By Chris Peters
REUTERS - Mark Karpeles, chief executive of Mt. Gox, the embattled Toyko-based bitcoin exchange, resigned on Sunday from the board of the Bitcoin Foundation, in the latest blow to the digital currency.
Jinyoung Lee Englund, a spokesperson for the Bitcoin Foundation - a trade group promoting the adoption of the digital currency, confirmed the news and said the resignation was effective immediately.
The resignation follows a number of technical issues, including a massive cyber attack from unknown sources that has been spamming bitcoin exchanges.
Earlier in February, Mt. Gox, the best-known digital marketplace operator, said it is halting withdrawals indefinitely after it detected "unusual activity.
Following the halting, the foundation's chief scientist Gavin Andresen defended the currency and criticized Mt. Gox, saying the problem was with exchange, not Bitcoin.
"The issues that Mt. Gox has been experiencing are due to an unfortunate interaction between Mt. Gox's implementation of their highly customized wallet software, their customer support procedures, and their unpreparedness for transaction malleability, a technical detail that allows changes to the way transactions are identified," Andresen said in a statement on the Foundation's blog on February 10.
Tokyo-based Mt. Gox was a founding member and one of three elected industry representatives on the board of the Bitcoin Foundation.
Mt. Gox was not immediately available to comment on the news, which was earlier reported by the Wall Street Journal.
Charles Shrem, another prominent member of the Bitcoin Foundation, resigned earlier this year after being arrested in connection with an alleged drug scheme involving his bitcoin currency exchange.
Bitcoin prices have been falling fast after Mt. Gox said a "bug in the bitcoin software" could allow transaction details to be altered.
Bitcoin is a decentralized digital system of value transfers that is not governed by any central bank, company or government.
No assets back the bitcoin, whose value has fluctuated widely as its visibility has increased. Last September, a bitcoin was worth around $150. By late December the value was near the $1,000 mark.
Mt. Gox bitcoins traded at about $232 in Monday trading in Tokyo, while the Bitstamp index bitcoin traded at around $568.
(Reporting by Chris Peters in Bangalore and Sophie Knight in Tokyo; Editing by Supriya Kurane)