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Mt. Gox CEO Charged With Stealing $2.7 Million
An anonymous reader writes: After being arrested six weeks ago in Japan, Mt. Gox CEO Mark Karpeles has now been formally charged with the theft of $2.66 million worth of clients' money. "Tokyo-based MtGox shuttered last year after admitting 850,000 coins — worth around $480 million at the time, or $387 million at current exchange rates — had disappeared from its digital vaults. The exchange, which once said it handled around 80 percent of global Bitcoin transactions, filed for bankruptcy protection soon after the cyber-money went missing, leaving a trail of angry investors calling for answers." Karpeles still denies doing anything illegal. The case is proving difficult for Japanese authorities to unravel, and they're taking it as slowly as they legally can.
He's going to jail. In Japan, the prosecutor decides if you are guilty, and then the court just rubber-stamps the decision. The conviction rate is over 99%.
The term vault shouldn't be used anyway, unless the "vault" computer is literally air-gapped.
Most vendors who really take BTC (as opposed to just using an instant-exchange payment processor to convert it to USD) do exactly that (though they use the term "cold storage").
They have a live (hot) wallet and an offline (cold storage) wallet (and usually a "watch" wallet, which allows verifying transactions to the hot wallet without any risk of compromise); the hot wallet regularly sends its balance (over a certain amount you want on hand) into cold storage, leaving only what you can bear to lose in the hot wallet.
The cold storage never even needs to power up unless you want to withdraw from it (which takes a few extra steps to do securely - Basically you need to make a new cold storage wallet and spend the entire old one between your hot wallet and your new cold storage wallet); but when talking about having a few million dollars on hand, only a moron would try to save themselves the extra five minutes it takes to do it right, once a month or so.
embezzlement:
The fraudulent appropriation to his own use or benefit of property or money in trusted to him by another
-Black's Law Dictionary
One can embezzle any type of property, including horses, currency, and chocolate. The distinguishing feature of embezzlement is that the culprit as been entrusted with the property. Theft would be if he took the thing from you without your permission. Embezzlement is when you hand him the thing, expecting him to hold it for you, but he uses it for himself.
Embezzlement applies to Mt Gox because people sent their stuff to Mt Gox willingly.
Although your conclusion
there's no guarantee that those people will get their money back - unlike with a government-issued, government-insured currency.
is sound, it's actually a little more subtle than that. The reason that people who lost money in Mt Gox can't get their money back isn't because it was in Bitcoin. In theory, the US government could decide to insure Bitcoin deposits in FDIC-regulated banks (of course they don't currently), even though the US government can't print Bitcoin (of course, the value of that guarantee is only as good as the US government's ability to get its hands on Bitcoin if a bank goes under). The reason people won't get their money back from Mt Gox is because Mt Gox isn't an FDIC insured bank. Even if people just deposited US Dollars in Mt Gox, they would have lost everything when it was stolen because there is no "deposit insurance" for a company that isn't FDIC-insured.
While it may seem like I am being pedantic for the sake of a silly "gotcha," that is not my intent. Instead, the very important point that this illustrates is that there is a big difference between Bitcoin as a currency, versus "Bitcoin" as a financial system. As strong as Bitcoin as a currency may be, the Bitcoin financial system is barely embryonic and needs to do a lot to develop the kind of institutional heft that the current financial system has. Note that this does not have to be centralized (and certainly doesn't have to be done through a government), but it's much more likely that large numbers of ordinary Joes will use Bitcoin only if the larger system is more robust.