Tokyo Former Bitcoin star Mark Karpelès is actively repenting of his biggest youthful sin. In 2014, his crypto exchange Mt.Gox went bankrupt after the biggest bitcoin hack to date. He himself was later given a suspended sentence in Japan for providing false information. Now the 36-year-old is raising money for a rating agency for crypto exchanges. “I’m trying to make sure something like Mt. Gox doesn’t happen again,” he said during a briefing in Tokyo on Monday.
At the time, a hacker embezzled around €400 million from the Japanese crypto exchange, which handled around 80% of global Bitcoin trading at the start of the boom in 2011. Then the exchange went bankrupt. The name of her new project is meant to show her purification. The Tokyo resident calls his idea Ungox, the opposite of “goxen”, which experts hear, derived from Mt.Gox, as a cryptocurrency fraud.
The hack of the online video game “Axie Infinity” shows how explosive the subject is. At the end of March, it became known that savvy programmers had stolen around $600 million worth of cryptocurrencies that players were trading. And this is just the most recent example. According to figures from analytics firm Chainanalysis, fraudsters stole virtual currencies worth a total of $14 billion last year – exchanges are too inviting.
Unlike traditional exchanges, the more than 1,000 virtual currency exchanges often hold the investors’ assets themselves and the security technology is often inadequate, says Karpelès. So there is a lot to steal. However, as a bitcoin dollar, he thinks he can become a good gardener in the hugely sprawling crypto biotope.
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“I have experienced everything that can go wrong in an exchange,” promises the founder of the start-up. In recent years, he has also verified other scholarships. “As a result, I have accumulated a lot of experience.” He now wants to offer this to private investors and large investors with Ungox for a fee or by subscription, in order to comprehensively assess the exchanges according to the background of the operators. , the technology used, the legal framework and other important aspects.
Doubts about Ungox’s chances of success
The problem: Until now, the start-up, which is registered in the US state of Delaware, had practically only a one-page landing page, which every click on “Get Started” led to on a subscription to a newsletter. Norbert Gehrke, founder of fintech community Tokyo Fintech, doubts the project will ever get past that stage.
“If he sees a business model there, then good luck,” said the German fintech expert. “I can’t really imagine a rating agency like this as a source of profit.” Various providers have already tried it, for example the crypto analyst Coingecko with its trust score for exchanges. However, Gehrke considers the demand for these services to be limited.
“I do not see the interest of a rating agency on stock exchanges where the market has already decided”, says the observer – in particular by the entry of institutional investors.
On the Coinbase exchange, which is listed on the American Nasdaq, for example, large investors already account for two-thirds of the trading volume. And these investors are committed to their clients and would therefore rely on internal audits and major global exchanges, says Gehrke. “Karpelès is four to five years behind.”
Mark Karpelès faces ten years in prison
At that time, he only had a disability. He was first detained for nine months in 2015 and 2016. He then fought in court against prosecutors, who wanted to jail him for ten years for embezzlement, until the verdict in 2019. The court said dismissed that charge and sentenced him to just two and a half years in prison, suspended for four years. After that, Mt.Gox’s bankruptcy processing caused it to end.
The insolvency mass contained 200,000 bitcoins in so-called “cold wallets” that were not connected to the internet. The administrator has already sold 50,000. The rest must now be issued to injured customers. Karpelès suspects that could happen later this year.
In his way of selling indulgences, he himself offers the latest fad to damaged Mt.Gox customers in the best crypto style: NFTs, non-fungible tokens that digitally represent real value. The redeemable equivalent: a lifetime membership to Ungox. Karpelès hopes to become the first bankrupt in the crypto world to gain credibility as a stock market evaluator. “If I say something is wrong, maybe a lot of people will believe it.”
After: Commentary – What a notation can and cannot do