When Mark started running it it was a Bitcoin exchange. Everyone banters about the origins of the name, but all they really did was reuse a domain name.

                                • zubairq 102 days ago

                                  You may be right, I don't know. I will probably have to wait until some good unbiased sources explain how the whole thing unfolded from start to current day. I've been wrong before, and maybe I am this time too, but right now I give Mark the benefit of the doubt until I am sure

                                  And yes, I did lose money from insolvent banks too in the 2007 - 2008 Financial Crisis, and no one went to jail for that either, even though they hid information from investors and depositors... but that is partly why I was interested in Bitcoin in the first place...

                              • pnongrata 102 days ago

                                Big Banks and Wall St. are glad you think like that.

                                • zubairq 102 days ago

                                  I wasn't talking about big banks or wall street. I was talking about startups who take investors money, and often totally mismanage their companies. They usually don't do it to cheat investors, they are just over optimistic, and not experienced enough.

                                  What I guess you are referring to is when big banks and wall street deliberately cheat and take investors money. And I think that should require people going to jail.

                                  • pnongrata 102 days ago

                                    Optimistic and/or naive people are not exempt from being held accountable. Regarding this particular case, Karpeles was handling lots of money and clearly 'cooked the books' for his own advantage. We know that.

                                    Also, from my own personal experience, startup culture is full of lies and deceit, and investors are not always big money firms looking to land its next unicorn exit. Regular people also invest in many startups.

                                    There can't be special rules is all I'm saying. We need to improve 'startup culture' and one of the ways of doing that is by holding people accountable.

                                    • zubairq 102 days ago

                                      I agree with most of this, especially about the deceit and lies, even with a lot of the fast growing startups like Facebook and Google. There are also a huge number of honest startups, but we don't hear much in the news about them as they just keep going along making a couple of million dollars a year for their founders.

                                      It is hard to hold people accountable as the legal system doesn't support this, even here in Europe. I don't know how to improve startup culture myself, except maybe to act with integrity in my own work, and to make sure that I do my homework better when I evaluate a startup

                                      And yes, regular people generally get wiped out when they invest in startups, it happened to me a few times in the past too, but I wanted Unicorn exits too the same as the VC firms :)

                                • gabbygab 102 days ago

                                  There is a world of difference between being an investor of a startup and having your money/property with a company. The former is an owner and the latter is a customer. Also, I find it odd that the top two comments are the same "over his head" and "fair punishment".

                                  • zubairq 102 days ago

                                    I agree with this, "There is a world of difference between being an investor of a startup and having your money/property with a company."

                                    I also believe the punishment is what Mark has gone through since 2014 when MtGox officially went down. From what I have heard Mark has suffered enough, and I hope he can turn his life around

                                • tomc1985 103 days ago

                                  I used to buy M:TG cards at Mt.Gox back in the day. It was really confusing when I heard they were now a bitcoin exchange

                                • jron 102 days ago

                                  Great interview with Mark about the start and demise of MtGox: https://www.youtube.com/watch?v=7cUBFXf678o

                                  • j-c-hewitt 102 days ago

                                    Someone should put together a crash weight loss program that simulates being convicted in the Japanese criminal justice system modeled on this.

                                    • jaequery 102 days ago

                                      There have been other exchanges getting hacked after him. How come none of them get jailed time and only Mark?

                                      • kabwj 103 days ago

                                        So he’s home free? If I were him, I’d be afraid that someone might want to physically harm me.

                                        • Mengkudulangsat 102 days ago

                                          He is, all the time, which he shared on his Reddit AMA some time ago.

                                          Might be worse than the actual sentence.

                                        • shawnps 103 days ago

                                          For anyone interested in learning more, I highly recommend this episode of the Darknet Diaries podcast: https://darknetdiaries.com/episode/9/

                                          • topmonk 103 days ago

                                            A happy result for all involved. Karpeles was appropriately punished and all investors are being made whole. Most bankruptcies don't end that way.

                                            • Nanocurrency 102 days ago

                                              I'm not being made whole. All investors that found out in time about the recovery process are being made whole; the rest of us - who haven't applied - are left with nothing.

                                              • jasonzemos 103 days ago

                                                I'm still out plenty of money thanks to Karpeles that I'll never see again. Not a happy result for me, sorry, no.

                                                • inuhj 103 days ago

                                                  Same, not counting the money I lost due to his scam trading bot that was front running the market. I think 5 years would be a light sentence here.

                                                • topmonk 102 days ago

                                                  I said being made whole. Justice takes time.

                                                  • GenericsMotors 102 days ago

                                                    In this case it will probably tend to infinity.

                                                    • topmonk 102 days ago

                                                      Why do you say that? They have $630 million in BTC tied up right now.

                                                  • stouset 103 days ago

                                                    You don’t consider your own lack of caution to be a component in this loss?

                                                    • watwut 102 days ago

                                                      That is irrelevant offtopic. Just because it is possible to figure out fraud does not make it any less fraud.

                                                  • viraptor 102 days ago

                                                    Not quite. Creditors get back all the fiat which was on their account. But they will not get a full refund of BTC. There's just not enough to distribute.

                                                    Also it's all in the future. The distribution had not happened yet and many details have not been published.

                                                    • topmonk 102 days ago

                                                      Yes, but, would all the people who deposited BTC realistically would have not cashed out before now? Most likely a lot would have cashed out after a 2x or 3x return on their investment.

                                                      They are really lucky as it is.

                                                      • h1d 102 days ago

                                                        The decision was made solely by the trustee for all the benefit but yet people call him the Tokyo whale who crashed the market in 2018. (Which is BS considering it was about to explode anyway when the price went up 20x.)

                                                    • colek42 103 days ago

                                                      Really?, they still have about .5 Bitcoin of mine