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Sources say Mt. Gox employees confronted CEO about finances two years before seeking bankruptcy

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(Credit: Reuters) Some of Bitcoin enthusiast Mike Caldwell's coins and paper vouchers, often called "paper wallets", are pictured at his office in this photo illustration in Sandy, Utah, January 31, 2014. Bitcoin
March 31
8:34 AM 2014

Sources told Reuters that some employees had already asked Chief Executive Officer Mark Karpeles two years before the bitcoin exchange filed for bankruptcy about proper accounting and handling of the firm's money. The sources spoke on the condition of anonymity because of the possible legal problems that would result if they revealed themselves.

According to the three people interviewed by Reuters, there were six employees who talked with Karpeles early in 2012. They asked him if Mt. Gox was safeguarding the deposits from their clients properly. These employees were concerned that consumer funds were used for operating expenses which were already going up. Some of these costs included a high-rise office in Tokyo, a robot and other gadgets and a 3D printer and Honda Civic that was imported from Britain for the CEO, the report said. 

The people who reviewed the expenses suspected that these expenses were funded from the same bank account that was supposed to be for customer deposits. Karpeles told them that this was not the case but did not provide details to support his claim. How Mt. Gox took care of the money of other people remained a key point in the investigation of Japanese authorities in determining the reason why the exchange lost around $27 million in cash and $450 million worth of Bitcoins, the report said. 

The meeting with Karpeles ended after one hour, with several staff members saying that the inconclusive results of the meeting frustrated them. A person familiar with how Karpeles thinks said that Karpeles was under the impression that he had halted a challenge to his leadership by some of his employees who did not have any right to look at the books of the company where he owns an 88% stake. It's not certain how Japanese law would address the issue of client funds being used for other purposes, the report said. 

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