Bitcoin Ponzi Schemer Hints at Dealings With Mt Gox CEO

Convicted Ponzi operator Trendon Shavers is now insinuating that the unidentified debtor cited in his defense against the SEC was Mark Karpeles.

AccessTimeIconAug 19, 2016 at 8:39 p.m. UTC
Updated Dec 12, 2022 at 12:48 p.m. UTC

Convicted Ponzi scheme operator Trendon Shavers is now insinuating the major unidentified debtor cited in his defense against the SEC may have been Mark Karpeles, CEO of the now-defunct bitcoin exchange Mt Gox.

The claims, while veiled, stem from a new interview for the popular industry podcast Bitcoin Uncensored, in which Shavers faced questions about the history of Bitcoin Savings and Trust (BTCST), an investment operation later deemed a Ponzi scheme in multiple court litigations. Investors lost as much as 700,000 BTC through the scheme, which collapsed in late 2012.

, Shavers claimed that BTCST's largest debtor, who was unidentified in public records, defaulted on a 202,000 BTC loan, thereby triggering the capital shortfall that accelerated its demise. However, he would go on to admit that "he has no proof at all of the lending activities he supposedly undertook for BTCST", including the major borrower.

Where does Karpeles factor into this? During the interview, Shavers references the debtor as someone connected to "a very, very big exchange" but stopped short of identifying the figure.

When pressed by co-hosts Chris DeRose and Joshua Unseth, he said the person was a "very well-known" exchange operator.

When asked if the debtor "[has] black hair and a cat" (a reference to both Karpeles’ physical appearance and his cat Tibanne), Shavers began to laugh, and jokingly asked, "Does he speak Japanese?"

At that point, Jason Seibert, Shavers’ attorney, taking part in the interview, intervened. He went on to say that "this is one of the things he can’t talk about".

Seibert declined to comment for this story when reached.

Claims scrutinized

That Karpeles would seek a massive loan seems plausible given that Mt Gox’s money problems predate its collapse by as many as three years.

from security firm WizSec posited that Mt Gox’s bitcoin holdings were far below its estimated liabilities for much of the period between 2011 and 2014. Further, The Daily Beast reported in May that the exchange was short by as much as 80,000 bitcoins by the time that Karpeles purchased it in mid-2011.

Yet, observers have sharply questioned Shavers' suggestion that a major loan default was behind the BTCST collapse.

When reached for comment, WizSec said that there’s no evidence that a major loan was issued in the period claimed by Shavers.

"There are no single transactions anywhere near that size on the blockchain for that time period,” the firm said, adding:

"Shavers' wallet, as best it can be reconstructed, only shows a steady exponentially growing sequence of receives and sends, peaking in July/August 2012, as would be expected from the frantic end of a ponzi scheme."

While it's tempting to suggest that the funds could represent the 200,000 BTC discovered after the exchange’s collapse, WizSec was equally dismissive.

"To be clear, there is absolutely no connection between the 202,000 BTC now held by the Mt Gox trustee and Trendon Shavers," the company said.

Doubling down

When pressed on the claims, Shavers is said to have claimed that the loan was issued by way of a coin mixer or tumbler, a process which obscures the transactive origin of bitcoins by mingling them with other funds.

According to WizSec, this could be true if the funds were distributed in small amounts or if they were collected into an account separate from the known BTCST addresses.

But that second hypothetical would only be valid if Shavers actually possessed the 202,000 BTC he claimed to have loaned, which WizSec doubted the veracity of in comments.

"There's no convincing evidence that Shavers ever even had 202,000 at any single point in time in the first place," the firm said.

Complicating matters is that the alleged personal loan was perhaps unrelated to any funds held on the exchange at the time of its demise.

An analysis of known claimants in the ongoing Mt Gox lawsuit reveals that Shavers is not listed as ever having registered a claim to any lost funds. A list of known claimants spans 1,422 Excel pages.

Listen to the full Bitcoin Uncensored podcast here. Listener discretion advised.

This story was co-written by Pete Rizzo. 


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