Report: Karpeles Rearrested Again, Allegedly Spent Bitcoins on Prostitutes

Former MtGox CEO Mark Karpeles has reportedly been rearrested on fresh suspicions of embezzlement, which include the spending of customer bitcoins on prostitutes.

According to a Japan Timesreport, Karpeles spent unspecified sums on prostitutes and had accessed venues involved with "sexual services" after allegedly moving ¥20 million ($166,000) to his own bank account.

MtGox, once the world’s largest Bitcoin Exchange by volume, collapsed in February last year, taking with it an estimated 850,000 bitcoins. Approximately 200,000 were subsequently “rediscovered” in an offline wallet.

Karpeles was first arrested three months ago on suspicion of manipulating account balances on the exchange. He has also been accused of funneling ¥1.1 billion ($8.9 million) in customer deposits both for personal use and to other businesses he operates, and was later rearrested on fresh accusations of misappropriating $2.6 million worth of customer funds.

As Karpeles had initially not been formally charged for a crime, authorities could not legally detain him for more than 23 days at a time. He was formally charged nearly two months ago for misappropriating $50 million worth of customer deposits.

Police in Japan have been investigating the coins' disappearance, which Karpeles originally blamed on hacking and a flaw in the Bitcoin protocol, but a subsequent police report suggested it was an inside job.