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Head of ripple cryptocurrency exchange arrested in Japan

A cybercrime unit at the Metropolitan Police Department arrested the head of Japanese cryptocurrency exchange Ripple Trade Japan on Oct. 18 on suspicion of fraud, investigators said.

Yuki Takenaka, a 31-year-old resident of Kyoto, is accused of defrauding a customer in connection with transactions of ripples, a cryptocurrency officially known as XRP. Takenaka has by and large admitted to the allegations against him, according to police.

Police suspect that in total at least 40 victims were defrauded of some 17 million yen, and they are continuing to investigate the case.

When using ripples, users deposit money with an exchange and receive a digital "IOU." The customer uses the IOU to make exchanges for other currencies, and it is also possible to withdraw the balance in cash. Many private companies are involved in the operation of exchanges, and Ripple Trade Japan, established in May 2014 and based in Hamamatsu, Shizuoka Prefecture, was one major exchange.

Takenaka was arrested over suspicions that the exchange received 1.4 million yen in cash from a 41-year-old resident of Miyagi Prefecture despite knowing that Ripple Trade Japan was basically in a state of insolvency and was not able to return money to customers. At the time, the exchange had promoted a campaign waiving deposit fees, and is said to have collected funds from at least 40 customers.

Takenaka is also suspected of having illicitly operated the company's system and issued some 120 million yen worth of IOUs to himself from around November 2014 to February 2015. He is thought to have exchanged some of these for cash at other exchanges and used the money for entertainment and investment.

In around March 2015, trouble with Ripple Trade Japan surfaced, with users becoming unable to withdraw their deposits and the site closing down. Police had been conducting an investigation after receiving a damage report.

The ripple payment protocol is said to perform strongly in international transactions, and major banks in Japan have accordingly announced the introduction of ripple services. At the same time, there have been cases of traders with low reliability operating exchanges, and it has been pointed out that customers risk losing their money in the event that such exchanges collapse.

In a separate case in Japan involving cryptocurrency, bitcoin exchange Mt. Gox collapsed. Its former president, Mark Karpeles, 32, was indicted on charges including embezzlement in the course of business. His trial at the Tokyo District Court is continuing.

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