Mt. Gox is again in the news with the arrest of its CEO Mark Karpeles by Japanese police–no charges have been filed yet, but allegations of serious misconduct have been leveled by authorities. Yesterday, Blockchain.info caused a bit of a row by displaying what looked like Satoshi Nakamoto moving some of the earliest minded bitcoins–which turned out to be a faked transaction only Blockchain.info fell for and a security researcher surfaced today to explain the technical details.

An Australian Senate committee is poised to set bitcoin in the country on the same standing as any other currency.

Interesting virtual tradable card game Spells of Genesis crowdsale is well underway and has already raised more than $67 thousand in bitcoins.

Microsoft is offering a reward of bitcoins to Bing users via the Bing Rewards program through a sweepstakes that will be drawn at the end of August.

Welcome to this week’s Bitcoin Weekly. Let’s just get the news about Mark Karpeles out of the way, since that seems to be clogging the airwaves…

CEO of Mt. Gox Mark Karpeles arrested by Japanese police

This past week has not been good for Mark Karpeles, CEO of now defunct Mt. Gox Bitcoin exchange, who was arrested by Japanese police on Friday who will be seeking charges against him in connection to the 2014 collapse of his company.

Karpeles, 30, is a French national living in Japan since 2009. His connection with the fall of Mt. Gox is legendary as the company went defunct after announcing the loss of more than 650,000 bitcoins. Although new information coming out now, from Karpeles himself, is that some of the bitcoins in the figure may have never existed.

Japanese police also believe that aside from manipulating the Mt. Gox database to claim that it had more bitcoins than the exchange did, Karpeles may also be guilty of embezzling ¥1.1 billion ($8.9 million) worth of funds from the failing company.

Mark Karpeles, chief executive officer of Tibanne Co., poses for a photograph with a bitcoin in the office operating the Mt.Gox. Photographer: Tomohiro Ohsumi/Bloomberg via Getty Images

Karpeles maintains his innocence against allegations of embezzlement, but has admitted manipulating Mt. Gox to the tune of adding false bitcoins to the platform “in the range of several thousand yen or several tens of thousands of yen, because it was a test,” and only used the imaginary currency in a test with a particular customer.

He also still maintains that Mt. Gox’s losses occurred due to a hack near the time the exchange folded and went bankrupt.

The Tokyo Metropolitan Police Department still has yet to file official charges against Karpeles, but according to local law the department has three weeks to do so. Japanese police have been involved in investigating the collapse of Mt. Gox since shortly after the bankruptcy.

The arrest of Karpeles continues the long, sordid misadventure of Mt. Gox and the early Bitcoin exchange economy. Questions still remain as to the disposition of what amounts to $182 million in missing customer funds (as 650,000 BTC at current exchange rates.)

Blockchain.info tricked into displaying Satoshi Nakamoto moving bitcoins

On Tuesday, August 4th, something odd happened at Blockchain.info: the Bitcoin blockchain explorer displayed transactions that suggested that bitcoins from the very beginnings of Bitcoin were on the move. Although these transactions showed as “unverified” on the site they were in fact invalid.

Blockchain.info claimed the transactions were “spoofed” in a tweet as soon as they were discovered and posted on Reddit. However, the technical details point to an exploit that only affects the Blockchain.info site—no other blockchain explorer showed the invalid transactions and users running Bitcoin nodes could not see them in their logs.

Even on Blockchain.info these odd transactions were not confirmed.

Today, a Reddit user claiming to be a security researcher named ShadowShark_ posted a message with technical details about how the “spoof” happened.

hello bitcoin community,

please excuse my english, i just want to clear things up. i’m a security researcher from central europe and i created yesterday’s (Aug. 4, 2015) spoofed transactions on blockchain.info. many people have speculated whether satoshi has spent his coins or not, and that caused some panic. it wasn’t my intention to harm the bitcoin community in any way and i’m sorry for what happened.

i simply created some transactions, signed them with a wrong private key and submitted them to https://blockchain.info/pushtx just to see what happens. in fact, the site accepted them! o.O

it’s no hack, but rather a problem with blockchain.info’s pushtx-api that could be used to trick sites which have implemented the 0-confirmation-api. best described by /u/murbul – http://www.reddit.com/r/Bitcoin/comments/3frn1d/satoshis_coins_have_not_moved_blockchaininfo_is/ctriscn

ShadowShark_ went on to list the transactions used, addresses sent from, and even teased Blockchain.info about fixing the problem.

After the spoof had been discovered and Blockchain.info responded, many users suggested that Blockchain.info simply failed to properly validate transactions against the private key used to produce them. As a result, Blockchain.info displayed incorrect information about invalid transactions. The technical explanation of the error made was published by Reddit user murbul.

Blockchain.info moved to erase the transactions from its website within two hours of the initial discovery.

And today, Blockchain.info tweeted that it has added security that will prevent these sort of spoofed transactions in the future.

We’ve updated our PushTX endpoint to guard against improperly signed transactions.

— Blockchain (@blockchain) August 5, 2015

While Blockchain.info is not the only Bitcoin block explorer on the market, it is one of the most commonly used and it is also the go-to for much of the media when speaking about Bitcoin. As a result, it is important that Blockchain.info stay on top of its game and not get tricked in this fashion. This time it was a security researcher who, not only proved there was a problem, but did so in a fashion that led community attention.

This sort of error in any block explorer software could be used to fake transactions long enough to defraud someone during a Bitcoin transaction—although only someone who was willing to accept a transaction on zero confirmations (a practice that is roundly warned against.)

Australian Senate Committee deems bitcoins as currency

The Australian government intends to rule that Bitcoin is a regular currency, a report cited by IBM Times UK suggests. A Senate inquiry will overturn a July 2014 ruling from the Australian Taxation Office (ATO) that earlier classified bitcoins as an “intangible asset” for the purposes of assessing taxes.

This ruling, expected to be tabled this week, will put Australia on similar footing with the United Kingdom as to the treatment of bitcoin as a currency. UK officials have shown great interest in treating bitcoins as a currency and a European Union justice has recently sought to make the cryptocurrency exempt from Value Added Tax (VAT) in EU states. Bitcoin is already exempt from VAT in the UK, Spain and Germany.

Card game Spells of Genesis raises over 240 BTC in 2 hours

The tradable card game from EverdreamSoft SA, Spells of Genesis, started a crowdfunding effort in conjunction with Erik Voorhees’s exchange ShapeShift.io to help fund the game and raised almost 240 BTC ($67k USD) in two hours. This according to a tweet from Ryan Raymond.

@SpellsofGenesis has raised over 240 BTC in the first three hours of its crowdsale http://t.co/Ak33o42oz2 with @ShapeShift_io — Ryan Raymond (@RyanARaymond) August 4, 2015

The crowdsale of BitCrystals, in game currency assets for Spells of Genesis, started recently and is still ongoing with further information at BitCrystals.com.

Further coverage of Spells of Genesis and the crowdsale can be found here at SiliconAngle.

Microsoft Bing bitcoin rewards sweepstakes

Microsoft recently added more seats to the Bitcoin bandwagon with its Bing search engine. CoinDesk reports that a new partnership between Bing Rewards and Tango Card will allow users of the Microsoft search engine to redeem reward points for a chance at $500 in bitcoin (or about 1.77 BTC at the current exchange rate.)

CoinDesk screenshot of Bing SnapCard Bitcoin sweepstakes.

The Bing Rewards system is a platform that rewards users for using the search engine and allows them to transform reward points into gift cards and other products. This sweepstakes emerged from a recent partnership between Tango Card and bitcoin processing service SnapCard.

SnapCard co-founder Ioannis Giannaros said that the drawing will occur near end of August with winners notified by the end of September.

This move shows that Microsoft continues to build a stronger relationship with the digital currency. Last December, the software giant added bitcoin as a payment method for mobile and Xbox.

Photo credit: Dawson/Bloomberg News