Report: Ex-Mt.Gox staff claim exchange used client money to cover costs

Home » Report: Ex-Mt.Gox staff claim exchange used client money to cover costs

mtgox-newIn a report published by Reuters today, former staffers at failed bitcoin exchange Mt.Gox claim that client funds were used to cover internal costs. In a series of exclusive interviews with reporters, the former staffers claimed that they had voiced concerns to CEO Mark Karpeles in early 2012, but that no changes were made.

By early 2012, a small group of Mt. Gox employees, all of whom worked on one-year contracts, began to worry that customer funds had been diverted to cover operating costs that they estimated to be rising. Those costs included rent in a Tokyo high-rise that also housed offices for Hulu and Google, high-tech gadgets such as a robot and a 3-D printer and a souped-up, racing version of the Honda Civic imported from Britain for Karpeles, people who have reviewed expenses said.

The employees claimed that they did not have access to any financial records, but noticed that Mt.Gox seemed to be spending far more money than it was bringing in from fees and services. They also raised concerns that company expenses were paid from the same bank accounts as customer deposits. In one meeting, Karpeles was confronted with these claims, but denied that there were any problems.

Karpeles told the group that customer money was not being used to fund the business, but declined to provide details on how the business had covered any loss. The meeting broke off after about an hour, those who participated said.

The Reuters report notes that even if the accusations are revealed to be true, this doesn’t mean that Mt.Gox or Karpeles broke any Japanese laws in using customer funds. Mt.Gox was registered as a private firm rather than as a financial institution, and had no legal obligation to report how it managed its finances.

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