Japanese Bitcoin Heist ‘an Inside Job,’ Not Hackers Alone

The financial collapse of Mt. Gox, one of the world’s largest bitcoin exchanges, wasn’t just due to hackers, Japanese police suspect.

Jim Urquhart/Reuters

The Japanese police are closer to completing their investigation into one of the large financial collapses in the virtual currency world last year, with a source close to the police claiming that “it looks like a partial inside job.”

What was once the world’s largest bitcoin exchange, Mt. Gox, filed for bankruptcy protection in February last year after disclosing that a half-billion dollars worth of virtual currency had disappeared into the blue, allegedly hacked.

A Japanese police investigation was launched in late July to try to find where the money went and how the bitcoins were consumed, or if other crimes had been committed. The amount of vanished bitcoins was 650,000 BTC (or 24.7 billion yen).

Today on January 1st (Japan time) Japan’s leading newspaper, the Yomiuri Shimbun, reported that Tokyo Metropolitan Police Investigators have concluded initial investigations and established that of the only 1% of the missing bitcoins (7,000 BTC) were due to cyber attacks.

The police suspect that the other unaccounted for 643,000 bitcoins, were removed from customer accounts via an unknown party. The police may be making arrests within the next few weeks.

The Tokyo Metropolitan Police Department Cyber Crimes Unit and officers from the White Collar Crimes Division, who have been investigating Mt. Gox for months, suspect someone familiar with the exchange system may have embezzled the bitcoins of the customers out from the company storage.

The bitcoins were poorly secured, and the codes necessary to “cash them” were sometimes kept in ‘paper wallets’ haphazardly stored in the offices.

Mark Karpeles, the former CEO of Mt. Gox, told the Daily Beast last month, “I suspect that some of the missing bit coins were taken by a company insider but when I tried to talk to the police about it, they seemed disinterested. I’ve been as helpful as I can with the investigation but I hope that they’re not targeting me. I didn’t steal anything.”

The Tokyo Metropolitan Police Department refused to discuss the case on the record. Sources close to the TMPD would only say to the Daily Beast, “It is certainly true that not all the coins were hacked and that it looks like a partial insider job. It would be inappropriate to comment more at this time.”

In November of last year, another Bitcoin exchange, Kraken, was asked to help investigate the missing bitcoins, as part of the liquidation of Mt. Gox.

Neither members of Kraken nor the trustee appointed by the Tokyo District Court to handle the Mt. Gox liquidation were available for comment.