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Mt. Gox boss to miss bankruptcy case

By Reuters
New York, 15 Apr 2014

Mark Karpeles, the founder of Mt. Gox, said he would not come to the United States to answer questions about the Japanese Bitcoin exchange's US bankruptcy case, Mt. Gox lawyers told a federal judge on Monday.

In the court filing, Mt. Gox lawyers cited a subpoena from the US Department of Treasury's Financial Crimes Enforcement Network, which has closely monitored virtual currencies like Bitcoin.

"Mr Karpeles is now in the process of obtaining counsel to represent him with respect to the FinCEN Subpoena. Until such time as counsel is retained and has an opportunity to 'get up to speed' and advise Mr Karpeles, he is not willing to travel to the US," the filing said.

The subpoena requires Karpeles to appear and provide testimony in Washington, DC, on Friday. The court papers also said a Japanese court had been informed of the issue and that a hearing was scheduled on Tuesday in Japan.

Bitcoin is a digital currency that, unlike conventional money, is bought and sold on a peer-to-peer network independent of central control. Its value has soared in the last year, and the total worth of Bitcoins minted is now about $7 billion.

Mt. Gox, once the world's biggest Bitcoin exchange, filed for bankruptcy protection in Japan last month, saying it may have lost nearly half a billion dollars' worth of the virtual coins due to hacking into its computer system.

According to Monday's court filings, the subpoena did not specify topics for discussion.

In the court filings, Karpeles' lawyers asked the court to delay the bankruptcy deposition to 5 May, but said Mt. Gox could not guarantee that Karpeles would attend that either.

Bitcoin promoter indicted

Meanwhile, prominent Bitcoin entrepreneur Charlie Shrem has been indicted by a federal grand jury in New York on charges of funnelling cash to the illicit online marketplace Silk Road.

Shrem, known as one of the digital currency's most visible promoters, is accused of conspiring with a Florida man, Robert Faiella, to sell more than $1 million in Bitcoins to the users of Silk Road despite knowing it would be spent on illegal uses like drug trafficking.

Both Shrem and Faiella face charges of money laundering, conspiracy and failing to file suspicious activity reports with government banking authorities, according to the indictment filed by Manhattan US attorney Preet Bharara.

Shrem's lawyer, Marc Agnifilo, and Faiella's lawyer, David Braun, did not immediately respond to a request for comment on Monday.

Federal authorities shut down Silk Road last year, and prosecutors from Bharara's office have charged Ross William Ulbricht with operating the site under the name "Dread Pirate Roberts".

Shrem, 24, was arrested in January and stepped down as VP of the Bitcoin Foundation, a well-known trade group, soon after. He was previously CEO of BitInstant, a Bitcoin exchange company that enjoyed financial backing from the twins Cameron and Tyler Winklevoss but closed last year.

Bitcoin is a digital currency, not backed by any government or central bank that fluctuates in value according to its users' demand. Users can transfer Bitcoins to each other online and store the currency in digital wallets.

Authorities have vowed to pursue those who use Bitcoin to complete illegal transactions, while regulators are still grappling with their approach to the nascent currency.

The recent failure of Japan's Mt. Gox, which filed for bankruptcy after apparently losing hundreds of millions of dollars' worth of Bitcoins, has underscored concerns about the currency's long-term viability.

Shrem will be arraigned on the indictment on 29 April, according to Bharara's office. He faces a maximum prison term of 20 years if convicted on the most serious charge.

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