FBI and Manhattan U.S. Attorney Preet Bharara to probe Mt. Gox closure

The cryptocurrency exchange is facing potential federal investigations, following its collapse earlier this week.
By Ananth Baliga  |  Feb. 26, 2014 at 5:06 PM
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NEW YORK, Feb. 26 (UPI) -- FBI and Manhattan U.S. Attorney Preet Bharara are probing possible financial wrongdoings by bitcoin exchange operator Mt. Gox, after its abrupt closure Monday.

Questions have been raised as to the future of Mt. Gox's bitcoin exchange, after it went underground Monday and allegations swirled that it had lost 744,0000 bitcoins over the years. This is not the first time bitcoin transactions have come under scrutiny from federal officials over possible money laundering and fraud allegations.

While his office has refused to confirm or deny the existence of an investigation, two people familiar with the matter said Bharara's office has been requesting documents from businesses that provide bitcoin services and that the FBI is reviewing the matter as well.

One of the two people, on condition of anonymity, said the matter is only in the preliminary stages and that a formal investigation hasn't been launched yet.

Mt. Gox CEO Mark Karpeles, posted a statement on the Mt. Gox website Wednesday, the first time the company has commented on the troubles surrounding its exchange.

As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues.

Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.

The website, which was taken down Tuesday, now features nothing except Karpeles' statement and a separate statement from the company.

The company statement reads:

In light of recent news reports and the potential repercussions on Mt. Gox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

Following Karpeles' resignation from the board of the Bitcoin Foundation, six companies released a statement distancing themselves from the ailing company and asked bitcoin users to continue to trust the value of the cryptocurrency industry.

Bitcoins have had a whirlwind journey in the last few months, reaching as high as $1,200 in value in December before falling to its current level of $571.69. Apart from the Mt. Gox controversy, the arrest of former Bitcoin Foundation executive Charles Shrem for money laundering and black market website Silk Road, which used bitcoins to trade illicit and illegal items including drugs, being shut down by federal authorities, have cast aspersions on the validity of the cryptocurrency.

[Businessweek] [Mt. Gox]

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