Mark Karpeles Launches New Cryptocurrency Exchange EllipX After Mt. Gox Closure

Closure of Mt. Gox and the Launch of EllipX

SEOUL, SOUTH KOREA – With the recent conclusion of its bankruptcy redemption payments, Mt. Gox has finally put an end to a tumultuous chapter in the cryptocurrency world, marking the end of what is arguably the most infamous hack in crypto history. Once vilified within the community, Mark Karpeles, the former CEO of the defunct exchange, found himself at the center of a storm, with Japanese prosecutors aiming for a decade-long imprisonment. However, against the odds, Karpeles has emerged victorious, joining a rare group of individuals who have successfully contested the law in Japan, a country known for its 99% conviction rate that typically favors coerced confessions over courtroom battles.

Now that this period is behind him, Karpeles is embarking on a fresh venture: the launch of a new cryptocurrency exchange named EllipX. This new platform aims to integrate modern best practices drawn from his experiences with Mt. Gox, while also advancing the development of a cryptocurrency ratings agency called Ungox. In an interview with CoinDesk during the Korea Blockchain Week, Karpeles stated, “I can say very confidently that the Mt. Gox hack wouldn’t have occurred if we had access to even a fraction of the security tools available today.”

Reflecting on his past, Karpeles pointed out that a significant tool he lacked during the peak of Mt. Gox’s operations was the Hierarchical Deterministic (HD) wallets. These wallets are designed to securely manage and generate multiple public and private key pairs from a single master seed. The catastrophic hack of his exchange was primarily due to the theft of private, encrypted keys and a vulnerability known as transaction malleability, resulting in the loss of approximately 850,000 Bitcoin (BTC) from the exchange’s poorly secured hot wallets.

Karpeles remarked, “In hindsight, had we implemented custodians and HD wallets, we wouldn’t have had to store private keys on our servers. We could have granted public seed access to an accountant for real-time transaction monitoring, which would not only have mitigated the Mt. Gox hack but also allowed us to identify suspicious activities much earlier.”

The structure of EllipX will resemble that of the New York Stock Exchange, featuring distinct groups responsible for trading, brokering, and asset storage. Karpeles emphasizes that this approach stems from hard-earned lessons learned from the past.

Japan has since instituted strict custodian regulations for cryptocurrency exchanges, which contributes to the notion that Japan is now one of the safest places to be an FTX customer. Karpeles noted, “Before the Mt. Gox incident, Bitcoin was virtually unknown in Japan. However, once the bankruptcy unfolded, it was headline news across national television. Even with only 10,000 to 20,000 customers in the country, the event received extensive live coverage on every major TV channel.”

He added, “The Coincheck hack that occurred four years later also played a crucial role in prompting Japan to adopt much stricter security regulations for cryptocurrency exchanges.”

The final chapter of the Mt. Gox saga concluded just a few months ago when bankruptcy creditors were finally reimbursed. Many speculated that this would lead to significant selling pressure on Bitcoin, potentially driving down its price. However, the market absorbed the news with surprising calmness. Karpeles observed, “What we’re witnessing is a lot of original Bitcoin (BTC) buyers, the ones who invested in Mt. Gox between 2010 and 2014, continue to have faith in the currency. While some may have sold their holdings upon retrieval, the majority still believe in the future of crypto.”

With these events in the rearview mirror, what are Karpeles’ thoughts on the current market landscape? He expresses concern over excessive centralization risks and the prevalence of “problematic projects.”

• “There are far too many… I’ll use the term ‘bad’ broadly, as it encompasses both scams and projects that fail to offer any meaningful innovation,” he stated.
• “I envision a safer crypto ecosystem where individuals can engage with projects that pique their interest without the constant fear of encountering scams.”

Karpeles concluded, “When people read about cryptocurrency, they are often bombarded with stories of scams and financial losses. This narrative has remained consistent since the inception of crypto.”