TOKYO -- Once described as a geek who stuffed himself with snacks in front of his computer, Mark Karpeles rose to head a firm that once claimed to handle 80 percent of the world's bitcoin transactions.
But his lavish Tokyo lifestyle came to an abrupt end when prosecutors charged him with creaming off millions of dollars of customer deposits from his cryptocurrency exchange MtGox.
In many ways, the trajectory of the Frenchman, now 33, mirrors the volatile rise and fall of the bitcoin currency itself.
According to his mother, he had few friends at school, as he was "unable to find a buddy who could talk like he could about IT and quantum physics".
The "only thing that interested" her "talented" son was computer science, according to his mother, speaking in a 2017 documentary.
Karpeles, whose real first name is Robert, himself admitted to French television that he would spend entire days in front of the computer screen without the slightest bit of physical activity.
Entering the professional world, he quickly found himself at odds with his French company Linux Cyberjoueurs, which found irregularities in its data and pointed the finger at Karpeles.
The firm brought the case to the authorities and in 2010, he received a year's suspended sentence in absentia in France for "fraudulent access of an automated data processing system" and "fraudulent altering of data".
But by this time, Karpeles was in Japan, which he had visited several years previously and found the people and culture to his liking.
Once in Japan, he founded his own company, called Tibanne -- after his cat.
'MAGIC'
But his life really changed the day a customer asked if he could pay in bitcoin -- a new virtual currency that was just taking its own baby steps.
The virtual currency appealed to the computer whiz and he began to delve into the technical and IT aspects of the new trend.
By 2011, he had bought his own cryptocurrency exchange MtGox, which stands for "Magic: The Gathering Online eXchange" -- referring to a "magic" card-swapping platform beloved by Japanese "otaku" or "geeks".
This grew rapidly until, at the height of its powers, it claimed to control 80 percent of all global bitcoin transactions.
"He was excited by the money that could be generated on this exchange market," one of his associates told a television documentary under the cover of anonymity.
And Karpeles enjoyed the trappings -- reportedly lodging in an $11,000-per-month luxury pad with a king-sized bed worth tens of thousands of dollars.
He married a Japanese woman and became a father but everything came crashing down in 2014, when MtGox suffered what Karpeles said was a "massive" hack attack and lost around 850,000 bitcoins, worth just under half a billion dollars at that time.
MtGox collapsed and filed for bankruptcy protection. Prosecutors are not pursuing Karpeles for that but for allegedly falsifying data and pilfering around $3 million from customers' accounts.
He had tried to take the traditional path of bowing deeply and apologizing profusely -- in Japanese -- for the losses.
But this earned him only mockery online and did not deter the authorities.
He was arrested in August 2015 and spent a year in Japanese detention after being re-arrested several times, as is possible under the legal system in Japan.
When he was finally released on bail, he had lost a huge amount of weight and at his first high-profile hearing offered up a clean-cut image.
Since then, Karpeles has been active on social media but has largely avoided commenting on his case in detail as he awaits the court's verdict, which is expected on Friday.
source: news.abs-cbn.com
TOKYO - Japan-based virtual currency exchange Coincheck said Tuesday it had refunded more than $440 million to customers following the hack of its systems, which was one of the largest thefts of its kind.
The company said it used its own funds to reimburse about 46.6 billion yen ($440 million) to all 260,000 customers who lost their holdings of NEM, a leading cryptocurrency.
"Procedures have been completed with the accounts of all 260,000 customers," company spokesman Yosuke Imai told AFP.
Thieves siphoned away 523 million units of the cryptocurrency from Coincheck -- then valued at $547 million -- during the January 26 hack, which exceeded the $480 million in bitcoin stolen in 2014 from another Japanese exchange, MtGox.
The 2014 hack prompted Japan to issue new regulations, requiring exchanges to obtain a government license, but Coincheck was allowed to continue operating while the Financial Services Agency was reviewing its application.
Authorities raided Coincheck's office last month and have slapped the company with sanctions.
Coincheck chief operating officer Yusuke Otsuka said last week that the company's system was breached after several staff members opened emails containing malware.
The firm had failed to upgrade its systems to keep up with the rapid expansion of the cryptocurrency market, he said.
In February, 7 plaintiffs -- 2 companies and 5 individuals -- filed a lawsuit against Coincheck seeking the reimbursement of 19.53 million yen in lost virtual currency and further compensation for interest lost due to the hack.
As many as 10,000 businesses in Japan are thought to accept bitcoin, and bitFlyer -- the country's main bitcoin exchange -- saw its user base grow beyond one million in November.
source: news.abs-cbn.com
TOKYO - From clampdowns to a warm embrace, regulators in Asia have taken very different approaches to dealing with the bitcoin phenomenon. Here are the developments in a few key markets:
CHINESE CLAMPDOWN
In mid-September, China's central bank, the People's Bank of China (PBOC), told virtual currency trading platforms based in Beijing and Shanghai to cease market operations.
Authorities also clamped down on ethereum and any other electronic units that are exchanged online without being regulated by any country.
The PBOC said it wanted to fight "speculation" around the crypto-currencies, which "seriously disrupted the financial system".
This came after the National Internet Finance Association of China -- an offshoot of the PBOC -- drew up a damning report on virtual currencies, saying they were "increasingly used as a tool in criminal activities" such as drug trafficking.
Experts say Chinese authorities are also concerned about possible capital flight which could harm the value of the yuan.
However, the authorities in Beijing have not yet attacked bitcoin mining -- the creation of the digital currency.
Between 60 and 70 percent of new bitcoins are created in China.
KOREAN CONCERN
Hyper-wired South Korea was also a hotbed for virtual currencies such as bitcoin, accounting for some 20 percent of global transactions, about 10 times its share of the world economy.
But South Korean authorities late last year banned financial institutions from dealing in virtual currencies on fears of a bubble fuelled by retail speculators.
About one million South Koreans, many of them small-time investors, are estimated to own bitcoins and demand is so high that prices are around 20 percent higher than in the US.
Initial coin offerings (ICOs) -- where companies sell newly mined cryptocurrencies to investors for real money -- were also outlawed.
The government has also pledged to strengthen investor protection rules, in an effort to curb speculation and potential fraud.
Announcing the ban on ICOs in September, South Korea's Financial Services Commission declared "cryptocurrencies are neither money nor currency nor financial products".
Youbit, a South Korean exchange trading bitcoin and other virtual currencies, declared itself bankrupt in December after being hacked for the second time this year.
North Korea was accused of being behind the first attack.
SINGAPORE CAUTION
Singapore's central bank has issued a warning over cryptocurrencies, cautioning the public about the risk of jumping in on the "bitcoin bubble".
The Monetary Authority of Singapore noted they are not backed by any central bank and are unregulated, which means those who lose their investments have no grounds for redress under Singapore law.
Yusho Liu, co-founder of Singapore-based cryptocurrency wallet Coinhako, says demand has been soaring, with transactions up around 10-fold over the past year.
However, while regulators have been prepared to offer a cautious free rein to the digital units, "financial institutions and service providers have been rather resistant", Liu told AFP.
"In fact, I believe that only 30-40 percent of the market potential is fulfilled because of the friction generated by such matters. This is the key missing piece of Singapore being the fintech hub," said Liu.
JAPANESE JUMP-IN
The high-profile collapse of digital currency exchange platform MtGox failed to douse the enthusiasm for virtual currencies in Japan, which in April became the first country in the world to proclaim it as legal tender.
As many as 10,000 businesses in Japan are thought to accept bitcoin and bitFlyer, the country's main bitcoin exchange, saw its user base pass the one-million mark in November.
Many Japanese, especially younger investors, have been seduced by the idea of strong profits in the context of ultra-low interest rates that offer little in the way of returns.
However, the governor of the Bank of Japan, Haruhiko Kuroda, has recently issued a warning that the recent rise of the bitcoin price was "abnormal".
source: news.abs-cbn.com
LONDON/NEW YORK - As bitcoin raced to another record high on Tuesday, one of the biggest providers of digital currency wallets, Coinbase, went down under the weight of traffic, leaving many of its more than 10 million customers unable to access their funds.
At the same time, Bitfinex, the world's biggest bitcoin exchange by trading volume, said it was under a heavy denial-of-service (DDoS) attack, meaning its servers had been intentionally flooded with junk online requests, taking down its website and crippling its services.
The latest outages show how the market infrastructure for an immature and volatile instrument that millions of investors have piled into may be ill-equipped to cope with sudden shifts in demand, which is worrying some investors.
During a particularly volatile period of trading on Dec. 7, bitcoin surged from below $16,000 to $19,500 in less than an hour on Coinbase's exchange GDAX, while it was changing hands at less than $16,000 on another, Bitstamp.
As trading volume surged, GDAX and Coinbase went down at least 10 times because of "record-high traffic", Coinbase said.
"More people are engaging with our platform than ever and that bodes well for the future of the digital currency. At the same time, it does create extreme volatility and stress on our systems," the company's director of business operations, David Farmer, said.
"We can confirm that there has been no unusual or suspicious activity. All we know right now is that there is a large amount of traffic," he told Reuters.
Bitfinex said it had been under a sustained DDoS attack since last week.
"While last week the platform traded continuously, to effectively perform emergency maintenance, we took the website down for a brief time today (Tuesday) to mitigate further issues for customers," a spokesman said.
"We are constantly improving our systems to ensure that we're able to both accommodate the immense volume of trading that occurs on our platform while also fending off sustained DDoS attacks," he said.
24/7 MARKET
Daniel Masters, founder of Global Advisors Bitcoin Investment Fund, worries the exchanges would struggle to cope if there were a sudden rush for the exit.
"The ability of these platforms to handle volume is yet to be tested properly," he said. "What happens if this market turns into a lot of sellers? The liquidity itself could be an issue."
Charles Cascarilla, chief executive of New York-based company Paxos, which operates cryptocurrency exchange itBit, told Reuters that dealing with spikes in volume was a problem faced by all exchanges, not just cryptocurrency platforms.
"Clearly the reality is the world of cryptocurrency is growing at an exponential rate right now and everyone is doing their best to expand infrastructure, but it is hard to know what would happen in a hypothetical scenario," he said.
Cameron Winklevoss, co-founder of the Gemini exchange, an early bitcoin investor and an outspoken supporter of the cryptocurrency, said the risk the wider market would suffer badly if one exchange went down no longer existed, as trading volume had become more evenly spread.
"We are definitely beyond the too-big-to-fail situation," he told Reuters. "That was a problem we had five years ago when Mt. Gox accounted for 95 percent of volume."
"Most of the exchanges are doing a good job. This is a 24/7 market, there is no session close and there is no downtime."
Mt. Gox, the world's biggest bitcoin exchange at the time, collapsed in 2014 after hackers stole 650,000 bitcoins, triggering a collapse in the bitcoin price.
The demise of Mt. Gox left more than 24,000 customers unable to access hundreds of millions of dollars of cryptocurrency and cash. More than three years later none has recouped a cent.
BITCOIN FUTURES
Some investors had said they were worried the launch of bitcoin futures by the world's biggest derivative exchanges could exacerbate volatility by prompting some traders to take out large positions betting on a price fall in the future.
The Chicago-based Cboe Global Markets Inc. futures launched a futures contracts on bitcoin on Dec. 10 and CME Group Inc will launch a rival contract a week later.
So far this week, the launch of futures by Cboe does not appear to have created any additional volatility, with price moves less violent than last week's wild trading.
But Tim Swanson, a bitcoin expert and founder of Post Oak Labs, a technology advisory firm, said he was concerned that if the futures liquidity increases there could be an incentive for someone with a large bet against bitcoin to disrupt or attack the network to make money from the ensuing price fall.
CME Group and Cboe declined to comment.
Flooding the bitcoin network with tiny transactions could potentially send the price down sharply, said Swanson, as could sending many sell-signals to the market that are not honoured - so-called spoofing, which is illegal in regulated markets.
A surge in bitcoin trades in recent weeks has also left the blockchain network that the cryptocurrency relies on to process and verify transactions struggling to keep up.
As of Wednesday at 1445 GMT, more than 125,000 bitcoin transactions remained unconfirmed.
In the past week, more than half a million new users have opened wallets with retail-focused bitcoin wallet provider Blockchain, the firm said, taking the total number of users to more than 20 million, from 10 million last year.
The London-based company has also been struggling to keep up, citing "record traffic levels" last week.
VOLATILE TRADING
Created in 2008, bitcoin uses encryption and a shared blockchain database that enables the anonymous transfer of funds outside of a conventional centralised payment system.
But there is little evidence to suggest buyers are using bitcoin as a means of exchange and payment. On the whole, they buy the cryptocurrency as a speculative investment, attracted by massive price gains, said Garrick Hileman, a research fellow at the University of Cambridge's Judge Business School.
As a result, some banks say they are worried that a collapse in bitcoin would have a knock-on effect on investments by individual investors in other asset classes.
Deutsche Bank said in a report on Dec. 7 that a bitcoin crash - and the impact it could have on retail investors' confidence - was one of the biggest risks to markets in 2018.
Periods of high volatility are not uncommon in other currencies and asset classes, particularly in commodities and emerging markets. But bitcoin's volatility is extreme, and frequent: the one-day price move has been more than 10 percent on nine days in the past three months.
Moves of a similar magnitude for the US dollar, for example, are extremely rare. Its biggest one-day move against a major currency was in January 2015 when the Swiss central bank abandoned a cap on the franc, sending the dollar down 18 percent.
Some bitcoin watchers, such as Swanson, also worry about the risk of one of the big exchanges being suddenly shut by authorities.
In July, US authorities shut down the website of the BTC-e exchange, saying it had "facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking".
BTC-e, which is no longer operating, could not be reached for comment.
The top three exchanges out of more than 100 - Bitfinex, GDAX and bitFlyer - are home to more than 60 percent of all trading, according to data provider Bitcoinity.
Another issue specific to the market is the risk of hacking and theft. More than 980,000 bitcoins have been stolen from exchanges, Reuters has found, with the Mt. Gox heist accounting for the majority.
Last week, a Slovenian cryptocurrency mining marketplace, NiceHash, said it had lost about $64 million worth of bitcoin in a hack of its payment system.
Reporting by Jemima Kelly and Anna Irrera; additional reporting by Amanda Cooper; editing by David Clarke
source: news.abs-cbn.com
Bitcoin flirted with $17,000 on Thursday, triggering a warning the cryptocurrency was like a "train with no brakes" and prompting fresh concern about its looming launch on mainstream markets.
Still under $14,000 in Asian trading hours, it smashed through $15,000 in European trading and got as high as $16,777 before pulling back, according to Bloomberg data. Near 2145 GMT (5:45 a.m. in Manila), bitcoin stood at $16,070.
The rally came just a day after the virtual currency, which has been used to buy everything from an ice cream to a pint of beer, hit the $12,000 mark for the first time. The eye-popping rise has seen the currency's value soar more than 50 percent in just one week, and from just $752 in mid-January.
Bitcoin -- which came into being in 2009 as a bit of encrypted software -- has no central bank backing it and no legal exchange rate.
It has surged dramatically in the past month, driven by growing acceptance among traditional investors of an innovation once considered the preserve of computer nerds and financial experts, and sometimes more shady users.
But some, including the US Federal Reserve, have warned against dabbling in bitcoin as it could threaten financial stability, and fears of a bubble have increased as the price has soared.
"Bitcoin now seems like a charging train with no brakes," said Shane Chanel, from Sydney-based ASR Wealth Advisers. "There is an unfathomable amount of new participants piling into the cryptocurrency market."
But he warned: "Once the hype slows down, we will most certainly see some sort of correction."
FINANCIAL INDUSTRY CONCERNS
There also are mounting concerns about its introduction into the mainstream financial system after a US regulator last week cleared the way for bitcoin futures to trade on major exchanges, a decision which analysts say has helped spur the recent rally.
The Commodity Futures Trading Commission decision allows bitcoin derivatives to be offered on the Cboe Futures Exchange starting this weekend and on the world's biggest futures venue, the Chicago Mercantile Exchange (CME), from December 18.
But the Futures Industry Association, which groups some of the world's biggest derivatives brokerages, criticized the CFTC's move in a letter to the regulator, saying contracts are being rushed through without properly weighing the risks.
"A more thorough and considered process would have allowed for a robust public discussion among clearing member firms, exchanges and clearing houses," the association said.
Bitcoin transactions happen when heavily encrypted codes are passed across a computer network.
Goldman Sachs, an FIA member, plans to clear bitcoin futures contracts for some clients, meaning it will serve as intermediary to enable transactions, a spokeswoman said.
"Given that this is a new product, as expected we are evaluating the specifications and risk attributes for the bitcoin futures contracts as part of our standard due diligence process," she said.
The NiceHash marketplace was meanwhile on Thursday investigating a security breach resulting in the theft of bitcoin.
"Clearly, this is a matter of deep concern and we are working hard to rectify the matter in the coming days," NiceHash said in a statement.
"In addition to undertaking our own investigation, the incident has been reported to the relevant authorities and law enforcement and we are co-operating with them as a matter of urgency."
Bitcoin and other virtual currencies use blockchain, which records transactions that are updated in real time on an online ledger and maintained by a network of computers.
In 2014 major Tokyo-based bitcoin exchange MtGox collapsed after admitting that 850,000 coins -- worth around $480 million at the time -- had disappeared from its vaults.
Bitcoin's use on the underground Silk Road website, where users could use it to buy drugs and guns, also raised suspicions about the virtual money.
source: news.abs-cbn.com
SINGAPORE - Bitcoin broke past $14,000 to a fresh record on Thursday as investors continued to pile in, triggering a warning the cryptocurrency was "like a charging train with no brakes" that would inevitably slip back.
It touched a new high of $14,485 before slipping back to $14,398 in Asian afternoon trade, according to Bloomberg News.
The rally came just a day after the virtual currency, which has been used to buy everything from an ice cream to a pint of beer, hit the $12,000 mark for the first time.
Bitcoin -- which came into being in 2009 as a bit of encrypted software and has no central bank backing it -- has risen from a 2017 low of $752 in mid-January, and surged dramatically in the past month.
The increased interest has been driven by growing acceptance among traditional investors of an innovation once considered the preserve of computer nerds and financial experts.
US regulators last week cleared the way for Bitcoin futures to trade on major exchanges, including the world's biggest futures centre the Chicago Mercantile Exchange (CME).
But some, including the US Federal Reserve, have warned against dabbling in Bitcoin as it could threaten financial stability, and fears of a bubble have increased as the price has soared.
"Bitcoin now seems like a charging train with no brakes," said Shane Chanel, from Sydney-based ASR Wealth Advisers. "There is an unfathomable amount of new participants piling into the cryptocurrency market."
But he warned: "Once the hype slows down, we will most certainly see some sort of correction."
Chris Weston, chief market strategist at IG, also predicted "downside moves" in future.
"When the price does turn and there is confusion, even panic.... then watch the short sellers come out in droves," he said.
Transactions happen when heavily encrypted codes are passed across a computer network.
Bitcoin and other virtual currencies use blockchain, which records transactions that are updated in real time on an online ledger and maintained by a network of computers.
But it has also suffered controversies. In 2014 major Tokyo-based Bitcoin exchange MtGox collapsed after admitting that 850,000 coins -- worth around $480 million at the time -- had disappeared from its vaults.
source: news.abs-cbn.com
