Mark Karpelès, former CEO of Tokyo-based bitcoin exchange Mt. Gox, has been arrested by Japanese authorities on Friday on accusations that he manipulated the exchange's computer system to falsify its assets.

The Wall Street Journal reports that Japanese police arrested Karpelès in his apartment early Friday morning, although he has not been placed with formal charges. Japanese law mandates that arrested persons can be detained without bail for up to 23 days before any formal charges can be made.

Karpelès is facing allegations of fraud and embezzlement and is accused of tampering with Mt. Gox's computer system in 2014, when the exchange filed for bankruptcy after it said it had lost 744,000 bitcoins worth $350 million in customer funds. Mt. Gox also said that it had lost 100,000 bitcoins of its own, which is equivalent to around $23 million, but the exchange later said it had recovered 200,000 bitcoins worth $56 million found in an old digital wallet created in 2011.

However, the Journal cites an anonymous Japanese official who says that some of the bitcoins Mt. Gox said was lost might not have existed after all.

For his part, Karpelès denies the accusations hurled at him, telling the Journal that they are "false" and that he will "of course deny" them if he will be made to face formal charges. When Mt. Gox announced its application for bankruptcy in 2014, Karpelès said the lost bitcoins were due to the work of hackers, and that the exchange's liability was in not strengthening a weak computer security system.

In a blog post written in May, Karpelès once again denied that the portrait of a swindler that he said the media is creating for him. He also said that his employees and Mt. Gox records can disprove the otherwise incriminating picture that will not help any case filed against him by Japanese authorities.

"I don't know why people are trying to portray me as some kind of person who didn't care about ongoing issues at that time and escaped reality through miscellaneous tasks," he writes. "Oh wait, actually some people are trying to portray me as the bad guy because that fits their understanding of things. Of course, let's just take the guy we know and make him the bad guy so we don't have to search for the culprit."

Mt. Gox is currently undergoing liquidation, and the courts have appointed Payward, parent company of bitcoin exchange Kraken, as trustee and assist with claims management.

ⓒ 2021 All rights reserved. Do not reproduce without permission.