By Natsuko Fukue
Mark Karpeles, the head of defunct Bitcoin exchange MtGox, manipulated its computer system at least 30 times over a couple of years, a report says.
The fresh allegation against France-born Karpeles, 30, follows his arrest on Saturday (local time) by Tokyo police, more than a year after the once-dominant exchange collapsed in the wake of fraud allegations.
Citing investigators, Japan's top-selling Yomiuri newspaper said Karpeles fraudulently tinkered with data and transferred funds to other firms controlled by him dozens of times between 2011 and 2013.
Police are questioning Karpeles about his alleged spending of customer deposits worth about 1.1 billion yen, according to public broadcaster NHK and the Yomiuri.
Officially, Karpeles was arrested for allegedly manipulating data in 2013 to artificially create about US$1 million in Bitcoins.
But police were also investigating his possible involvement in the massive loss of hundreds of millions of dollars worth of the virtual currency last year, local media have said.
In Japan police can hold a suspect without charge for up to three weeks, during which time they may carry out intense interrogations in an attempt to extract a confession. Karpeles is currently in police custody.
In response to the arrest, Tokyo said it would boost efforts to regulate the crypto-currency in co-ordination with other G7 countries.
"With respect to virtual currencies such as Bitcoin, we have gathered information and discussed measures" to regulate it, top government spokesman Yoshihide Suga told a regular press briefing.
"At the G7 summit, it was requested that each country introduce regulations from the viewpoint of measures to stop terrorism financing and money-laundering."
Regulators have scrambled to respond to the use of Bitcoins, with some calling for caution until rules are developed to stop them being abused.
Bitcoins are generated by complex chains of interactions among a huge network of computers around the planet, and are not backed by any government or central bank, unlike traditional currencies.