Mt. Gox CEO Denies Involvement Behind The Silk Road Drugs Marketplace

The trial of the alleged Silk Road mastermind Ross Ulbricht took an unexpected turn yesterday when it was revealed that government agents had at one point suspected Mark Kapeles, the CEO of Mt. Gox, once the world's largest bitcoin exchange, of being behind the online drugs marketplace.

Karpeles has since denied all involvement.

He told Motherboard: "This probably going to be disappointing for you, but I am not Dread Pirate Roberts." Dread Pirate Roberts is the online alias used by the administrator of Silk Road.

Silk Road, founded in 2011, was seized by law enforcement in late 2013. Ross Ulbricht was arrested at the time, and is currently standing trial in New York for his alleged involvement in the website.

Mark Karpeles, meanwhile, was the CEO of Mt. Gox, a wildly succesful Bitcoin exchange that was at its peak responsible for more than 70% of all transactions of the virtual currency. However, it spectacularly collapsed in early 2014, with $450-million worth of Bitcoin (at then current prices) missing. Karpeles claimed hackers were to blame, many in the community openly accused him of fraud, and law enforcement investigations are ongoing.

Despite being two of the biggest Bitcoin stories of the last few years, they have been considered unrelated, until now. On Thursday, undercover Department of Homeland Security agent Jared Der-Yeghiayan admitted while being cross-examined by defence attorney Joshua Dratel that, for months, he strongly suspected Kapeles of being Dread Pirate Roberts.

"Lots of little things added up to [Karpeles]," Der-Yeghiayan testified, reports the Daily Dot.

At one point, the DHS agent even sought a warrant to search Karpeles' emails, WIRED reports.

It's important to note that the defence is not accusing Karpeles of being behind Silk Road. WIRED reporter Andy Greenberg points out on Twitter that their argument is "just that he was considered by investigators as a suspect," with the aim of casting doubt on the investigation's judgement.

However, Motherboard's Kari Paul believes that the defence is gearing up to claim that Kapeles is indeed Dread Pirate Roberts. In court, Dratel said that "he has the name of the real mastermind and it's not Ulbricht." According to Paul, it "seems clear that [Dratel] plans to argue that Karpeles framed Ulbricht."

Kapeles currently lives in Japan, where he operated Mt. Gox, and is the subject of an ongoing criminal investigation. He is French, and acquired the exchange from programmer Jed McCaleb in 2011. It had previously been an online trading platform for Magic: The Gathering playing cards, hence the name: Magic The Gathering Online Exchange. Prior to the acquisition, he was tried in absentia by a French court and found guilty of fraud, though he is yet to serve his sentence. In August 2014, after the exchange's collapse, he launched a new web-hosting service, which is unrelated to Bitcoin.

Meanwhile, Ulbricht has admitted that he created the Silk Road, but claims he ceased involvement shortly afterwards. He's just the "fall guy," he alleges.

Here's the full statement Mark Karpeles provided to Motherboard:

"This is probably going to be disappointing for you, but I am not Dread Pirate Roberts. The investigation reached that conclusion already - this is why I am not the one sitting during the Silk Road trial, and I can only feel defense attorney Joshua Dratel trying everything he can to point the attention away from his client.

I have nothing to do with Silk Road and do not condone what has been happening there. I believe Bitcoin (and its underlying technology) is not meant to help people evade the law, but to improve everyone's way of life by offering never thought before possibilities.

As for the silkroadmarket.org domain, it was registered by a KalyHost.com customer and paid in Bitcoins (KalyHost is a service of Tibanne that has been up since 2009)."