Bitcoin entrepreneur Charlie Shrem, has spoken out about his experiences dealing with Mt. Gox CEO Mark Karpeles. Taking part in a Google hangout for the Toronto Decentral Bitcoin Meetup Group, Shrem was asked to explain his relationship with Karpeles, who ran what was once the world's largest digital currency exchange.  

Shrem, who was a co-founder of the Bitcoin Foundation, describes difficult and labored exchanges with Karpeles during Shrem's time as BitInstant CEO. At the time, Shrem was attempting to make the two services work together through their public APIs. Remembering the period when Mt. Gox had been taken offline by denial of service attacks, Shrem recounts Karpeles' reaction to the issue:

“Remember  Mt Gox went down the first time and it was like, a Friday, and Roger and Jessie were helping him out and Roger's [says] to Mark 'what time do you want me come in tomorrow?' like Saturday morning to help”

“Mark's [says] 'no problem, we'll deal with it on Monday', and they're like 'you're shut down, the customers think all of the money's lost, you've been hacked, everyone's flipping out, people have you know [have] hits out on you, you want to go back to work on Monday? He just didn't care about anything”.

Shrem later sums up his collaboration with Karpeles:“he's one of the hardest people I've ever had to work with […] he's a weird dude […]  he never cared about anything[.]”

Asked if he has a theory about what happened inside Mt. Gox during its collapse, Shrem explained he believes Karpeles had lost the coins back in the 2011 hack attack against the digital currency exchange. At the time, this was reported to be a minor attack, foiled by the exchange's US $1000 per day withdrawal limit. Shrem explains however, that he believes it was around this time that “[Karpeles] lost those coins” which was much earlier than previously believed.

Charlie Shrem

In the video, Shrem points to self-delusion on the users' part in the face of blockchain transactions visibily removing funds from Mt. Gox's addresses. “[W]e see the bitcoin exiting your addresses, but don't really question it, because everyone was happy that they got their money.” He suggests Karpeles covered up his tracks, believing that he would be able to make the lost money back and be able to repurchase enough coins to cover future customer withdrawals.

Shrem elaborates that “the money that today is worth hundreds of millions, was then only single millions or tens of millions”, a sum Karpeles could have believed was salvageable. With the soaring price of Bitcoins arriving in 2013 Shrem points to this moment as when “the ponzi started unraveling”.

The former BitInstant CEO faces his own legal troubles in the United States. At the end of 2014, Shrem was sentenced to two years in prison for indirectly helping to transmit US$1 million to the online marketplace Silk Road. Having pleaded guilty to charges of “aiding and abetting unlicensed money transmission[,]” the entrepreneur avoided more serious charges of money laundering and conspiracy.

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